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Amazon HQ2 Spurs Worries of a Wage War in Winning City

The Wall Street Journal. logo The Wall Street Journal. 1/31/2018 Lauren Weber and Laura Stevens Inc. plans to hire thousands of people in the area it picks as a second home from a shortlist of 20 locations. That’s worrying other companies because it could become more difficult to attract talent if the behemoth moves into their backyard.

Amazon has said it expects to create as many as 50,000 jobs paying an average of $100,000 at its new site. Supplying that many employees is a feat for any area, and is likely to result in greater competition for workers and wage increases at a time when unemployment already stands at a low 4.1% nationally, some economists say.

“We’re nervous,” says Steven Kosakow, director of talent acquisition at Lionbridge, a Boston-based company that helps firms with translation and globalization services. Lionbridge is building out its sales team, and recruiters there worry that hiring salespeople will become nearly impossible if Amazon moves in. Boston is among the cities on the shortlist.

Employers are concerned in part because there’s little known about Amazon’s hiring plans.

“No one knows who they’re moving,” says Andrew Gadomski, a consultant who helps large employers execute recruiting campaigns. Amazon’s effect on local employment would depend partly on the kinds of jobs it plans to fill, he said. Still, more competition for the same workers in general could mean that hiring decisions become protracted and firms have difficulty filling slots.

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Amazon is already known for poaching talent from companies, including United Parcel Service Inc. and General Electric Co., and that would become even easier if the tech giant were also located in the neighborhood. Both Atlanta, where UPS is based, and Boston, where GE is building its new headquarters, are on Amazon’s shortlist.

Some executives at companies in the Atlanta area, including UPS and Home Depot Inc., are voicing concerns about the impact on the local job markets, according to people familiar with the matter.

A UPS spokesman said the company isn’t throwing its support behind any specific city where it operates because of its wide reach as a company. Where it competes for workers, “we are committed to being a preferred employer,” he said.

A Home Depot spokesman said the company is primarily concerned about whether Amazon will receive higher tax incentives than the norm.

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Amazon’s search for a second headquarters has set off a beauty contest, with local governments offering incentives or working to fix local problems. Georgia legislators, for instance, are considering providing substantial state funding for Atlanta’s mass-transit system, partly to address concerns that traffic congestion might hurt its chances to land Amazon.

Audrey Russo, president and CEO of the Pittsburgh Technology Council, which helped formulate the city’s proposal and represents about 1,200 employers, says many of her group’s members simply want more details at this point, including what kinds of workers Amazon will want.

“Our members are data-focused and they want facts and at this point we can’t articulate the facts,” she said.

In Seattle, where Amazon has expanded its original headquarters to more than 40,000 people from just a few thousand a decade ago, its presence there has been both positive and negative. Labor competition has intensified and living costs have risen, but local tech employers have benefited from the online retail juggernaut’s being there.

The city, also home to Microsoft Corp., has seen a boom in startups, many led by former Amazon employees. Tech giants, including Alphabet Inc.’s Google and Apple Inc., have also set up big offices in the area.

“I think we have a very competitive job market in Seattle, in part because of Amazon,” said Tom Alberg, managing director of venture-capital firm Madrona Venture Group and an Amazon board member. Amazon has created jobs, new opportunities for people to move to the area and become better educated, “so we’re actually producing more people to fill these jobs,” he said.

Amazon’s impact on local labor markets could be a net positive if its arrival draws workers from other areas and expands the overall pool of educated, ambitious workers, says Mark Muro, senior fellow in the Metropolitan Policy Program at the Brookings Institution. “A regional ecosystem becoming more dense with added talent can bring significant returns.”

Officials in Toronto, the only city outside the U.S. to make Amazon’s shortlist, played up the region’s access to affordable engineering talent in its proposal. But some local executives have opposed the idea, citing an existing shortage of engineers as well as a soaring housing market. Instead, Amazon could suck Canadian workers to the company’s Seattle base rather than improve Canada’s economy, says Toronto-based venture capitalist Anthony Lacavera, who launched the country’s fourth wireless company a decade ago.

Even in a city as big as Chicago, another finalist, the scale of hiring could be unprecedented. Motorola Solutions recently put its headquarters there, and Kraft Heinz set up a second main office. But even the relocation of McDonald’s Corp., which will move its headquarters downtown from a Chicago suburb this year, is expected to bring only around 2,000 jobs.

Best Buy Co. and Target Corp. both expressed concerns to Minnesota’s governor regarding a bid by Minneapolis-Saint Paul to woo Amazon, one of their biggest rivals. At a media briefing in October, Target Chief Executive Brian Cornell told reporters that while he wants to see continued prosperity for the area, “on behalf of our shareholders, I want to make sure we get the same benefits as any other company.”

The final proposal from the region to Amazon included just $3 million in incentives. It didn’t land on Amazon’s shortlist earlier this month.

“There’s no way to get into a spending contest with Amazon and win,” says Rob Daley, a tech entrepreneur in Pittsburgh. “Salaries will go up whether you’re competing directly with them or not.”


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