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After Amazon: What Happened In New York Isn’t Just About New York

The fiasco surrounding Amazon’s recent escape from New York reflects a broader, potentially devastating trend. The impact goes well beyond Gotham.

Yet, new migration trends suggest that educated workers are headed elsewhere, and in increasingly large numbers. As they age, millennials are moving decisively away from core urban centers and expensive metro areas. A recent study by Brookings’ Bill Frey found that the largest gainers of millennials (ages 25 to 34) are now solidly in the Sunbelt—led by Houston, Orlando, Dallas-Ft. Worth and Austin—while traditional urban “hot spots” like New York, Los Angeles and Chicago are the biggest losers.

At the same time, as they enter their 30s, millennials are fleeing for the suburbs. All this runs counter to the decree that companies must head to inner cities to find young talent. Some of the “best and brightest” still migrate, as they have for generations, to “superstar” cities, but many don’t stay long. In fact, the average resident in the downtown areas so popular with post-college millennials has lived in the same house for approximately 2.4 years, compared with seven-plus years in the suburbs and exurbs.

What High-Tech Employees Want

To be sure, some high-tech firms will cluster in dense urban cores. These will tend to be those most closely associated with city-oriented industries like advertising and media. Google’s recent expansion in Manhattan needed no subsidy and made estimable sense. But for much of the tech employment base—and many high-end services as well—locating in a less dense, more affordable location, often in the suburbs, may be vastly preferable.

Ali Modarres, professor and director of urban studies at the University of Washington Tacoma, suggests firms that rely on long-term mature engineers and managers need to follow a different course. This is why most of what he calls “the first wave” of tech firms—companies like Intel, Cisco, Hewlett-Packard and Apple—still cluster in suburban locations.
Modarres points to Apple’s creation of its second-largest employment center in suburban Williamson County, Texas, outside less costly Austin. Apple already has more than 6,000 employees there, roughly half the size of the company’s spaceship headquarters in suburban Cupertino. Significantly, the Texas location hosts the company’s hardware engineering division.

In contrast, what he labels “second-wave” tech firms like Amazon tend to be short-term employers, with many young people earning their spurs before heading out to other areas.

“The new information-peddling economy,” notes Modarres, “creates nomadic labor pools, who have to embrace ‘place-lessness’ to survive. They move where their skills take them.” These firms may create pools of instant wealth, when companies go public, but they do not seem to create a long-term middle class.

“The new economy, epitomized by Amazon, neither requires nor offers loyalty to its employees,” he notes. “They need the largely youthful ‘creative class,’ to give a few stressful years of their lives to innovate, pad their CVs and leave for the next job, hopefully in less expensive places. They work hard, live fast and burn out in a few years, ending up often in more suburban and other less costly areas.”

Where Is Best for Innovation?

One can appreciate the enormous economic benefits that firms like Uber, Lyft, and others have brought to San Francisco, Seattle and other tech cities. Yet the concentration of high-end businesses has also created something of a Dickensian reality—a city with sky-high housing prices, massive homelessness and a rapidly diminishing middle class. San Francisco now has more hard drug addicts than high school students, streets filled with fecal matter and a burgeoning homeless population.

The kind of conditions seen in San Francisco, and increasingly Seattle, are not ideal for people seeking stable long-time employment. Engineers generally seek to buy houses and often raise families, meaning they tend to move to more affordable locales. Over the past several years, engineering-oriented firms such as Bechtel, Jacobs Engineering, Occidental Petroleum and Parsons have all moved, largely to Texas or Virginia.

This suggests a surprising future for the tech economy, particularly if the progressive tide continues to mount. An aging millennial population, growing dysfunction in centers like San Francisco and political radicalism all work against business investment and the migration of educated middle-aged adults to cities. The bad old days of urban decline may not return, but the bright high-tech future predicted for our urban cores may be far less promising than widely heralded.


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