By N. David Milder
Jobs, Incentives and Huge New Expensive Projects
In the last few weeks I confronted an intellectual jolt that made me ask some very basic questions about economic development, the field I have been professionally active in for over 40 years. The causes of this jolt were the discussions in the traditional media and on LinkedIn about Amazon’s Long Island City 2HQ project and the opening of the huge $25 billion Hudson Yards project on the West Side of Manhattan’s Midtown CBD. The merits of both projects have been the subjects of significant debate – especially with Amazon reneging on the deal. The key concepts on these debates seemed to be:
- JOBS. For the Amazon deal, jobs seemed to be the be all and end all of all of the pro-Amazon arguments.
- THE DESIRABILITY OF HUGE NEW EXPENSIVE PROJECTS. For the advocates of both projects, the size and expense of both projects made them worthy, and the fact that they would attract the intellectually and financially blessed added greatly to their luster.
- INCENTIVES. Criticisms of both projects were heavily cloaked in attacks of the large financial incentive packages given, both directly and indirectly to Amazon and Related, while proponents seemed to argue that direct incentives had no real cost – after all, no Brinks trucks were being driven up to the City’s treasury to take away billions in cash.
What jolted me was that these discussions about big, important projects seemed to be vapid because they were missing so many really essential points. Indeed, this vapidity suggested that we, in the economic development field, had forgotten how to answer an elemental question and then use that answer in our professional activities. That key question is: Why do we do economic development? What is it supposed to achieve? I have been to countless professional conferences, but I don’t remember too much attention ever being given to that question.
Are Jobs a Means or an End?
Jobs certainly are important. However, there are good jobs and bad jobs. Economic development should seek to maximize good jobs. Economic development should also try to provide good jobs for those who need them. All this would seem to be part of our field’s conventional wisdom. Amen.
Lots of Jobs Can Have Big Impacts That Can Be Good Or Bad, That Can Help Or Hinder Reaching Important Societal and Political Goals. Unfortunately, not all jobs are good ones. The US, today, has an incredibly low unemployment rate. But, how many of those plentiful jobs pay a livable wage? How many people are holding several of those jobs because none of them alone pays enough to support their households?
Good jobs are also the means to many important socio-economic and political ends. They can enable system residents to have a better quality of life, enable a more equitable distribution of incomes, and reduce the extent and depth of socio-economic frictions. Unfortunately, what many people may consider good jobs, may also have bad impacts on such things as the environment, public health, housing demand and prices, commercial space demand and prices, stress on mass transit. It is precisely at this “system” level where the suasion of the arguments of the advocates for gobs of more jobs are most likely to fade or outright fail. It is also why such discussions are not likely to occur or be given import. It is also why questions such as this are almost never asked: how can 25,000 very high paying jobs in one relatively small area be absorbed without huge disruptions in the housing, market, labor market, public transportation, traffic congestion, etc.?
Jobs Are More Important to Some Economic Developers Than Others. The centrality of jobs to economic development practitioners varies. For those who are concerned about downtowns and Main Streets, jobs are not a key concern, save when they need to demonstrate the positive impacts of a new project. Job creation and development are much more salient to economic developers who are concerned about workforce growth and development, and those active in obtaining project approvals and funding from government agencies and foundations.
Jobs Have Become an Important Concern Because We Are Told We Can Accurately Estimate Them. Concern about jobs is also highly embedded in our politics and in our assessments of the economic impacts of large projects such as new buildings, stadiums and arenas, arts and entertainment venues, etc. This is facilitated by the ease with which input-output models can generate estimates about how many jobs such projects can generate.
Alas, the use of these I-O models often reminds me of a story the famous French sociologist Raymond Aron once told a seminar at Cornell about the former president of France, Valery Giscard d’Estaing. When taking a university exam and asked where the Seine was deepest as it courses through Paris, d’Estaing’s reply was something like: “Under which bridge? I am sure I can make a convincing argument for each one.” Similarly, these I-O models seem to have never met a project for which they cannot find huge positive benefits. I would argue that the importance given to new jobs in many project assessments is, to an important degree, a result of the ability of I-O models to churn out positive employment impacts. I have come to treat the indirect and induced estimates of the I-O models with considerable wariness and skepticism. Reviewing them I keep in mind the axiom Garbage In, Garbage Out.
The Incentives Tie-In. Across the nation, scads of financial incentives have been given away for more new jobs, usually at an $XX/job rate . That was, indeed, at the heart of all of Amazon’s 2HQ deals. But, experience, has shown that far too often those jobs don’t show up or quickly disappear or are not the type pf jobs promised. For example, Amazon’s hoopla that 2HQ jobs will have a median salary of $150,000 seems to be very far from true for its new Nashville location.
Deal-Making. In my years in the field I have met an awful lot of people for whom economic development is about making deals. These deals usually involve using public financial incentives to produce projects. A promised primary benefit of most of these projects is lots of more jobs. Too often the content of the deal and its probable impacts are not as important as the making of the deal.
Suggested Take Away. Jobs are undeniably important, but also a means to larger and more important economic development ends. We must not lose sight of those ends. Moreover, jobs, even those considered “good” ones, can have impacts beyond those on the job-holders that are beneficial or harmful. Those impacts are important to know and assess, though too often never looked into.
Jobs are often presented as the means by which the larger community benefits from a major project. Just knowing the number of jobs or even their pay ranges are really insufficient to assess a project’s real impacts on the larger community.
Are “More”, “Bigger” and “More Expensive” Always Better?
Also embedded in the argument for the Amazon and Hudson Yards projects were that they are big or in some way the biggest, or the most expensive. Lots more workers, pedestrians, and residents, were taken as being desirable. BUT in the real world, you have to know a lot more about those jobs, pedestrians and residents. There can be too many of them that produce congested trains, buses, and auto traffic, that make sidewalks almost impossible to walk on comfortably, that provide more but lower paying jobs, that create a housing shortage and huge increases in housing costs. Do we really want every neighborhood to be like Manhattan or San Francisco or Seattle where those who can’t afford $1 million for a condo are hard pressed to find decent housing, where either midget apartments or shared housing – the types of residential experiences the affluent definitely do not seek – are lauded as acceptable alternatives?
Walkability and high levels of pedestrian activity understandably have become almost religious mantras among downtown leaders, but many places in Manhattan have become almost unwalkable because of the density of pedestrians, and many tourist attractions in Europe are being overrun and ruined by attracting too many tourists. Often, as I walk through them, I think that Times Square and parts of Fifth Ave should have olive oil misters to lubricate pedestrian traffic.
If our downtowns are being changed into places that only can be used by people who can afford $1 million apartments, $500 per person meals and $500 theater tickets, will they still be everyone’s neighborhoods?
The fact that the Hudson Yards project is the biggest and most expensive urban project certainly does not in any way make it a “good” project for the community, for the city, for all of those who are neither its developer/landlord nor tenants, but who are paying $ billions for the project to happen. Compared to Rockefeller Center it is an outright gated community failure.
Just because a project might produce huge increases of something, be it jobs, housing units, money invested, etc., are poor reasons by themselves for doing the project. Why do we keep falling for the “more is better” types of arguments?
The Critical Density Issue
For a significant number of economic developers, particularly those with a partiality for urban areas, greater agglomeration and development density have long been seen as desirable community goals. Valid conventional wisdom recognizes that often there can be too much of a good thing, e.g., rain, food, fire, etc. Can there also be too much development density? One might argue that traffic congestion, growing pedestrian congestion, growing air pollution and garbage production might all reach the “too much” stage. A recent study has also shown that once our large cities reach a certain population level, their economic growth slows appreciably.
Today, we can no longer assume that greater density will always be good. It is unfortunate that we are just beginning to look at where those cut off points might be.
Where Are Concerns and Discussions About Community, Equity, Justice and the Common Good?
These are the kind of concerns that I think best justify economic development activities and projects. It is amazing to me how often they are never raised when economic development projects, programs and policies are being discussed or how little attention is paid to them when they are. For example, one would be hard pressed to find them in the discussions about the NYC Amazon 2HQ or the Hudson Yards projects. While housing affordability was raised in the fight against the 2HQ project, incentives and jobs seemed to consume most of the oxygen in that debate.
For decades, downtown revitalization advocates argued that downtowns should be everyone’s neighborhoods. Can that aspiration be achieved when downtowns are increasingly being turned into places that even solid middle income households cannot afford to live or play in?
These concepts are fundamentally about values and often hard to quantify. They are also often very political. Discussions that involve them can be highly emotionally charged, even combative. Consequently, public officials may be inclined to want to avoid them. However, that avoidance does not diminish the importance of these concepts – or the incompetence and turpitude of too many of those public officials.
Who’s in Charge of Development?
Amazon’s 2HQ national effort initially drew a lot of my interest, but I slowly grew uneasy about it. The reason for my unease did not become clear until Amazon reneged on the NYC-LIC deal: Amazon and its needs and plans were driving things, not the needs and well-thought out plans and strategies of the responding communities. Amazon was taking charge of the economic development processes in all of these communities so hungry for more jobs and huge investments in real estate. The cities were responding like giddy, compliant lackeys, anxious to give away anything to get such a prestigious corporation with all its promised jobs and investment dollars.
Amazon early on plainly established by its actions that they had an “our way or the highway” policy, but political leaders — many of whom claim to be powerful politicians — just accepted Amazon’s lead. Amazon reneged in NYC when it became clear it would have to engage in some real negotiations. They were never prepared to be a true development partner. They were/are more of a potential imperial development partner. Cities do not need such imperious corporations –- they care mostly about themselves, little about the communities in which they are located.