Amazon’s HQ2 Is a Smart Move — Only If It Fosters Inclusivity

Image credit: Flickr Contributor Peter R.

Cities across North America have embarked on a competitive race to win over Amazon. On the surface, the company’s plan to build a second headquarters that rivals its current home base in Seattle is an enticing one, promising to create new jobs, office space, and a host of economic development. But a proposal like Amazon’s comes with a long list of challenges.

The company’s influence on the city of Seattle offers insight into both the benefits and obstacles that lie ahead. From 2010 to 2016, Amazon had a $38 billion economic impact on Seattle, increasing the personal income of non-Amazon employees by $17 billion. The company also directly invested $3.7 billion in Seattle’s buildings and infrastructure, and another $43 million in the city’s transportation system. According to Amazon’s latest proposal, its new headquarters will invest more than $5 billion in construction, tens of billions of dollars in the surrounding community, and create as many as 50,000 high-paying jobs — not including the tens of thousands of service and working class jobs needed for construction and operation.

But rising levels of inequality have begun to offset this progress. As Amazon becomes increasingly successful, the company has incited criticism for not doing enough to give back to the Seattle community. More recently, Amazon has endeavored to mend this reputation through a number of community initiatives including mentorship programs and investments in local transit — but the city’s divides still linger.

In the last decade, Amazon’s expanding real estate presence has managed to drive out many smaller businesses in Seattle, leaving fewer job opportunities for those outside the tech industry. The company has also had a negative impact on both rental and home prices in the area, with apartment rents having increased 63 percent since 2010. Today, the median price of a home in Seattle is around $730,000 — nearly 17 percent more than it was in 2016.

Despite these concerns, most cities have remained steadfast in their mission to attract the corporate giant. Lured by the promise of job growth and economic revival, even small- to medium-size cities are now scrambling to provide hefty subsidies and incentives at the expense of local taxpayers. This is a mistake. Multiple studies have concluded that incentives in the form of expenditures and tax breaks are unlikely to produce stronger economies or reduce unemployment. By using incentives as a way to drive economic development, cities threaten to exacerbate their already troubling divides.

Whichever city wins the bid for Amazon’s new headquarters should require the company to assume a development approach that helps mitigate these divides in exchange for incentives or new investment. In this way, Amazon can help to heal, rather than intensify, local inequality. By adopting a strategy of inclusive prosperity, the company’s next headquarters can serve as a tool for community development.

Here are four strategies that Amazon can and should prioritize in its commitment to inclusivity.

Build More Affordable Workforce Housing

One of the most important steps for Amazon to consider is incorporating affordable workforce housing into its larger development plan. In its RFP, Amazon asks cities to describe their “diversity of housing options,” suggesting that the company is already prioritizing locations with affordable homes nearby. But Amazon must be even more focused on its proximity to workforce housing, which allows low-paid service and blue-collar workers to live near their jobs.

Upgrade Local Service Jobs

Although Amazon employs a significant share of creative talent, the company must also consider the needs of its low-paid service workers. This starts with paying service workers a family-supporting wage that accounts for the local cost of living. Research from MIT’s Zeynep Ton provides detailed evidence of how a “good jobs strategy” — wherein employees invest in their lower-skill workers — helps to improve workers’ quality of life while reducing turnover and generating greater productivity. Amazon’s headquarters should look to tenant selection as a lever for upgrading low-wage jobs, choosing only those tenants that align with a mission of inclusive prosperity.

Promote Local Entrepreneurship and Innovation

Next, Amazon should consider working with disadvantaged communities to provide residents with technical skills, job training programs, and entrepreneurial know-how — particularly as it relates to the tech sector. By partnering with local community initiatives that teach coding and tech skills to low-income residents, for instance, Amazon can train its next round of employees while creating opportunities for upward mobility. While these partnerships can be modeled off the company’s current work in Seattle — where it hosts a number of training and mentorship programs for the city’s youth and low-income residents — they should also cater to the unique needs and characteristics of the company’s next home base.

Design and Build for Inclusivity

Whether Amazon chooses to locate in a large or small metro, its headquarters must feature inclusive public space that spans across neighborhoods. In Seattle, for instance, the Amazon biospheres serve as an office space for employees, a retail space for the public, and a home for 300 endangered species. In the past, these community initiatives have helped to remedy issues of inequality that were perpetuated, in part, by Amazon’s arrival. Rather than waiting for a crisis to occur, Amazon’s future headquarters should make public space a key component of its initial design.

Despite opening its application to cities across North America, Amazon’s search will most likely center on a few key characteristics: density, an extensive transit system, and an abundance of high-tech talent and industry. Research has shown that urban communities with these characteristics tend to suffer from higher levels of segregation and inequality, leaving Amazon with many barriers to address. As the company endeavors to expand its brand into new territory, its options are simple: Prioritize inclusive growth now or face the consequences in the coming years.

A full version of this article was first published in the Oxford Analytica Daily Brief on Tuesday, October 17.

STEVEN PEDIGO is the Director of the NYU SPS Schack Institute of Real Estate Urban Lab and a Clinical Assistant Professor for Economic Development at the NYU School of Professional Studies. He is also the Director of Research for the Creative Class Group. Follow him on twitter @iamstevenpedigo.

ARIA BENDIX is a writer for the NYU SPS Schack Institute of Real Estate Urban Lab. Her work has appeared in The Atlantic, CityLab, Bustle, and The Harvard Crimson, among other publications. Follow her on twitter @ariabendix.