New York: Amazon’s Choice for HQ2

Amazon, the global retail giant, has been based out of Seattle, Washington since its inception. However, now the scale of operations being controlled by the company is growing big as well. This is the reason why Amazon felt the need for a second headquarters. For many months, Amazon has been publically toying with the idea of where the second headquarters should be located. Even small move made by Amazon in this regard makes the headlines of newspapers worldwide. After all, Amazon is a giant corporation if it locates to a certain city or province, it is very likely that the city or province will benefit economically.

Most experts were of the opinion that Amazon would move its headquarters to a remote location. This is because it was expected that the state government will give the most incentive to Amazon if it promises to develop an underdeveloped area. However, to everybody’s surprise, it has been reported that Amazon is likely to set up its second headquarters in New York City.

Instead of being thrilled by the fact, most New Yorkers were upset with the development. Many of them took out protest marches in order to show their displeasure regarding the entry of this corporate giant into New York City.

In this article, we will have a closer look at why New Yorker’s are upset about this development.

Manipulating the Tax System

Amazon has decided to set up its second headquarters in New York City only because New York has decided to give it the biggest tax advantage. The exact nature of the deal is unknown. However, it has been estimated that New York will give Amazon tax breaks worth $3 billion over the course of the next ten years. Many analysts are surprised that New York City has agreed to give such a huge tax break to a mega-corporation. After all, New York City doesn’t need Amazon any more than Amazon needs New York City. Also, Amazon is not the only corporation that wants to open up a center in New York. Google has also been eying this location for very long. In fact, Google has also started working on its plans to open up a facility in New York. This has infuriated residents of New York who are at their wit's end because of their inability to understand why the government wants to pay $3 billion to Amazon when Google is doing the same thing for free.

The biggest argument in the favor of this government handout is that it will help in creating jobs and that those jobs will lead to higher tax revenues. However, as per initial estimates, the New York government will pay close to $100,000 per job to Amazon. Given that the typical salary at Amazon is close to $150,000, the government will not make anything in taxes for the next ten years!

Favoring the Large Firms

A large number of New Yorkers are viewing this move to be pro-big business and anti-small business. This is because big businesses like Amazon are getting tax breaks. This reduces the cost of their operations and helps them to undercut competition on the basis of price.

On the other hand, smaller corporations have to pay more tax and also comply with a lot of regulation. This leads to an increase in their operating costs and makes them uncompetitive. The problem with the tax breaks being given to Amazon is the fact that the government is selecting winners and losers. The responsibility of the government is to provide a level playing field to all the players. Instead, the government itself is making market conditions more conducive for a select group of companies.

Strain on Resources

New York City already has an infrastructure problem. There are already too many people living in the city, and the infrastructure is bursting at its seams. The entry of Amazon and the so-called “high paying jobs” will further worsen the infrastructure problem.

This is because New Yorkers already spend a large amount of their time commuting to and from work. The public transport is not able to handle the current population. If more working class people have to use the New York subway system or cabs to get to different parts of town, the strain on the system will be tremendous.

Also, the property prices in New York City are already sky high. People have to share small apartments in order to get by. With the influx of people having high paying jobs, these prices will go even higher making it more difficult for New Yorkers to find suitable living conditions in the city.

Inequality Problem

Amazon’s decision to relocate to a city like New York further exacerbates the inequality problem. New York already has more commercial activity that it can possibly handle. This decision is projecting Amazon in a bad light. Social activists, as well as economic analysts, were hoping that Amazon would relocate to a more remote area. This will help bridge the increasing income inequality between urban and rural households in America.

The bottom line is that New Yorkers are not very happy with either their government or with Amazon. Hence, it needs to be seen whether Amazon will stick to its decision of using New York City as its second headquarters or will it bow down under pressure.

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The article is Written By “Prachi Juneja” and Reviewed By Management Study Guide Content Team. MSG Content Team comprises experienced Faculty Member, Professionals and Subject Matter Experts. We are a ISO 2001:2015 Certified Education Provider. To Know more, click on About Us. The use of this material is free for learning and education purpose. Please reference authorship of content used, including link(s) to ManagementStudyGuide.com and the content page url.


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