Guest Column

What lessons can Michigan learn from Amazon HQ2 search?

December 7, 2018
| By Lou Glazer |
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As we all now know, Amazon picked New York City and the northern Virginia inner-ring suburbs of Washington D.C. for its HQ2. Both are characterized by high concentrations of those with four-year degrees or more and extensive transit systems. The bottom line for Amazon? No talent, no transit, no Amazon.

There are three key lessons the Amazon HQ2 competition teaches us in Michigan about what matters when looking to retain and attract high-wage jobs:

Talent, not low taxes, is what matters most. Former New York Mayor Michael Bloomberg got it right when he wrote: "Many newly successful cities on the global stage — such as Shenzhen and Dubai — have sought to make themselves attractive to businesses based on price and infrastructure subsidies. Those competitive advantages can work in the short term, but they tend to be transitory. For cities to have sustained success, they must compete for the grand prize: intellectual capital and talent." Amazon did not choose low cost/low tax places, nor did it choose the places that offered the most money. Amazon chose places, first and foremost, that had the talent it needs today and tomorrow.

Talent is concentrated in big metros. Amazon's first eligibility requirement for HQ2 was a region with a population of 1 million or more. That meant more than 90 percent of the land mass in America was not eligible even to apply. The reason is professionals and managers — those with four-year degrees or more — are concentrated in big metros. Michigan is fortunate that it has two regions large enough to compete: Detroit and Grand Rapids. Many states have none. But at the moment, neither metro Detroit nor metro Grand Rapids have the talent concentrations necessary to be competitive for future HQ2s. If Michigan is going to retain and attract high-wage employers, its two big metros must be talent magnets.

Professionals and managers are the core of the middle class. What made HQ2 the Super Bowl of economic development was 50,000 jobs at an average pay of over $100,000. Those with a four-year degree working in professional and managerial occupations in offices, schools and hospitals are today's and tomorrow's mass middle class. High-wage jobs at Amazon are in their headquarters jobs, not in their warehouses or those who deliver packages for them. What makes metro New York and D.C. high per capita income regions is their high proportion of adults with four-year degrees or more, not the proportion of those in the skilled trades or other midskill occupations. Michigan is a low college attainment state and, therefore, is a low per capita income state. The same is true for metro Detroit and metro Grand Rapids.

This all adds up to a simple lesson that Michigan has yet to learn: Preparing, retaining and attracting talent is the economic development priority. Michigan must shift from an emphasis on being a low-cost state to a state that develops, retains and attracts human capital as its core strategy for economic success.

So what are the policies that can best retain and attract talent? Over two decades of research has taught us one fundamental lesson: Talent equals economic growth. The key to retaining and attracting talent is creating places where people want to live, work and play.

In Michigan Future’s new report, which focuses on creating places across Michigan where people want to live and work, we identify five placemaking policy levers that must become priorities:

• Be welcoming to all. Create a legal framework that prohibits all forms of discrimination and access to the resources necessary for social and economic mobility.

• State and local development-friendly regulations that facilitate the creation of high-density, walkable, high-amenity neighborhoods in our cities and inner-ring suburbs.

• Understanding that economies are regional and each region needs the flexibility to develop and implement its own strategies for retaining and attracting talent.

• Providing and paying for world-class, 21st-century infrastructure, basic services and amenities.

• Transportation — with an emphasis on transit — as the most important placemaking public investment. This requires a shift from accepting a crumbling 20th-century infrastructure to providing a world-class, 21st-century transportation infrastructure, where world-class 21st-century infrastructure means complete streets, not just fixing the damn roads, and is aligned with the transition to autonomous vehicles and mobility as a service. This will be a world in which almost certainly fewer and fewer of us will own and/or drive a car as the primary way to get around.

Lou Glazer is president of Michigan Future Inc.

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