Brains not Brawn crucial to luring Innovation Companies
Amazon has decided to split its new headquarters between Washington, D.C. and New York City. The Public’s Radio political analyst Scott MacKay ponders what this means for Rhode Island and southeastern Massachusetts.
After an international search, the on-line retailing giant Amazon decided to build its new headquarters in two of the country’s highest-cost locations: The Virginia suburbs of the nation’s capital and the Queens borough of the country’s largest media and financial center.
To the winners flow the spoils of 25,000 high-paid jobs in each venue and the collateral economic development that comes with them. New York projects that the company could occupy as much as eight million square feet of office space –the equivalent of three Empire State buildings. All these folks with six-figure salaries will need places to live and the restaurants, leisure activities and health services they’ll demand.
This bonanza isn’t without costs. Traffic will increase. Housing costs will soar. Public transportation systems will be burdened. Then there are the taxpayer subsidies. New York politicians have agreed to remake the Queens waterfront and provide a huge subsidy of $1.7 billion in state incentives and hundreds of millions more from the city. There is even a helicopter pad for Amazon’s CEO.
Both Providence and Boston made pitches to Amazon. Providence was never seriously in the running. Boston was. Cry no tears for the Hub. Boston, Cambridge and North Reading have already been given a striking consolation prize—more than 4,000 high-tech Amazon jobs working on robotics and other ventures.
Boston was never prepared to put up as much public money as Virginia and New York. The area will be spared more strain on roads and mass transit systems that are already clotted everywhere inside the 495 belt. Not to mention pressure on the overheated housing market.
There are lessons for our region. One is that the pace of the creative destruction of capitalism is accelerating. This has been occurring since the spinning jenny put the weavers of Manchester out of business. And this churn killed the flourishing New England textile business. But those movements took generations.
Who could have predicted a half dozen years ago that an on-line retailer would become a trillion dollar company?
Luring 21st century innovation jobs to Rhode Island and southeastern Massachusetts will require changes in economic development thinking. These companies aren’t going to places that rely on the traditional metrics, such as low-taxes, low rents and cheap labor.
“They aren’t going to low-cost places,” says Michael Goodman, director of public policy at the University of Massachusetts Dartmouth. “Nowadays brains matter much more than brawn.”
Human capital is paramount to innovation companies, says Goodman. This means that having a cluster of well-educated young workers is crucial. Plus big tax incentives for companies. Our region needs to invest more in education and job-training or risk being left behind in the new economy.
Too many in Rhode Island and Massachusetts cling to the nostalgic notion that large-scale manufacturing is somehow coming back. Except for such defense contractors as Raytheon and Electric Boat, that isn’t the case.
Goodman says Providence could be in a better position than southeastern Massachusetts to attract younger educated workers. Rhode Island’s capital has more cultural amenities, colleges and nightlife than southern Massachusetts communities.
What the region could use is better transportation. Perhaps the biggest mistake Rhode Island made in the past was neglecting to invest in better, faster train links with Boston. Providence mayors once thought the city could compete with Boston. Those of us of a certain age remember the billboards former Providence Mayor Joe Paolino erected in Boston in the 1980s urging businesses to move to Providence. That never happened.
A more problematic element for New England: The lavish taxpayer incentives these well-heeled companies have come to expect. Even if workforce training and education create a reservoir of coveted workers, you have to wonder if deals that require modestly-paid taxpayers to pay for amenities to lure jobs for the wealthy will fly politically. Massachusetts and Rhode Island won’t win spending contests with Texas, California and New York.
Scott MacKay’s commentary can be heard every Monday morning at 6:45 and 8:45 and at 5:44 in the afternoon. You can also follow his political reporting and analysis at our “On Politics” blog at thepublicsrado.org