Amazon is currently planning to build a second headquarters in the United States, a move that will definitely transform whatever city is lucky enough to win the bid. However, experts are noting that hosting Amazon’s HQ2 building will not only bring mixed economic effects.
The Benefits
The benefits of being home to Amazon’s second headquarters compound are pretty obvious. The company is promising to hire up to 50,000 people in the city it bases out of; what is more, the average annual pay per employee is expected to come to more than $100,000.
The fact that Amazon will spend more than $5 billion on constructing its new building means that carpenters, engineers, construction workers, welders, electricians and other trade workers in the city in question will also have good jobs for years to come.
Amazon’s new HQ2 building will also boost businesses in the city as Amazon’s employees earn the money to purchase not only necessities but also luxury items. The company is also sure to attract other businesses to the city it calls home, creating a successful business climate that will benefit not only business owners but also city residents who will be gain access to new products and/or services.
Tech companies in particular are likely to seriously consider setting up shop in any city that Amazon deems good enough for its headquarters building — creating a vibrant, successful atmosphere that would strengthen a city’s economy and create many good job opportunities.
The Drawbacks
Perhaps the largest drawback is the fact that Amazon’s new location will not necessarily benefit the city’s existing residents. Amazon needs people who can meet specific requirements, and many cities who are bidding for Amazon’s HQ2 building don’t have enough qualified workers to fill all of the job slots.
The result of this shortfall would be that workers from other parts of the country would apply to Amazon, and then move to the city in question if hired. The massive influx of people into any city would then send the cost of housing soaring far past what many existing city residents would be able to pay. A similar situation came about in Seattle when Amazon built its first headquarters building there and many lower-middle class and lower class city residents were forced to move outside of city limits in order to find a place to live.
Furthermore, an influx of new people will also cause traffic problems as streets, highways and public transportation services struggle to deal with the population increase. This population increase not only includes Amazon’s new out of town workers but also other individuals (i.e. teachers, lawyers, real estate agents, etc.) who wind up moving to the city to take advantage of new job openings created by Amazon’s presence.
Another serious problem comes from the fact that many cities are offering massive tax cuts in a desperate effort to become home to Amazon’s HQ2 building. New Jersey is leading the way by promising Amazon an astounding $7 billion tax credit. Pennsylvania and Philadelphia together are offering up to $3 billion in tax breaks while Worcester is offering not only $500 million in real-estate tax exemptions but also a 100% personal property tax exemption for 20 years. California is offering up to $300 million in tax credits.
If any of these cities or states actually wins the deal then Amazon will save billions of dollars every year. Unfortunately, the city or state in question may need to raise taxes on residents in order to make up for the money given to Amazon in exchange for its presence. In other instances, services may suffer as the city and/or state does not have the funds needed to provide needed assistance to new and existing residents.
Hosting Amazon’s new headquarters building will be a mixed blessing for any city. While no state or city would say no to the opportunity to become home to one of the world’s largest, most profitable companies, many local and state governments are realizing that there is no such thing as a free lunch.
Regards,
Ethan Warrick
Editor
Wealth Authority