Amazon’s decision to scuttle its highly controversial plans to build one of its headquarters, dubbed HQ2, in New York City was a positive move–but not for the reasons you might think.
It appears the tech giant backed out in response to heightened public backlash against the $3 billion in state and city tax breaks it would have received for moving to the Big Apple. Concerns about rising rents caused by so many employees coming to town, as well as zoning changes that would have favored the company over local residents, also led local lawmakers and advocates to oppose the new campus.
Some would argue that this represents a huge loss for the city of New York. After all, Amazon estimated its HQ2 would lead to 25,000 local jobs in the next 10 years and spend $5 billion locally, which is why 19 other major cities across the United States competed heavily to land them.
Yet New Yorkers didn’t miss out on much. In fact, they dodged a bullet.
Publicly, this began as a well-executed publicity stunt by Amazon. They had a strategy to create a long-running narrative about expanding their business and increasing their visibility in new cities. They gained tremendous buzz as they whittled their choice of cities down to the 20 that had large enough North American populations to support their growing workforce requirements.
While Amazon still plans to move ahead with new facilities near Washington, D.C., and Nashville, by pulling the plug on New York City, the company seems to be sending a clear message to any city pursuing them in the future that this is their game. Their rules. And if local lawmakers can’t deliver controversy-free support for everything Amazon offers, they are willing to pick up their pieces and go home. It’s not exactly the type of behavior that indicates this company would have been easy to play with in the future.
Beyond that, though, New Yorkers should also consider how bringing large pools of high-salary, white-collar workers to town would have affected their quality of life. Very few of those workers would have been coming from Queens, where HQ2 would have been located. Many probably don’t even already live in New York City. They would have either been commuting long distances, further overburdening transportation infrastructure, or relocating from elsewhere and buying into local real estate. Those relocations would have driven up already skyrocketing property values and displaced lower-income residents who would no longer be able to afford to live nearby.
Deal proponents, such as Governor Andrew Cuomo (D-NY), might say the benefits of Amazon’s HQ2 vastly outweighed such concerns. That HQ2 would benefit enough people to make it worthwhile. That HQ2 opponents put their narrow political interests ahead of New York’s economy and the state’s $2.3 billion shortfall in tax revenues.
However, these activists ignore a more fundamental point: Large corporate campuses no longer make sense because they are incompatible with current and future employment trends.
Today, many U.S. companies are struggling to find and hire good talent. At the same time, workforces are becoming more decentralized and distributed. The days of requiring professionals to sit within eyeshot of micromanaging supervisors are giving way to more remote work and freelancing scenarios. Nearly two-thirds of companies today have remote workers, and more than half are embracing more freelancers, temporary, and agency workers, according to my company Upwork’s “Future Workforce Report.”
Such data flies in the face of the antiquated expansion models of companies like Amazon that continue investing billions of dollars into corporate campuses that are outdated almost as soon as they’re built.
We know from nearly every workforce report these days that hiring only local talent is a shortsighted path to growth. Indeed, we can be fairly certain that Amazon, which is by no means foolish, had little intention of hiring only New Yorkers for HQ2. To attract the right talent, it would have logically had to recruit employees from across the country and strongly encourage them to relocate.
Expanding companies must also consider whether the overhead tied to physical infrastructure makes financial sense. If employees are increasingly working remotely, there isn’t as much need for brick-and-mortar office space. According to Global Workplace Analytics, businesses save as much as $10,000 in real estate costs per year for each remote employee.
Investing in physical headquarters buildings also stands at odds with how actual, long-term job growth is being created in the New Economy. Studies show nearly 90% of remote workers are more productive since they have fewer distractions and spend less time commuting to and from the office. More employees, especially millennials, also prefer remote and flexible work options, which rank as one of their top priorities when evaluating potential employers.
There’s also something to be said for drawing upon the diverse talent of employees around the country instead of putting all your talent in one place. One of the bothersome aspects of how Amazon conducted its search was that it defaulted to the idea of having big, shiny buildings in major centers of commerce. As Steve Case, cofounder of AOL, recently tweeted, Amazon’s NYC pullout “sends [an] important signal about dispersion of talent. Great people are NOT just in CA/NY/MA, even though 75% of venture capital goes to those 3 states.”
That’s exactly right. I wrote last fall that I believe Amazon would have been better served to distribute its headquarters among “mini-headquarters” across the country–ideally in communities that are struggling. Doing so would not only tap richer and deeper pools of talent, but also give an economic boost to areas that truly need it, engendering employee and community goodwill and loyalty in the process.
So now that Amazon has apparently made its decision (there is some talk that NYC could still attempt a Hail Mary pass to recapture HQ2), should other cities step forward to compete for the shuttered deal? Some are expected to try, even as Amazon says it is not reopening its search for another HQ2 site at this time. But if there is any lesson to be gained from what happened in New York City, it’s that there are better uses of public money than tossing billions at corporations in exchange for uncertain gains.
If Cuomo, Mayor Bill De Blasio, and other politicians, whether in New York or any other city, really want to create equitable, sustainable job growth that enriches the city’s neighborhoods, they should work with companies large and small to reimagine how and when work gets done. For instance, they could expand New York City’s footprint in the job market by encouraging many companies they already have to hire remotely. Vermont recently did something similar when it passed legislation offering $10,000 to people who move to the state and work remotely.
Spurring job growth doesn’t have to come down to attracting big corporate names and glistening new office buildings to town anymore. In the New Economy, the more practical approach is to invest in remote work programs that enable companies to grow without creating massive strains on local infrastructure or further exacerbating already intolerable wealth gaps.
Perpetuating the ill-advised cycle of building big corporate offices in mega-cities is futile.