More than 20 years after Amazon was first established, it is on its way to becoming the first retail company to be worth $1 trillion in the history of corporate America. Having been among the pioneers of the American sharing economy, Amazon is, in all senses of the word, a tycoon. After 11 years of being located in Seattle, the company is looking to branch out elsewhere with Amazon HQ2, sending cities across the U.S. in a frenzy.
The competition is fierce, with the list currently at 20 cities that the company is considering to host Amazon HQ2. Boston and New York, two popular choices, are ranking relatively poorly on the list. Other cities like Austin and Pittsburgh have fared pretty well for real estate affordability and low crime rates, among other factors.
Amazon HQ2 is a promising opportunity for cities across the board. With the new headquarters comes the prestige of being home to the retail tycoon and scores of jobs for city residents. But more and more cities have been reporting of the negative impacts of the presence of Amazon on their economy, the wellbeing of their residents, and on urban growth. Purported by what experts are calling ‘the Amazon Effect,’ the location of Amazon HQ2 has city leadership and policymakers excited and equally concerned about the ramifications of hosting Amazon’s new headquarters.
Birth of a Retail Giant
Founder of Amazon, current Chairman and CEO Jeff Bezos, first established Amazon in Washington state in 1994. Initially settling for the name ‘Relentless,’ Bezos was advised by others to choose something a little less malicious. He opted for Amazon in part because it starts with the letter ‘A’ so that his company’s name will always appear atop alphabetized lists.
Amazon came at a time when e-commerce was quickly gaining momentum in the U.S. Bezos initially wanted Amazon to only sell books and had the hopes of making the company the biggest bookstore in the world. Within the first two months of operation in 1995, Amazon was making $20,000 per week, selling books across the United States.
Today, more than 20 years after its establishment, Amazon sells everything from music and clothes to electronics and food, since acquiring Whole Foods last year. In 2016, Amazon became the fourth most valuable company in the world and the largest Internet company in the world, making $177.86 billion in 2017. In the United States, Amazon is also the second largest private employer in the United States, falling behind Walmart.
In 2007, the company outgrew its office and announced it was relocating to the South Lake Union neighborhood in downtown Seattle, Washington. The new office, also called Amazon’s ‘urban campus’, is 1.6 million square feet (148,644 square meters) in size. In more than 10 years, the company has expanded further into the city, opening a new office every two and a half months on average. When the company moved into its urban campus in 2010, it employed 5,000 people, a number which has increased 8-fold to 40,000 employees in under a decade.
Seattle hails Amazon as a child of its own, a home-grown idea that the city is proud of. With the establishment of Amazon as a retail powerhouse in Seattle, thousands of jobs were created at over the years. And as the company continued to grow, scores of other jobs around the city were created.
“[Amazon] means lots of jobs for that company and great tax revenue, employees that are supporting restaurants and bars and art museums and small retail [in the area],” said Jon Scholes, CEO of the Downtown Seattle Association to ABC 11 News. Since Amazon began operation in Seattle, 53,000 jobs were created outside of Amazon and 2,000 business have opened in the area. The company has also said its direct spending boosted Seattle’s economy by $38 billion from 2010 to 2016.
The surge in employment opportunities and revenue, however, are not unfounded. With the increase in the number of people working in downtown Seattle at Amazon or any of the other companies with offices downtown like Snapchat or Twitter, the city transformed. Today, Seattle is the fifth most expensive city to live in across the United States.
Amazon’s Turn for the Worst
As Amazon HQ2 looks for a place to call home, the company says it is looking for a city with a “stable and consistent business climate.” And while Seattle has proved to be an adept host city for its HQ1, the city’s residents have suffered the brunt of that burden.
Out of the 50,000 employees at Amazon, approximately one fifth of them are original Seattleites. And with such a sharp rise in the population, housing prices and the overall cost of living also shot up. According to ABC 11 News, the average price of a home in Seattle is currently at $830,000 and in the King County area around $635,000. That is 38 percent higher than the peak average was prior to the 2007 recession.
The influx of employees into the city has also taken a toll on Seattle’s traffic, making it difficult for Seattleites to navigate the city. According to a study by software and traffic-data company Inrix, the average commuter spent 55 hours in traffic 2016. And as the number of buildings Amazon owns is growing – soon to be 40 across the entire city – more people are facing displacement due to rising rent.
King County, where Amazon is located, is already struggling to address its current problem with homelessness, numbers of which are the third worst in the country. And while city leadership says it is working to provide more affordable housing, their efforts do not match the staggering increase in the number of new residents in the city. Some residents have dubbed this phenomenon ‘Amageddon,’ a play on the biblical reference to the battle at the end of the world.
“High demand and low inventory creates bidding wars and animosity among those who can’t even afford a starter home in the city they grew up in,” said GeekWire’s Kurt Schlosser. “[The] rent is too damn high, too,” he continues. “Workers who don’t wear tech badges for a living are forced to look outside the city and thus contend with the traffic coming in and out of it, creating a vicious cycle and affordability crisis.”
Amazon has repeatedly shown its commitment to ‘giving back’, donating financial resources, old buildings, and other ‘giveaways’ to Mary’s Place, one of Seattle’s established homeless shelters. In 2016, the company vouched to donate free food to the shelter from the company’s new checkout-less supermarket, Amazon Go. The following year, Amazon also donated one of its abandoned office buildings to Mary’s Place and promised to turn it into a 200-bed shelter, making it one of the biggest homeless shelters in the world. The entire donation process was filmed on camera.
And while Amazon’s generous giveaways fall under CSR or Corporate Social Responsibility, corporate giveaways are neither out of the goodness of CEO’s hearts nor sustainable; rather, a stunt and hindrance simultaneously. Slate reported last month that the food Amazon vouched is difficult to store, which is mostly because of the difficulties of storing food in the building which the company donated to Mary’s Place the year before. And because the company has so heavily used this as part of its image, it is difficult for Mary’s Place to speak out, said an employee at Mary’s Place to Slate.
Amazon HQ2: Blessing or Curse?
With technology quickly making its way into our cities, leadership tries to make the appropriate changes to ensure their cities are becoming more and not less. But in light of the race to become home to Amazon HQ2, cities are catering these changes towards what Amazon seeks in a host city in hopes of receiving the golden Amazon ticket. This, however, is not new to urban growth. American cities have had a history of adjusting their plans based on what corporations need from them. On paper, it’s a win-win situation, but, as was the case with Seattle, that isn’t necessarily the case.
After Amazon claimed Cincinnati didn’t have enough tech talent, the city’s investment chamber poured money into organizing an IT internship program for high school students. Kansas City also looked into expanding its talent pool by spending money on educational reform following similar criticism from Amazon. Jordan Vogel said to Business Insider that he doesn’t think there is anything wrong with taking policy recommendations from big corporations. “’When we get feedback from a big place, it’s great to hear and it helps us double down on bets we were already making.'”
But these corporations don’t always carry through with their promises to cities. In 2009, GMAC Financial Services promised to create 200 high-salary jobs in Charlotte, North Carolina, in exchange for a $4.5 million subsidy from the city. But instead of following through with their promise, the company instead laid off 160 workers. An analysis by WRAL states that “more than 100 companies named in job announcements since 2009 have since reported no new jobs.”
And even when Amazon creates new jobs, which it has historically done in smaller cities, the working conditions are squalid, causing more harm than good. In San Bernardino, California, Amazon’s warehouses are a blessing and a curse. The Inland Valley, where San Bernardino is located, has been economically starved. So when Amazon announced it was opening a warehouse there, the mayor of the city welcomed the tycoon with open arms. However, workers have reported that they are fainting from dehydration, being deprived of bathroom breaks, and are overworked.
Earlier this year, Seattle’s city council passed a bill requiring corporations making more than $20 million in gross revenue to put $500 per full-time worker per year into a fund that would address Seattle’s housing and homelessness crises. In May of this year, the city revised the bill and lowered the tax to $275 per full-time worker in a move that was ‘more reasonable’ in the eyes of corporations.
Prior to the modification, Amazon’s Vice President Drew Herdener released a statement stating the company was hesitant on resuming work in the city due to council’s “hostile approach and rhetoric toward larger businesses.” He reiterated that Seattle’s problem with funding is because of the city’s inefficient spending, rather than the presence of big business in the city.
What is happening in Corporate America is now able to influence urban policy. With such a grip deeply rooted in the needs of host cities, Amazon is well aware of what cities need and is arguably using those needs as a bargaining chip against them. Many are calling on the cities Amazon is considering for Amazon HQ to learn from Seattle. The idea here, however, is not to claim that the company is purposely looking to destroy host cities by blackmailing city leadership or forcing them to, since that isn’t what Amazon or Corporate America do.
And in the wake of selecting another city for Amazon HQ2, cities have been proposing large-scale tax breaks for the company with hopes of catching Bezos’ attention. In return, Amazon has promised $5 billion in investment and 50,000 jobs to the city that is the most suitable to host Amazon HQ2. And while this, like Amazon’s donation to Mary’s Place, comes off as the company-giving-back, is it the best bet for host cities? In other words, how close will these promises – empty or followed through with – bring in the way of urban and economic growth?