AmazonHQ2 - What Metros Have the Tech Base?

September 11, 2017

 

It is not often that potential economic development deals reach the top of the national news, but Amazon’s announcement that they will be looking for a second headquarters did just that.

 

In case you missed it, Amazon announced they were asking large metros (with at least 1 million people) in North America to submit requests for proposal to be their second home. There are 53 such metros in the U.S. and an additional 6 in Canada.

 

Amazon expects this development would employ 50,000 workers with average earnings topping $100,000. It would be an investment of $5 billion. Such a development would be a game changer for any of these metros, so Amazon had better be prepared for a lot of proposals.

 

Now, this is the company that uses algorithms to know what I might like to buy before I know I’d like to buy it, so I am pretty sure Amazon will have a fairly sophisticated algorithm to help them in this process. But, it is a fun and telling exercise to try to handicap the field in advance. Amazon had a short list of requirements besides the 1 million population.

  • A stable and business friendly environment

  • Communities that think big

  • An urban or suburban location with the potential to attract talent

I want to look at this last measure in detail.

 

Finding an additional 50,000 skilled computer workers would be a challenge for any metro. Undoubtedly, a good plan to build a pipeline of qualified tech workers will be a key part to the winning proposal. But where could Amazon begin their search? Using data from the Bureau of Labor Statistics, I identified metros that might already have a strong computer occupation base on which to build. (You can see the makeup of your metro by using our Metro Dashboard). 

 

This is for US metros only, I could not find equivalent data for Canada.

 

The chart below shows the location quotient by metro for computer and mathematical occupations. The location quotient is a measure of specialization in a given occupation. A score of 1 means you have the same share of your employment in this occupation as the U.S. A location quotient significantly over 1 is indicative of a metro that has a relatively strong base in computer and math occupations.

 

35 of our largest metros have a location quotient of over 1. Topping the list is San Jose, which should come as no surprise. San Jose is such an outlier that their 4.21 location quotient doesn’t even fit on the chart. If a high concentration of computer and math professionals was the only criteria Amazon was looking for, this competition would be over before it begins.

 

But there are some other metros, some surprising and some not surprising that do quite well in this measure. D.C., Seattle, Austin and San Francisco are also well known tech hotbeds. Each has a location quotient greater than 2.

 

Raleigh, Boston, Denver, Baltimore, and Atlanta have strong location quotients over 1.5, giving them a strong tech worker base. A third tier of metros (Minneapolis, Columbus, Kansas City, Dallas, Phoenix and Salt Lake City) also have strong computer and math location quotients over 1.3 that might warrant consideration on this measure.

 

One final point on talent attraction, yes, finding tech talent is difficult and finding 50,000 quality tech workers would be a chore, but the winning metro is going to be a destination for tech workers if they know Amazon is going to locate there. So, you don’t necessarily need to have 50,000 spare tech workers ready to go, but you will need a plan to accommodate thousands of them moving to your city as well as a plan of how you will begin to train your current residents for these jobs.

 

The other measures seem less quantifiable. Amazon might be looking for specific numbers (i.e. tax breaks) but each metro will have the opportunity to describe why they are business friendly or think big.

 

I am sure Amazon will be receiving some very creative “big-thinking” proposals. It will be interesting to see how open Amazon is to such proposals. Some of the items Amazon has mentioned, like mass transit and air service might not currently be up to expectations in places like Raleigh or Kansas City, but an investment like Amazon is looking to make could be the catalyst that makes them reality. In this scenario, Amazon could be a partner in making their HQ2 home what they want it to be.

 

Finally, there will be just one winner out of all this. A lot of metros are going to do a lot of work and will ultimately be disappointed in the final decision. But they should not consider this work wasted. The questions Amazon is asking these metros (do you have the needed tech workforce? are you a well-connected city? do you have the right education/training system in place?) are questions they should be asking themselves anyway if they wish to stay competitive in today’s economy.

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