12:00 am
March 25, 2013
Seattle Times columnist Danny Westneat calls Seattle’s recent employment boom an “inconvenient truth” undercutting claims that the city’s “taxes and rules and supposedly socialist groupthink” are bad for business. There’s no denying the growth in metro Seattle, but a good case can be made that it’s occuring despite the city’s business climate, not because of it.
Westneat’s colleage, Times business columnist, Jon Talton, makes the point. Talton also writes about Seattle’s job growth, citing Amazon as the cause of the city’s comeback smile.
Seattle would be in a far worse place today without one company: Amazon.com. The corporate headquarters has transformed South Lake Union into an urban technology campus that’s attracted wide acclaim as a model. Better for us, it has drawn big investment and thousands of well-paid employees.
True enough as a description of what’s happening within the city limits, but the genesis of the renaissance goes back a few decades, to the decision of a young Bill Gates and Paul Allen to bring Microsoft to the metro area. In our tech sector report, we cite economist Enrico Moretti’s account of the decision, which led to the development of a strong technology cluster. Microsoft’s presence attracted Amazon and, later, Google.
Moretti writes of the competitive advantages to a region stemming from the “forces of agglomeration”—the labor force, specialized services, and knowledge spillovers reinforcing a successful cluster.
The cluster’s strength confers benefits to firms that can allow them, for a time, to thrive despite adverse regulatory and tax burdens. As Talton writes, however, these conditions can change. He indulges his Amazon Anxiety Syndrome to consider threats to the company’s dominance (I encourage you to read the piece) and then offers this policy observation.
City and regional leaders shouldn’t for a second confuse good fortune in the Amazon boom with a sound economic strategy. That includes addressing higher education funding, infrastructure needs, building more international ties and thinking in multiple dimensions about competitiveness.
We cite similar issues in our tech report. Washington and Seattle continue to suffer from high business costs, heavy regulation, a shortage of job seekers with STEM skills and other competitive disadvantages. Efforts to improve these conditions are not undercut by the limited Seattle boomlet.
To underscore the challenges Seattle faces, Forbes last month reported on the cities winning the battle for the biggest growth sector in the U.S., that is professional, scientific and technical services. Seattle didn’t make the top 10. The cluster, which includes computer consulting, engineering and scinetific research, ought to be a natural for this region. Yet author Joel Kotkin notes that large metros are increasing losing their allure.
… the strong performance of many mid-sized cities – ranging from Austin, Raleigh and Salt Lake to less-heralded Jacksonville, Kansas City, Oklahoma City and Richmond — suggest that these jobs will likely continue to migrate to smaller, less costly and generally less dense urban regions. Once considered the natural domain of megacities and dense urban cores, high-wage business service jobs, largely due to technology, can increasingly be done anywhere. This suggests that the playing field for such positions, rather than concentrating, will become ever wider.
Still, Forbes reports that Seattle ranks No. 5 among best cities for good jobs – the top four are all in Texas. And lest anybody fall back on a tired and false explanation for the Texas success:
Texas isn’t growing on the backs of underpaid, non-union workers. While Texas is a right-to-work state, many of the highest paying jobs in the Dallas area are with unionized defense manufacturers like Bell Helicopter and Lockheed Martin, which produces the F-35 Lightning II fighter at a mile-long plant in Fort Worth.
Asked about the state’s reputation for union-busting and low-wage jobs, Dallas Federal Reserve Economist Pia Orrenius said “we get a lot of that.”
“People say it’s all low-pay jobs, so I looked at employment growth by wage quartile,” she said. And guess what? Not only is the Dallas-area per-capita income of $39,548 comfortably above the national average of $37,000, but it’s growing fastest in the top half of wages above $16 an hour.
Another caution from another of Forbes apparently inexhaustible file folder of rankings — Seattle doesn’t make the top 10 fastest growing cities, another list dominated by the south and southwest (Texas has four). Seattle does post favorable marks among what Forbes dubs the “elite” cities, with respectable GDP growth of about 2.5 percent, alongside San Francisco and Boston. Overall, however,
…sustained economic growth, low density and more affordable housing all clearly continue to push the center of population gravity toward certain Sun Belt cities, primarily in the Southeast and Texas.
While Seattle’s limited success is properly celebrated as good news in an otherwise still bleak economy, the region’s advantages, as Talton writes, don’t stem from a sound economic strategy. And, as Moretti writes, a healthy cluster is “not an argument for complacency.”
Current legislative efforts to strengthen education, reform workers’ compensation, invest in transportation, and put the state on a sustainable budget trajectory are necessary to spur Washington’s economic vitality. Nothing in the Seattle experience changes that story.
For a broader discussion of how to evaluate a business climate, please see our brief, Characteristics of a Healthy Business Climate.
Categories: Categories , Current Affairs , Economy , Tax Policy.