Amazon HQ2 Proved It Again: Talent Fuels Businesses and Local Economies

Fourteen months. That’s how long it took for the Amazon HQ2 saga to unfold—first as an announcement that rocked the economic development community, then as a drawn-out process that forced 238 (and then 20) regions to practice serious patience, and finally as a mega site selection project that splintered into HQ2a and HQ2b.

On Tuesday, Amazon declared New York City and Arlington, Virginia, the winners. In each Amazon will build a headquarters that could employ 25,000 highly paid workers. The retail and tech giant also threw a (very nice) bone to Nashville in the form of a distribution and logistics center that could employ 5,000 people, while it also expands in its original home, Seattle.

What does HQ2 say about the current state of the economy and economic development? Here are three takeaways:

1. It’s the Labor Market, Stupid

This is a riff off James Carville’s slogan for Bill Clinton in the 1992 presidential campaign, but the fact is, a huge part of the health of a city’s economy is the health of its labor market. How well can it develop, attract, and retain skilled talent?

That’s the chief question Amazon asked.

“During the process it became clear to us that the overriding criteria was going to be the ability to find and attract talent,” Jay Carney, senior VP at Amazon, told the New York Times.

Amazon’s answer: It was best positioned to choose the metro with the largest pool of software engineering and programming talent in America (New York City) and another metro with one of the highest concentrations of tech workers (Northern Virginia/Washington, D.C.). Mitchell Schnurman of the Dallas Morning News explored this in depth in part using Emsi data.

Incentives, viable sites, and infrastructure no doubt played big roles. Yet available and accessible talent was the trump card for Amazon. The same goes for other companies that have made recent site selection splashes: Google, Apple, and Foxconn, which reportedly will try to import Chinese engineers to its new Wisconsin location because of a dearth of talent there.

2. Amazon Picked the Top Two Magnets for College Grads

Shortly after Amazon released its initial RFP in September 2017, we created the Amazon Talent Index, knowing that labor—specifically tech labor—was going to be a key determinant. And not only do New York City and Northern Virginia have a lot of tech workers, both are part of metro areas that do a better job attracting college grads than all other U.S. cities, originally published in a joint article by Emsi and the Wall Street Journal.

Per Emsi’s full profile database, over the last decade the New York metro area has attracted 7.3% of all four-year college grads who attended school in another region. That’s heads and shoulders above any other region. The Washington-Arlington-Alexandria MSA is second, drawing 4.1% of four-year grads outside the D.C. region—just ahead of Chicago (4.0%), San Francisco (3.8%), and Los Angeles (3.7%). Atlanta (3.1%) and Dallas (2.9%) were just outside the top five.

Source: Emsi profile database; graduates and attendees of all non-online U.S. institutions

So together New York and D.C. attract almost 1 out of every 8 university students, and that doesn’t count the thousands of college grads every year that come from local institutions. In the 2016-2017 academic year alone, the New York metro produced 2,200 graduates in computer science (CIP 11.0701), a jump of 21% from 2015-2016.

Amazon understands that to fill 25,000 highly skilled jobs in both cities it isn’t going to be able to just tap into the existing workforce. Talent attraction and retention of new grads is paramount. And for Amazon, luring world-class talent as Jeff Bezos said is especially vital.

Which makes New York and Northern Virginia two logical picks.

3. Communities Need to Focus on Workforce, Education, and Tending to Their Own Companies

HQ2 ignited a furious debate on the future and merits of business recruitment, the elephant hunting in economic development that so many bemoan. But as our second takeaway illustrates, it makes sense in the current growth economy for communities to emphasize talent recruitment over company recruitment.

At minimum, the onus is on cities and states to prove they’re investing in workforce development and education. Those that do will have a better chance at getting the attention of relocating companies, and at retaining local companies and helping them expand—which, after all, is the most tried-and-true method for growing a local economy.

We’re not talking about running quick talent attraction plays, though we do walk through short-term (zero- to six-month), as well as long-term strategies in our new edition of the Talent Attraction Scorecard. We’re talking about sustainable, strategic workforce development—a process that should involve higher education, K-12 schools, workforce boards, and, most importantly, employers.

Two workforce development partners bear special mention here. First, if businesses aren’t engaged or driving the conversation, regional talent attraction and workforce development will have a hard time succeeding. Second, community colleges can quickly develop workforce training programs, and they retain a higher percentage of their graduates than other higher ed sectors, which makes them worth the investment and worth giving a prominent seat at the table.

Sure, Amazon signaled through this process that smaller regions will have a hard time competing with mega cities for mega projects. We already knew that. Only a handful of cities could have handled 50,000 highly skilled jobs, and halving that to 25,000 jobs didn’t open up many more.

Cities like Indianapolis and Columbus—as well as small or mid-sized metros like Boise, Bend, and Des Moines—should isolate their comparative advantages and market them like crazy. Does your region have lower cost of living? A cluster of niche industries? A vibrant technical college system? Nimble public-private partnerships? All of the above?

Another site selection spectacle like HQ2 might not come around, but communities that can illustrate and build on their strengths will do just fine.

To learn more about any of these data metrics or strategies, or to learn more about Emsi, email Josh Wright or call 208-883-3500.

The post Amazon HQ2 Proved It Again: Talent Fuels Businesses and Local Economies appeared first on Emsi.