Lloyd Alter on Treehugger.com has a cautionary message concerning Amazon looking to create a secondary headquarters:
It’s almost abusive. After shipping all their retail dollars and after years of losing jobs, sales taxes and so much else to Amazon, Cities are lining up to say hit me, hit me again! Amazon demands incentives to offset the initial costs and ongoing costs, tax credits, relocation grants, fee reductions. They want a “business friendly tax structure.”
The cities want growth. They want the jobs and the well-paid workers. But as Greg Leroy writes in Fast Company, there is no such thing as free growth. Particularly in some of the poorer, rust belt type cities that praying that Amazon will give them a new lease on life, they will have to bulk up on infrastructure and resources to cope.More families arriving means more teachers to hire; more classrooms, roads, water mains and sewerage to build; more public safety to provide; and more trash to pick up. All of those things cost money. But if Amazon is paying no sales tax, no property tax, no income tax, and is getting cash gifts from its employees and/or the state treasury by selling tax credits, then Amazon won’t be bearing those new costs. Instead, there will be a huge burden shift: Either everyone else’s taxes will have to go up, or the quality of public services will have to go down, or some of both. There’s no such thing as free growth.
This is much like the Foxconn bribe that Wisconsin has issued, and I continue to wonder about the wisdom of trying to lure large companies via tax breaks and other incentives by cities and even states. After all, it really devalues and disrespects the local workforce, because it says We need to bribe these companies to come work in the local area – as if all workforces are interchangeable cogs in the great world-wide machine, or even inferior.
Which is most definitely not true. When education & experience levels and societies differ, inevitably the capabilities of the workforces will also differ – and there’s nothing wrong with acknowledging that. For example, in the computer industry there’s a widespread impression, possibly out of date, that the Chinese are good at replicating technologies and products, but innovation is not their forte. Assuming this is true, and it may not be, does it makes sense for an innovator to setup an office in a Chinese city? Of course not.
But – does it make sense for a company to try to get the best offer they can? You’d think so. Many follow this model. And so it’s incumbent on cities to
- not permit themselves to get caught up in this whirlwind.
- develop an able and distinctive workforce.
These are non-trivial undertakings, as the first requires an understanding of how corporations work – often not easy for government officials who may not have corporate experience.
The second is even more difficult in the face of easy nation-wide transport. Back when it was walk, ride a horse, or take a train, workforces would stay put; these days, a sufficient number of similar employers in a single location can attract the desired work force from all over the country – or the world. Meanwhile, cities don’t move and cannot restrain movement, which suggests more indirect strategies must be used, such as provision or encouragement of cultural institutions, entertainments (preferably peculiar to the area), etc.
For those cities which are losing population, this can be a real challenge. But trying to bribe companies to come to their town will have their inevitable – possibly fatal – costs.
