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Milwaukee area officials make pitch for Amazon (UPDATE)

By: Alex Zank, [email protected]//October 18, 2017//

Milwaukee area officials make pitch for Amazon (UPDATE)

By: Alex Zank, [email protected]//October 18, 2017//

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Southeast Wisconsin may be rarely, if ever, mentioned by national pundits as a possible location for Amazon’s planned second headquarters. Still, a group of local officials say the region has exactly what the giant tech company is seeking.

Milwaukee Mayor Tom Barrett and Waukesha County Executive Paul Farrow announced Wednesday that the regional economic-development group Milwaukee 7 was submitting an application later that day calling on Amazon to consider the Greater Milwaukee Area for the second headquarters building the company has announced it wants to build somewhere in the U.S.

Barrett and Farrow said the application identifies specific sites, but declined to name which ones. Barrett would only say that some of them are “shovel ready.”

Barrett said the application was compiled without the use of gimmicks or frills, because “we actually meet the requirements … almost to the T as to what Amazon is looking for.”

Of the region’s attributes that the mayor said meet Amazon’s criteria, he placed emphasis on: Its population of more than 1 million; its proximity to airports, including Milwaukee’s General Mitchell International Airport and Chicago’s O’Hare International Airport; its good infrastructure; its welcoming attitude toward business; and its deep well of educated students and workers.

The coup de grace, Barrett said, is the region’s location between Madison and Chicago.

“So as I went through the criteria that Amazon was laying out, I was able to say over and over and over again, ‘check, check, check,’” Barrett said.

Farrow cited Foxconn Technology Group’s plans to build a $10 billion manufacturing plant as evidence that employers look at the region favorably. The Taiwanese manufacturer’s plans call for building the 20 million-square-foot factory just down Interstate 94 from Milwaukee, in Mount Pleasant.

“For the last 5 to 7 years, we’ve created an atmosphere for businesses to understand they can work here, they can grow here,” Farrow said.

As officials in Southeast Wisconsin encourage Amazon to consider their region, they are already facing stiff competition from other municipalities where local leaders are just as eager to land what is expected to be a $5 billion investment that would create as many as 50,000 jobs over the next decade and a half.

Most economists say landing the project would be worth the tradeoff — that the prospect of getting an Amazon headquarters presents a rare instance in which an offer of at least modest incentives could repay a city over time. That’s particularly true compared with other projects that often receive public financial aid. Sports stadiums for the Olympics and manufacturing plants, for instance, generally return few, if any, benefits over the long run.

To many a city, Amazon’s second headquarters presents an opportunity to join the elite club of “tech hubs.” With that rise in status, city officials could expect to gain a highly skilled, well-paid workforce composed of thousands of people who would be willing and able to spend freely, help improve a city’s urban core and fuel job growth well beyond Amazon itself.

Over time, other companies would be likely to move to the selected city. Some of them would be employers that work with Amazon in such cutting-edge fields as virtual reality and artificial intelligence. Amazon employees would also most likely leave the company to start their own businesses, producing additional job growth.

Hypothetically at least, those trends could help attract more highly educated residents in a virtuous cycle that helps increase salaries and home values.

“This definitely beats other deals that I have seen, to be sure,” said Enrico Moretti, an economist at the University of California, Berkeley and author of “The New Geography of Jobs.”

“It would certainly increase the attractiveness of that city for other well-paying high-tech jobs.”

It’s that hope that has given rise to much enthusiasm in places not only like New York, Boston and Chicago but also tiny Maumee, Ohio, with its population of 14,000. Economists give little reason to think officials are being foolish in raising their hopes so high.

High-tech firms like Amazon create a “clustering effect,” Moretti’s research has found, by attracting workers with specialized knowledge in fields such as software and data analysis. These workers are hard to find in other cities but reach a critical mass in a tech hub. And higher-skilled workers are more productive when they work in proximity to each other, sharing ideas and experiences.

The result is that each new high-tech job can create up to five more jobs, Moretti estimates. That’s far more “spillover” than is true in manufacturing, an industry in which a new job typically creates fewer than two other jobs, he calculates. His findings suggest that Amazon’s second headquarters could lead to as many as 300,000 total jobs over a couple of decades.

The spillover would probably include not only other high-tech positions but also professional occupations — there would be more doctors, accountants and architects, for example. Then there would be higher-paying blue collar jobs, in, say, construction, and lower-paid service jobs at retailers and restaurants.

By contrast, manufacturing jobs tend to decline over time, Moretti said, as factories become more efficient through automation or succumb to competition from overseas.

“When you lock in manufacturing, you don’t know what will be there in 10 years,” he said.

Like most economists, Moretti doesn’t think cities should dangle billions in subsidies to Amazon. Many say local governments should concentrate instead on developing assets that would benefit the larger region, such as offering to improve community colleges.

And the competition for Amazon might not be as intense as it looks at first blush. Few metro areas meet the company’s criteria. The company, for instance, has said it wants a place with a population of more than 1 million, an international airport and a “strong university system.” Not every city that has expressed interest in the project has the necessary assets, Moretti said.

Amazon’s search comes at a particularly fraught time, as differences in regional incomes and employment become greater. The effects of clustering have lifted a small number of cities far above the rest of the country.

EMSI, an economic consulting firm, calculates that workers in only five of the country’s 100 largest cities experienced good average annual pay increases of at least 2 percent, adjusted for inflation, from 2012 to 2016. They were San Jose; Seattle; San Francisco; Raleigh, North Carolina; and Madison, Wisconsin. The first four are tech hubs, and Madison is home to both the University of Wisconsin and is in close proximity to the headquarters of the medical-software company Epic Systems Corp.

Meanwhile, the Economic Innovation Group, a think tank, found in a recent report that the nation’s wealthiest municipalities, where about one-quarter of all Americans live, captured 52 percent of new jobs from 2011 through 2015.

The Associated Press also contributed to this report.


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