Amazon's HQ Search Is a Reminder of the Crucial Role of People
Anyone looking for proof of the overwhelming importance of human talent in today’s economy should take a glance at the criteria Amazon is using in selecting a site for its new joint corporate headquarters.
Amazon has stated that to be even considered as the home of its second corporate headquarters, a city needs a million-plus metropolitan population, mass transit, a strong higher education system, a large technically fluent workforce, and the ability to attract and retain skilled workers. In other words, they want immediate access to the kind of workforce they need to compete, targeting software development engineers, accountants and administrative personnel, with many of the jobs paying $100,000. Like almost all companies making location decisions these days, Amazon is also looking for financial inducements from government. But while a city may feel it is necessary to offer financial incentives to buy itself a place on the short list, that will probably not be sufficient to leap to the top. Before opening the vault, or deciding how wide to open it, governments should consider that to snag a corporate headquarters and the jobs and prestige that come with it, a city must possess other assets. In a time of growing specialization and deployment of sophisticated technologies, increasingly the most important asset is people.
Workers with the right skill sets constitute a powerful magnet. Often human talent pools overcome long-time corporate histories. When GE and Motorola moved from long-occupied locations last year to Boston and Chicago’s West Loop neighborhood respectively, both cited the need to access talent for the future. ConAgra Foods moved its corporate headquarters from Omaha to Chicago last year, after almost a century based at the center of the Nebraska food basket, a decision explained by the CEO as “the best shot to attract the kind of talent this company needs to rebuild its brands and come up with new ideas.”
Attracting talent is so important that companies will bear relocation costs to move just a short distance to maximize their appeal to employees. When Reebok announced a few months ago it was relocating its corporate headquarters from suburban Canton, Ma., to Boston, the company explained that one of the main reasons for the move was a desire to be in a place where millennials are eager to work and live. And Canton is just 15 miles from downtown Boston, with a predominantly millennial workforce, many of whom already live in Boston.
The proliferation of local talent also often outweighs local costs as a factor in deciding where to locate a company or a division. When Walmart decided to enter e-commerce in 2000, it located its new division 1800 miles from its head office in Bentonville, in the pricey labor and real estate market of Silicon Valley. Why? Because it offered a wide choice of skilled workers, access to specialized service providers, and knowledge spillovers. Walmart may have left its heart in Arkansas, but it is pursuing ecommerce from a site near San Francisco. High housing costs are endemic to Silicon Valley, but they have not dampened economic investment and growth in a region with a deep pool of talent. Between 2014 and 2015, the San Jose-Sunnyvale-Santa Clara metropolitan area posted an 8.9 percent increase in economic output, significantly more than China’s growth rate of 6.9 percent. “In the world of innovation, productivity and creativity can outweigh labor and real estate costs,” Enrico Moretti pointed out in The New Geography of Jobs.
While University of Toronto professor Richard Florida has come to lament “winner-take-all urbanism,” in The Rise of the Creative Class he argued robustly that clustering of talented and ambitious people has become an urban area’s principal engine of economic growth. The demand for high-end human talent is not new, and it may have become so common that it is little noticed. But it represents a sea change in corporate investment strategy. The 19th century was characterized by a need for large numbers of lower-skilled, less educated laborers. In the early 20th century, that was overtaken by moving assembly lines with the need for moderately trained, semi-skilled workers. Now, the demand for highly trained, skilled workers has prompted companies to focus on the importance of a thick labor pool, characterized by a diverse range of skills, willingness to bear wider responsibilities and take on increased risks, and adaptability to constantly evolving technologies.
That is why the common theme of cities vying for the new Amazon center is skilled people, and the ability to provide, attract and retain them. Within hours of Amazon’s call for potential locations, for example, the New York City Economic Development Corporation put forward its opening argument that the Big Apple has “the most innovative and diverse tech sector in the nation.” Similar claims were echoed by mayors and other municipal officials from Los Angeles to Washington D.C., from Dallas to Toronto. The comparative weight of these boasts is less important than the common recognition they display of the importance of local workforce quality in drawing direct investment.
Companies may have potential locations over a barrel when it comes to obtaining financial incentives, but Amazon’s criteria in selecting a site for a corporate headquarters illustrates the fact that increasingly a city’s most important draw is its people, their skills, and the ability to make the most of them.
