On Post-HQ2 despair…

The blog is back! (Yes, I’ve said this before.) Let’s start with something tangentially related to IP… high tech jobs. Like many, I’ve been mired in post-HQ2 loss despair after my city, Toronto, missed out.

But ever since Amazon chose Virginia and New York (and, sort of, Nashville) instead for HQ2, several news stories have focused on the benefits of not winning. An article in The Atlantic points to an LSE paper that found that adding thousands of high tech jobs to an economy will inevitably affect things like house prices, rent, transportation, etc. The paper concludes that “the wider effects of tech employment in tight housing markets can be negative at the regional scale.” Here in Toronto we have a tight housing market, so we should be happy we didn’t win… right? Obviously, the LSE paper’s conclusion is equivocal. It goes on to say the effects can vary by city. Any study of this kind is also necessarily limited in scope; the LSE paper doesn’t, for example, consider additional tax revenues from new tech jobs, and all the potential downstream impacts they might have.

Aside from the impact of winning, the deals cities make to land these jobs also have to make sense. Wisconsin’s 2017 Foxconn coup seems less certain to be a boon, with total government subsidies rising to $4.1b or $315,000 per job.

But if a city does manage to strike the right policy and planning balance, those 50,000 Amazon jobs (or 25,000 because it was split into two cities. And more specifically, 12,500 tech jobs and 12,500 administrative jobs.) must be worth it. Microsoft, for example, was found in 2010 (in a Microsoft-backed, but still seemingly very legit, study) to be responsible for 13.6% of the Washington State economy, while employing just under 40,000 people. The difference, of course, is that Microsoft started in Washington with 30 jobs as a $3m company.

A brand new study from the U.S. non-partisan Tax Policy Center backs up the idea of fostering organic, local growth, concluding, “efforts to win over businesses with tax exemptions and subsidies may not be fiscally fruitful for overall job generation for regional economies.” The study suggests that the tax incentive money is better spent on encouraging local establishment births and expansions and investing in things like job skills training. Most business migration job losses are offset by job gains, and most migration is local anyway. Instead of trying to lure a giant like Amazon or Foxconn, maybe it’s a better plan to build great local companies.

So there, now the rest of us can feel great about missing out on HQ2. We’ll just start our own Amazons. On the other hand, if Amazon wants to change its mind and come to Toronto after all, please ignore everything I just wrote.

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