Homepage / Technology / The big question for US cities: Is Amazon’s HQ2 worth the price?
Former China internet regulator probed for suspected graft Cramer Remix: For investors scared of this market, it could be time to sell Cramer: Bitcoin and junk bonds are bubbles, but stocks aren't overvalued Marvell CEO on creating an internet of things infrastructure 'pure play' with Cavium acquisition Stocks are 'absolutely' overpriced, but it doesn't matter, says Empire Executions' Peter Costa Cramer: The market's 'era of good feelings' is lifting stocks despite bad news Asia set to open higher after US stocks reach record highs There's a '50/50' chance Meg Whitman will run for president in 2020, says Kevin O'Leary Uber hid a hack that exposed data of 57 million users and drivers for more than a year Trader who tried to bet against tech changes his tune Meg Whitman to leave role as CEO of Hewlett Packard Enterprise, shares tumble 6% Salesforce earnings: 39 cents a share vs expected EPS of 37 cents Electric trucks could sell faster than cars, but Tesla may be aiming at wrong end of the market Disney executive and Pixar co-founder John Lasseter takes leave of absence: Report JPMorgan has a new cybersecurity play, which it says could rally more than 20% JPMorgan reportedly getting into bitcoin futures trading even though Dimon believes it is a fraud Facebook allowed the buying of illegal housing ads months after it said it fixed the problem: Report Alphabet's Eric Schmidt: It can be 'very difficult' for Google to understand truth Forget FANG. These four tech stocks are outperforming this year, adding $600 billion in market cap The advertising-based internet is destroying society, tech pioneer says The case for reforming airport-slot allocation Bank of America sees end of bull market coming in 2018: Here's how it will happen Chinese micro-lenders are plunging on US exchanges after new regulations at home Wall Street analysts say AT&T will ‘prevail’ against DOJ over Time Warner These are the 10 fastest growing jobs in the U.S. US existing home sales rise 2 percent, beat expectations Read this before you buy a new 4K TV this Black Friday Suddenly bullish Goldman sees a big 2018 for stocks due to 'rational exuberance' Shoe retailer DSW stock plunges after company blames hurricanes for earnings miss Boeing shares to rally to new record on 'robust demand' for aircraft: Jefferies PayPal users can now send invoices over Facebook Messenger Amazon has suddenly become a big marketplace for selling genetic tests Apple iPhone X reportedly assembled with illegal student labor Stocks making the biggest moves premarket: LOW, HRL, MDT, DSW, CPB, T & more Dollar Tree profit beats estimates on higher customer traffic A cryptocurrency start-up disappeared with $375,000 from an ICO and nobody can find them Billionaire Mark Cuban says the 'big losers' of the move to block the AT&T-Time Warner merger are Facebook and Google Chip maker Micron, up almost 120% this year, has way more room to run, technician says Buckle up: Tesla could surge to $400 and then get cut in half in 2018, Morgan Stanley predicts This ride-hailing service will pick up your kids where school buses don't go China to fend off bubble risk with tighter property rules Broadcom eyes big changes for Qualcomm's patent practices Political turmoil is good for Angela Merkel, says analyst Iran President Rouhani declares end of Islamic State China's Tencent surpasses Facebook in valuation a day after breaking $500 billion barrier German liberal party member blames socialists for political turmoil, says there was 'zero' compromise Merkel's political future may hinge on one big gamble Tesla’s breakneck expansion speed could be a car crash Finance chiefs say bitcoin is 'real' but many think it's in a bubble right now European markets seen mostly lower on German political uncertainty UK's embattled government set for budget update — here's all you need to know More than $30 million worth of cryptocurrency was just stolen by hackers, company says Trump's latest move on North Korea is confusing experts US Treasury Dept. imposes sanctions on North Korea to curb military programs How personal shopping is giving retailers vital customer data India received a 'surprise' upgrade, but other ratings agencies may not be quick to follow SoftBank funding may spur Uber to re-think tough Southeast Asian market GOP plan will ultimately raise taxes on 50% of Americans, nonpartisan assessment says The FCC has plans to dismantle the rule protecting a neutral internet Cramer Remix: Forget the $450M painting, Intuitive Surgical is the da Vinci of stocks Cramer: The bulls are right about Ollie's Bargain Outlet, but the bears may have a point Airbnb lashes out at Marriott as clash between Silicon Valley and the hotel industry intensifies Cramer gets even more bullish on Netflix and Amazon after comments from Liberty Media's John Malone Cramer's take on Wall Street's top 15 'anointed' stocks for 2017 Asia set to open higher, following US gains overnight Colorado hits Uber with $8.9 million fine over shady drivers Eight women allege Charlie Rose sexually harassed them: Report Market is 'clearly near to a top,' says longtime bull Jeremy Siegel The start-up behind Denver's 200-mph Hyperloop system: 'We love regulation' Tesla has dropped more than 20 percent from September's all-time high The debt time bomb that keeps growing and now equals nearly half of US GDP Square will generate $30 million in annual sales from bitcoin in 2 years, Credit Suisse predicts It's not the economy, stupid. What retail advisors are really worried about this holiday season Vivendi declines to try to take over Ubisoft, for now FanDuel CEO and co-founder Nigel Eccles is leaving to start an eSports company Bitcoin is working well for some big-ticket purchases despite its volatility Ex-Facebook privacy manager says company cares more about data collection than protecting users For its 10th anniversary, Jeff Bezos posted 'before' and 'after' photos of Kindle on Instagram America’s culture wars are spreading to hotels Wall Street is betting against Tinder. Here's why the company's going to succeed Standpoint's Ronnie Moas predicts bitcoin will surge another 70% Apple's new visitor center is now open to the public and dishing out some exclusive swag Salesforce CEO Marc Benioff: 'There's no finish line when it comes to equality' If the US had this H1-B fight in the past, we'd never have gotten Elon Musk, says Roger McNamee The stock market is 'dancing on the rim of a volcano,' warns investment bank eBay leans on AI to help you find the right gift for the holiday season How to find out what Google knows about you and limit the data it collects Merkel says she would prefer new elections to minority government Major AI funding boost in UK aims to fuel driverless car revolution Amazon launches a cloud service for US intelligence agencies Gamers are overreacting to EA's ‘Star Wars’ controversy, publishers should raise prices: Analyst US credit access, financial fragility improve: Fed survey Elon Musk teases flying cars: ‘Rocket tech applied to a car opens up revolutionary possibilities’ Amazon shares to keep rallying as company uses massive spending to deepen its 'moat': Analyst Uber set to buy self-driving cars from Volvo, rivaling Lyft's fleet GM shares upgraded because of automaker's 'advanced' autonomous technology Number of DDoS attack attempts increasing, research shows Victoria's Secret fashion show hits Shanghai without Katy Perry and supermodel Gigi Hadid Jack Bogle’s 5 bold investment predictions for 2018 and beyond EU's preference is ambitious trade deal with UK, Barnier says

Technology

The big question for US cities: Is Amazon’s HQ2 worth the price?

Dozens of cities are working frantically to land Amazon’s second headquarters, raising a weighty question with no easy answer:

Is it worth it?

Amazon is promising $5 billion of investment and 50,000 jobs over the next decade and a half. Yet the winning city would have to provide Amazon with generous tax breaks and other incentives that can erode a city’s tax base.

Most economists say the answer is a qualified yes — that an Amazon headquarters is a rare case in which a package of at least modest enticements could repay a city over time. That’s particularly true compared with other projects that often receive public financial aid, from sports stadiums to the Olympics to manufacturing plants, which generally return lesser, if any, benefits over the long run.

For the right city, winning Amazon’s second headquarters could help it attain the rarefied status of “tech hub,” with the prospect of highly skilled, well-paid workers by the thousands spending freely, upgrading a city’s urban core and fueling job growth beyond Amazon itself.

Other companies would likely move, over time, to that city, including employers that partner with Amazon in such cutting-edge fields as virtual reality and artificial intelligence. Some Amazon employees would also likely leave the company to launch their own startups, thereby producing additional job growth.

In theory, at least, those trends could help attract more highly educated residents in a virtuous cycle that helps increase salaries and home values.

“This definitely beats other deals that I have seen, to be sure,” said Enrico Moretti, an economist at the University of California, Berkeley, and author of “The New Geography of Jobs. “It would certainly increase the attractiveness of that city for other well-paying high-tech jobs.”

It’s that hope that has triggered excitement, from such metropolises as New York, Boston, and Chicago to tiny Maumee, Ohio (population 14,000). The deadline for submissions is Thursday.

High-tech firms like Amazon create a “clustering effect,” Moretti’s research has found, whereby a company attracts workers with specialized knowledge in, say, software and data analysis. These workers are rare in other cities but reach a critical mass in a tech hub. And higher-skilled workers are more productive when they work in proximity to each other, sharing ideas and experiences.

A result is that each new high-tech job can create up to five more jobs, Moretti estimates. That’s far more “spillover” than is true in manufacturing, where a new job typically creates fewer than two other jobs, he calculates. His findings suggest that Amazon’s second headquarters could lead to as many as 300,000 total jobs over a couple of decades.

The spillover job growth would likely include not only other high-tech positions but also professional occupations — doctors, accountants, and architects, for example — in addition to higher-paying blue-collar jobs, in, say, construction, and lower-paid service jobs at retailers and restaurants.

By contrast, manufacturing jobs tend to decline over time, Moretti said, as factories become more efficient through automation or succumb to competition from overseas.

“When you lock in manufacturing, you don’t know what will be there in 10 years,” he said.

Like most economists, Moretti doesn’t think cities should dangle billions in subsidies to Amazon. Many say local governments should focus instead on developing assets that would benefit the larger region, such as offering to upgrade community colleges.

Still, for a city struggling to develop a modern economic base, landing Amazon could be transformative.

“Not all corporate relocations are scams, and not all of them are created equal,” Mark Muro, a senior fellow at Brookings Institution’s Metropolitan Policy Program, said, referring to Amazon’s HQ2 announcement. “It’s certainly big enough that one place, particularly in the Midwest, could have its fortunes meaningfully improved.”

That said, the competition for Amazon might not be as intense as it seems: Few metro areas meet the company’s criteria, including a population of more than 1 million people, an international airport, and a “strong university system.” That reality should give the eligible cities some leverage, Moretti says.

Amazon’s search comes at a particularly fraught time, with regional income and employment gaps are widening. The effects of clustering have lifted a limited number of cities far above the rest of the country.

EMSI, an economic consulting firm, calculates that workers in only five of the nation’s 100 largest cities experienced healthy average annual pay increases of at least 2 percent, adjusted for inflation, from 2012 through 2016: San Jose; Seattle; San Francisco; Raleigh, North Carolina; and Madison, Wisconsin. The first four are tech hubs, while Madison is the home of the University of Wisconsin.

And the Economic Innovation Group, a think tank, found in a recent report that the nation’s wealthiest communities, where about one-quarter of all Americans live, captured 52 percent of new jobs from 2011 through 2015.

Amazon built its headquarters in Seattle in 1994 partly because Microsoft’s presence there had attracted many software programmers, Moretti notes. Microsoft employees went on to start other companies in the area, including Real Networks and Expedia.

Boston, one of many cities competing for Amazon’s second headquarters, has benefited from clustering effects in the past decade. Amazon and Apple have already set up smaller offices there, mostly in search of voice-recognition and artificial intelligence expertise.

Boston is also now the site of a robotics cluster, thanks in part to iRobot, the company that makes the Roomba automated vacuum, which launched there in 1990.

Reese Mozer, chief executive of American Robotics, chose to start his firm in Boston even though he had earned an advanced degree from Carnegie Mellon University in Pittsburgh.

“Boston just had a little bit more access to capital and talent than Pittsburgh,” Mozer said.

Amazon’s preferences — which also include mass transit and a “highly educated labor pool” — suggest that the ultimate winner might turn out to be a city that is already economically vibrant.

“When you find places like that that have all those characteristics, that place is likely already doing well,” said John Lettieri, a co-founder of the Economic Innovation Group.

Many analysts say they hope Amazon chooses a city far from the tech hubs on the coasts, so the new headquarters can benefit a city that needs the lift — Indianapolis, say, or Columbus, Ohio. Even so, the company’s decision isn’t going to address the country’s geographical imbalances. It would take “50 Amazons” to do that, Muro said.

Landing Amazon is like “trying to win the lottery,” Lettieri said. “Economic development can’t be dependent on these once-in-a-generation opportunities.”

Source: Tech CNBC
The big question for US cities: Is Amazon’s HQ2 worth the price?

Comments are closed.