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By CHRISTOPHER RUGABER, Economic Editor of the AP
WASHINGTON (AP) – The awarding of Amazon's second head office to two wealthy localities has fueled intense speculation around a key question: will economic gain be profitable for the winning cities?
Amazon's decision will create 50,000 jobs and $ 5 billion in investment over the next two decades. However, this influx of capital will certainly inflate housing prices and apartment rents, which could overload transit systems. And the two regions combined provide grants of more than $ 2 billion to one of the world's richest companies – a premium that, according to many analysts, was probably not needed to influence Amazon.
The decision to create these jobs, which Amazon says will cost an average of $ 150,000 a year, in the New York and Washington areas will also exacerbate regional inequality in the United States, economists say. Midwestern cities such as Columbus (Ohio) and Indianapolis (Indiana), which were on Amazon's shortlist, would have spread more widely the high-skilled, high-paying jobs in the technology sector.
"It's ambiguous for the winners, not good for the" losers "and not good at all for the nation," said Mark Muro, a researcher at the Brookings Institution.
Nevertheless, at first glance, the deal seems to be better than most others. Amazon claims receiving incentives and grants in the amount of $ 1.525 billion from New York State and $ 573 million from Virginia County and Arlington. That equates to $ 61,000 of incentives provided to Amazon for every job in Long Island City and about $ 23,000 for every job in Arlington.
This compares to a much higher average of $ 658,000 per job for other large transactions, "said Greg LeRoy, executive director of Good Jobs First, a non-partisan monitoring group. The Taiwanese manufacturer Foxconn, for example, received $ 4.8 billion in subsidies for a plant in Wisconsin on which it started this year. This agreement is expected to generate only 13,000 jobs.
Nevertheless, Amazon's total subsidies will probably end up being much higher, said LeRoy. Amazon said it would also apply existing incentive programs that could add nearly a billion dollars to New York grants.
And Amazon's final selections suggest that all grants and gifts were probably not needed, other economists said. Other state and local governments have offered much more, including at least $ 8.5 billion on behalf of Montgomery County, Maryland, and $ 7 billion in Newark, New York. Jersey.
"If Amazon were seeking subsidies, its decision would be wrong," said Michael Ferren, research fellow at the Mercatus Center at George Mason University. "Even the biggest grants you can imagine really do not affect this type of decision."
Amazon's top priority was rather to gain access to a considerable pool of highly skilled employees, Ferren said. She would probably have chosen the same two sites, even without the subsidies.
"The only thing that's useful to them is the companies that get them and the politicians who get the credit," he said.
Indeed, Jay Carney, Senior Vice President of Amazon, acknowledged in an interview with CNN that the company had chosen two sites offering fewer grants than others.
"It shows that talent was really the determining factor for us," said Carney.
Some experts in regional economics have suggested that the gain for selected cities would go well beyond Amazon's initial investment. Stephen Fuller, an economist at George Mason University, estimates that the new headquarters in Arlington would generate expenses of about $ 1.3 billion each year once the initial construction is complete. That would support nearly 50,000 jobs in the state, said Fuller, in addition to those of Amazon.
"It's really a no-brainer," Fuller said. "They will pay a huge amount in property taxes and sales taxes."
Fuller also argues that the region is large enough to absorb the influx of new workers.
"The region adds 50,000 jobs every year, and no one complains about it," Fuller said. "They do not all arrive at the same time, they last between 15 and 20. It's not as overwhelming as people think."
At the same time, Tim Bartik, senior economist at the Upjohn Institute, warned that unemployment being so low in both cities, many jobs created by Amazon will likely go to people living in either Arlington or At New York . The influx of these workers could weigh heavily on schools and transportation systems.
A coalition of non-profit groups warned that the arrival of Amazon would likely worsen housing affordability for many low-income workers in both cities. About one-third of residents in Washington, DC and 40 percent in New York spend more than 30 percent of their income on housing, groups said, including LeRoy's Good Jobs First. The typical rent in Queens, including Long Island City, is already $ 3,000 per month.
Some analysts had thought that Amazon could follow the trend of other companies and create jobs in cities where wages and housing were often cheaper. Some Wall Street banks, for example, have sent many of their back office jobs to distant states of New York. The auto plants that once filled the Midwest have migrated south, where the unions have less weight.
Instead, Amazon has chosen to expand its footprint to two locations where wages and home prices are relatively close to those of Seattle, its only current location, said Aaron Terrazas, chief economist at Zillow.
"These two markets can certainly absorb this type of employment shock – and they have some time to prepare for it," he said.
Josh Boak, AP Economics Editor, contributed to this report.
Copyright 2018 The Associated Press. All rights reserved. This material may not be published, disseminated, rewritten or redistributed.
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