Today the bids roll in from cities and regions seeking to be home to Amazon’s second headquarters. The Seattle Times reports more than 150 locations have expressed interest. We’ve written that we think it makes sense for Washington communities to engage in the effort, as a form of a self-assessment. It’s useful to consider policies and practices that can make a place more “business-friendly,” to repeat the term Amazon used in its Request for Proposal.
And while we’ve said the introspection is more interesting than the speculation about where HQ2 will go, the guessing games can also be informative. That’s because the informed speculation can provide insight into what company leaders value. The Seattle Times, for example, reports,
Kevin Boeh, a former technology investment banker and corporate consultant, thinks Amazon will put a priority on quick travel between the two headquarters. He’s done some research to back up the wisdom of such a move.
A study of the performance of Japanese firms’ U.S. subsidiaries over more than a decade found that, all else being equal, an extra hour of travel time from headquarters to a subsidiary means that unit has a 7 percent lower chance of turning a profit.
Mark Zandi took a different approach. The economist for Moody’s Analytics, along with colleague Adam Ozimek, lined up 29 sets of data designed to match Amazon’s preferences.
To gauge a city’s business environment, Moody’s weighed things like metropolitan credit ratings, tax systems and employment growth rates. For quality of life, they used measures of the school dropout rate and arts establishments per capita.
Amazon’s request for proposals asks cities to provide information on nine bullet-pointed topics.
No. 2 through 4 are related to incentives, the euphemism for tax abatements, job-training aid, and other public subsidies municipalities rely on to coax corporations to expand or relocate in their area.
With respect to the tax incentives, the Puget Sound Business Journal writes that Washington has identified policies that could apply to Amazon.
While the state isn’t submitting documents to Amazon directly, the Department of Commerce on Friday sent an email to cities and counties including a list of existing state tax credits that could apply to Amazon and a letter of support from Gov. Jay Inslee and U.S. Sens. Maria Cantwell and Patty Murray.
Cities and counties around the state – including King, Snohomish and Pierce – are bidding to win “HQ2,” the 50,000-employee, $5 billion expansion of Amazon’s headquarters. The state prepared the documents for inclusion in local proposals.
Tacoma got its bid in early. And local leaders feel good about their chances, reports The News Tribune.
Though some say Tacoma’s proximity to Amazon’s current headquarters is a detriment — “Not everybody wants to live in the Northwest,” said Amazon Worldwide Consumer CEO Jeff Wilke — [Bruce] Kendall [president and CEO of the Economic Development Board for Tacoma-Pierce County] says it’s a selling point.
A second headquarters in Tacoma, he said, means workers could commute between the two for face-to-face collaboration.
“And it’s far enough away to engender intra-company competition,” he said. “This is still a very open competition. … We’ve got reassurances that we are still in the game.”
In addition to the HQ2 search, Amazon continues to make news for its use of automation. The Puget Sound Business Journal reports that the firm’s robots are not replacing human workers.
“It’s a myth that automation replaces jobs and destroys net job growth,” spokesman Adam Sedo said, adding that Amazon fulfillment center employees still pick, pack and ship orders. Automation makes jobs “more efficient and allows employees to redirect their focus to other tasks.”
…“The robots essentially drive more volume and it feeds into itself. (Amazon) becomes bigger and busier and they have to hire more people,” said Sachin Chitta, founder and CEO of Silicon Valley startup Kinema Systems, which makes robots that unload pallets of heavy boxes.
Michael Mandel, chief economic strategist for the Progressive Policy Institute, makes a similar point in a larger context in a Wall Street Journal op-ed on the Internet of Goods.
Our research shows that fulfillment center weekly wages are 31% higher on average than brick-and-mortar retail in the same area.
Note that fulfillment centers are not hiring college-educated coders. Instead, these jobs use a mixture of physical and cognitive skills. Better yet, they pay decent wages, and require only a high-school education. Jobs like these can close the income gap…
In the short run, e-commerce employment is likely to keep soaring, as big brick-and-mortar retailers like Wal-Mart and Target build out their e-commerce capabilities.
Mandel allows that automation may eventually reduce employment at fulfillment centers. He adds,
The Internet of Goods—our term for the fast-growing digitization of the production, sorting and movement of physical products—will be the next major step in the internet’s evolution.
If e-commerce is any guide, the jobs created for the Internet of Goods will require workers who have a good mix of physical and cognitive skills, just like the industrial jobs of the early-20th century. Moreover, they will be more evenly spread around the country, boosting growth in America’s heartland as well as the coasts.
And it’s just possible that some of those cities bidding for HQ2 are also putting themselves in play for other areas of e-commerce expansion.