Amazon recently announced the cities still in the running for the company’s second headquarters, setting off a new wave of frenzied speculation. Over 200 cities applied, and the list is down to 20. Only one will win. What then happens for the prospective cities still grappling with slow job creation and wage stagnation? Do they wait for the next RFP?
Cities are waiting for a knight in shining armor to solve their economic woes. This strategy is based on a popular “urban myth”: that a local economy can sustain itself and grow in the long-run by attracting established businesses away from other regions. On the contrary, research from the Kauffman Foundation has shown that recruiting companies—even providing incentives like tax breaks—doesn’t correlate with job creation. In fact, analysis of job creation patterns in California, from 1992 to 2006, found that the overwhelming majority of state job growth came from the birth of new firms or the expansion of existing ones, not from firms moving to the state. Data increasingly shows the importance and power of fully leveraging your existing assets–keeping “place” in the forefront as a tool for change.
We see the same dynamic with other gargantuan, subsidized investments like sports stadiums. Most economists agree that, in the long-run, these projects don’t translate into sustained economic growth. And they can worsen a city’s existing challenges, such as affordable housing. Mega projects like these can actually drive financial instability for many and massive displacement for low-income families and families of color, in particular.
And the opportunity costs are staggering. Most cities in the HQ2 running are offering Amazon economic incentives valued in the billions of dollars (offsetting a huge portion of the $5 billion investment). Those billions of dollars could be going to health initiatives, infrastructure investment, education and more—long-term investments that we know sustain the economic security of residents and can even help reverse long-standing racial disparities. Richard Florida and Amy Liu, among others, have already made this case convincingly.
That’s why, if HQ2 is to be a net positive wherever it lands, equity must be front and center. Without efforts to ensure that job creation is inclusive, such growth will undoubtedly replicate patterns of racial inequities, and widen income and wealth gaps. Amazon could lead the charge by putting pressure on cities to consider strategies for inclusivity in their pitches. As Brookings Fellows Andre Perry and Martha Ross aptly point out, “by targeting the factors of diversity and inclusion, Bezos can create a model for companies to follow that maximizes the talent that our changing racial demographics present.”
But if Bezos won’t, then it’s on the cities to take both historical inequities and today’s rapidly changing demographics into consideration as they prepare for HQ2. Rather than touting massive incentives, they should be competing to demonstrate that they are the best stewards of their residents’ tax dollars, and that means using all the resources in their own back yards to generate sustainable, inclusive economic growth.