Amazon HQ2: Cities Say Yes, Economic Data Says No [Updated]

Update: see editor’s note at end of story.

Ever since Amazon announced it would build a second headquarters, dubbed HQ2, city officials all over the United States have been bending over backward to attract the e-commerce giant.

Tax cuts, subsidies, incentive packages, infrastructure improvements, free land — it would take more time to list the things that haven’t been offered to Amazon on a silver platter than those that have.

In a blog post published in September, Amazon revealed its plans, claiming the second headquarters will include as many as 50,000 jobs.

According to Quartz, Amazon received 238 bids to host its new headquarters but narrowed the list down later on. The HQ2 project seems to have caused a bidding war of sorts.

A few people have come out and criticized city officials. The Intercept talked to Rohit Ro Khanna, U.S. Representative for California’s 17th congressional district as a member of the Democratic Party, who argued that the cities “should not compete against each other in a race to the bottom. It’s absurd for the taxpayers to offer subsidies to one of the richest companies in the world.”

Are cities in a race to the bottom?

A new report by the Economic Policy Institute points to a similar conclusion.

“When Amazon opens a new fulfillment center, the host county gains roughly 30 percent more warehousing and storage jobs but no new net jobs overall, as the jobs created in warehousing and storage are likely offset by job losses in other industries,” researchers wrote.

Luring in companies like Amazon is, the Economic Policy Institute argues, an ineffective strategy to boost local employment.

Historically, Amazon’s expansion strategies have included negotiating millions in assistance from local governments. By the end of 2016, Amazon had likely received over $1 billion in state and local subsidies, researchers assert.

economic policy institute amazon employment

Amazon’s negotiating tactics are fairly simple. In return for the incentives, they promise to create jobs. And indeed they do. The host county gains more warehousing and storage jobs, and the opening of an Amazon fulfillment center leads to an increase in warehousing and storage employment.

Things are a bit more complex, according to the Economic Policy Institute.

Their analysis shows that overall private-sector employment in counties does not increase. Rather, the jobs created in the warehousing and storage sector are offset by job losses in other industries.

Furthermore, the employment growth generated by the e-commerce titan is not even large enough to be statistically detected.

Is there an alternative? The Economic Policy Institute has proposed a few.

Instead of spending public resources on luring in companies like Amazon — which their analysis shows to be an ineffective strategy to boost employment — cities should invest in other public services. Services which are proven to boost long-term economic development.

Infrastructure and early childhood education, researchers wrote, are just two examples of public services that would accomplish that.

Editor’s note: Amazon’s communications team reached out to the Inquisitr with a statement.

“In addition to the 200,000 Amazon employees in the US, we know from 2016 data, which is more current than the EPI data, Amazon’s investments led to the creation of 200,000 additional non-Amazon jobs, ranging from construction jobs to healthcare industry positions. In fact, over the last five years, counties that have received Amazon investment have seen the unemployment rate drop by 4.8 percentage points on average, and in some areas, the rate has been lower than the state average.

In regions, such as California’s Inland Empire, the effects of Amazon’s $2 billion investment between 2012 and 2016 have resulted in creating an estimated 34,600 additional jobs. In similar regions across the US, such as Lehigh Valley, Fall River, Mass. and the Rust Belt, Amazon has created employment opportunities for employees who had been out of work due to industry closures or had little employment opportunities in their communities.

Amazon’s fulfillment center jobs are good jobs that offer competitive pay and comprehensive benefits, which include medical insurance, bonuses, 401(k) with 50% match, generous maternity and parental leave, and innovative programs like Career Choice that pre-pays 95% of tuition and associated fees for employees to get training or education for in-demand fields, whether they are applicable to Amazon or not. Our goal is to give employees the opportunity to learn new skills that can help an employee further build their career at Amazon or even in another industry.”