Amazon and Montgomery County
Amazon has recently narrowed their list of prospective locations. One of the places being considered is Montgomery County, MD. No matter what one thinks about the prospects of attracting HQ 2.0, a very careful assessment of the short- and long-term costs and benefits, as well as the distribution of those costs and benefits should be performed.
In a recent article with Roy Meyers, Professor of Political Science and Public Policy at UMBC, we highlight this failure in the case of the economic impact assessment conducted by Sage.
The full article is here.
I look forward to your thoughts and comments.
Depending on your perspective, some very interesting things are happening right now in our markets. Amazon Go has just opened in Seattle, where you enter the store by a QR code on your phone and you can literally just pick up the products you want, put them in your Amazon bag, and walk out. Cameras and sensors detect all of your purchases, which apply to your Amazon account.
The New York Times mentions that there are currently about 3.5 million cashiers in the United States. It will, of course, take time to disrupt an entire occupation; however, we are certainly heading in that direction with our technological advances. It is not that this is inherently bad, we can see efficiency gains in our system; however, we need to ensure that our populations are skilled to move with these industrial changes.
Before you read this and think, well this will always be the case for jobs that require less formal education or without specialized levels of skills- I want to call your attention to one other change that shows even our most technologically skilled can be outpaced by Artificial Intelligence and machine learning programs. No, I am not going to tell you about how AI has beaten the best humans in chess or the board game Go (a much harder feat) based on training, and learning, by playing itself. No human input is actually even needed (See article here). Google has created an AI that, get this- creates other AIs. Google is using deep learning neural networks to write programs that write their own, more efficient programs. According to Google, these programs are better than what many of Google's top programmers could do. The implications of all of this are TBD, but programming jobs had seem the one safe haven in a postindustrial economy. Maybe so, but maybe not. Of course, as pointed out by this article in WIRED, these neural networks are black boxes that are assuming more and more responsibility for how decisions are made and even changing the way we "think about ourselves, our world, and our place within it."
The wonderful economic development watchdog group, Good Jobs First, has been at the forefront of tracking economic development mega deals. This recent article shows why governments since the Great Recession have been keen on spending so much to attract large firms, which will come at the expense of entrepreneurs and small firms trying to compete. It touches on a topic that I have been increasingly interested in, how competition is different in metropolitan areas at the border of two or more states. More on that later though!
In a second interesting article, the Government Accounting Standards Board has issued statement number 77 which requires governments to provide information within their Comprehensive Annual Financial Report (CAFR) on how much the government is providing in economic development incentives. This Bloomberg News article shows that there will likely be variation in how transparent governments will be in their reporting. Also, it demonstrates that even programs like TIFs which might deliver the benefits in rebates over time are required to be reported.
More on the Amazon HQ2.0 Offerings
So, I do intend on writing posts on things other than Amazon's HQ2.0 deal, but it has certainly been interesting watching it unfold. In fact, even comedy has come to appreciate the usage of the megadeals and vast offerings that governments are providing to lure this new headquarters.
When John Oliver gets five million viewers to watch an episode on the usage of economic development incentives, you recognize the broad appeal of the topic.
The satirical news source, The Onion, has two interesting pieces on the topic. While I think the plea from Albany in this piece is good, the Philadelphia case is quite funny.
I enjoyed Zirin's article in The Nation which suggested that these deals were partially the result of cities seeking to attract massive sports stadia and the Olympic games.
Communities across the United States and in Canada and Mexico are vying for Amazon HQ2.0. It could mean up to 50,000 jobs, which will be fairly high paying. In reality, this could be transformative for many communities should they land this headquarters.
There are many questions that can be, and should be asked:
(1) How many jobs are really likely to materialize- many estimates of jobs being created fall short of reality;
(2) Who will benefit- not everyone in the community will benefit, some will experience higher costs of living and be priced out of their homes or rental units while others will gain access to good jobs;
(3) What will governments offer in the form of incentives- This will likely be more than most should, New Jersey alone agreed to pay almost the entire bill;
(4) Will it be worth the costs- Rarely do you see careful economic evaluations before these decisions are made and often communities spend a lot in tax incentives only to see job projections fall short or the company leave; and
(5) What determines how much a government will offer? For this last question, I wrote a recent article for the London School of Economics USAPP blog which can be linked to here.
We should continue to ask these questions and evaluate whether it is always worth spending a lot to attract companies. I am not saying it isn't, but evaluations are needed which can account for not just employment in the short term- but that also account for the opportunity costs.
I am an assistant professor of political science at the University of Maryland Baltimore County (UMBC). I completed my Ph.D. in Public Policy and Public Administration at George Washington University.