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. By driving the Seattle-based behemoth out of the Big Apple, New York’s increasingly militant progressives have created a political paradigm that could resonate in cities across the country.

Simply put, after decades of trying to lure businesses, many cities are adopting political agendas—from minimum wage hikes to rent control and threatened tax boosts—that make them less attractive to both big firms and smaller businesses. This new development is being driven by demographic shifts as cities become more dominated by hipster radicals and increasingly polarized with little room for a middle ground between the very rich and the very poor.

Cities have traditionally been more left than the rest of the country, but now that ideological gap is widening. Chicago, New York and Los Angeles seem destined to embrace ever-more radical politics as the young, single population and the poor dominate the electorate. Only a handful of major city mayors, including Miami’s Francis Suarez, are Republicans, while pro-business Democrats, like Chicago’s Rahm Emanuel, are being replaced by ever more stridently progressive politicians.

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Rising Socialism in Cities

Jeff Bezos should have seen this coming. He had already tussled with Seattle’s effort to tax his and other large firms to address homelessness and the lack of affordable housing. The city council-imposed homeless tax on large corporations was only repealed when Amazon—responsible for nearly 20 percent of the city’s office space—responded by stopping construction on a downtown office tower.

Even so, Bezos loosened his ties to the ever-more-progressive Emerald City. Amazon announced expansions in suburban Washington, D.C., and Nashville, places where costs are lower and politics far less pink. The online giant has also announced plans to lease out most of the new high-rise it is constructing in downtown Seattle and reportedly plans to move employees to the less politically fraught and more affordable confines of nearby edge city suburb Bellevue.

Amazon’s experience reflects the emerging new norms of locating jobs in inner cities. Companies in America’s most favored and bluest cities increasingly face a cascade of regulation that may make them think twice about expanding there—e.g., the limits to terminating employees currently being considered by New York’s City Council. Much of this reflects a sort of hubris. Mayor Bill de Blasio, who helped craft the original deal, lambasted Amazon for missing out on what he described as “the best talent in the world.”

In the past, tech firms sought to win over progressives by adopting their agenda on issues such as gay and transgender rights, climate change and racial redress. In New York last year, Amazon and its fellow oligopolies poured $600,000 in donations into Democratic campaigns, 10 times what they gave to Republicans.

Increasingly, the tech elite seems more like Lenin’s “useful idiots.” Appearing “woke” on social issues does not cut it with progressive firebrands like New York’s Alexandria Ocasio-Cortez, who openly regards tech and Wall Street billionaires as “immoral” class enemies deserving of being systematically stripped of their wealth. When Amazon withdrew, the country’s most glamorous democratic socialist trilled: “Anything is possible: today was the day a group of dedicated, everyday New Yorkers and their neighbors defeated Amazon’s corporate greed, its worker exploitation and the power of the richest man in the world.”

This is not just a New York phenomenon. An increasing number of millennials—soon to be the nation’s largest voting bloc—say that they prefer socialism to capitalism, threatening the future profits of Silicon Valley plutocrats. This sentiment is particularly marked among the educated young workers so coveted by tech firms.

Demographic Truths and Lies

As a rationale for choosing New York for its second headquarters, Amazon cited the city’s talent base—one reason Gotham and other big, dense expensive cities are promoting themselves as destined to become “tech towns” due to their young, motivated labor pool.

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, Salesforce.com 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.