At some point in the next year or so, a city is going to be announced as the winner of the Amazon HQ2 sweepstakes. That city will pay a steep price for that victory, and, whatever its contributions are, they will be substantial, they will be hard to track down, and the costs will be spread over decades. But worst of all, that victorious city will be spending money chasing an economic development strategy that is outdated at birth. The winner will, in effect, be the toast of America circa 1995.
Chasing corporate headquarters and throwing money at them, reflects a great-man theory of economic development that reflects deep civic insecurity: only a corporation can save a city from its struggles. But corporations aren’t the civic heavyweights they used to be. For starters, employee loyalty has plummeted. The percentage of workers engaged in "alternative work arrangements" (freelancers, contractors, on-call workers and temp agency workers) grew from 10 percent in 2005 to 16 percent in 2015. And job growth in that sector far outpaces growth in salaried jobs. Tech companies are leading the charge: For example, about half of Google’s employees aren’t salaried.
Cities should reprogram the incentive money and use it to position themselves as safe havens for the new freelancer. They should hunt for the workers themselves.
This period of change, when workers are being decoupled from their traditional employers, is a huge opportunity for cities. They should look to fill the vacuum created by receding corporations.
Some locales are trying innovative ways: The State of Vermont just announced that it will be offering $5,000 per year for two years to any worker who moves to Vermont and works from home as long as their employer is out-of-state. It’s a fantastic idea to reduce the barriers to entry for people who might be willing but hesitant to give living in beautiful but remote Vermont a try. But, while the direct subsidy makes sound economic sense, it falls short of forging a relationship with workers because it doesn’t address their day-to-day needs. To make that connection, cities have to put themselves in the shoes of freelancers and understand their most pressing problems. Being a contract worker offers freedom and control, but at what cost? They’re flying without a net.
A robust unemployment insurance to fortify existing plans would create a very attractive safety net, attracting workers, incentivizing entrepreneurship and risk, and encouraging freelancers to put down roots, which has the added benefit of stabilizing your community. Or look at healthcare. If a city is willing to offer $5 billion over ten years in subsidies to land the Amazon HQ2, how far could that money go towards subsidized healthcare for freelancers? Pretty far. San Francisco’s Universal Health Care costs the city $236 per member per month. Using that figure as a rough guide, that would allow a city to reprogram the $5 billion Amazon subsidy to cover more than 175,000 people per year for those ten years.
Or think of family life. Freelancing quickly becomes financially and psychologically taxing once familial responsibilities materialize. By reducing some of these burdens, and being early to the gate to do so, cities could position themselves as forward-looking and welcoming to this changing workforce. Families are increasingly abandoning major cities, but, if a city offered families with children under a certain age a childcare subsidy, similar to what Swedish families receive, more families might come, and better yet stay. And to make a more equitable city, it could be adjusted higher for lower-income families.
Redirecting huge corporate subsidies to a workforce-focused economic development strategy has five benefits: First, it mitigates the risk of becoming a one-company town that loses its one company. Second, by pursuing the talent and not the company itself, your city is stocking up on what the companies themselves pursue. Why chase one company when you can make them all come to you by supplying cheaper, subsidized talent? Sure, Amazon brings its elite workforce with it, but why pay the middleman? Third, in paying the subsidy directly to residents, your city sets up a public benefits program that improves social equity.
But it’s the last two reasons that are most important, since they combine to tell a compelling and unique story about a city and cement a relationship between place and people. Redirecting corporate subsidies to residents is a bold values statement that underpins a city’s reputation as confident and forward-thinking. And finally, these approaches align city government with its residents and strive to make them feel supported by their hometown, a result that engenders loyalty, not to a corporate employer that may come and go with a varying economy, but to the city itself.