Your town must have talent — and lots of it — to land Amazon’s HQ2

Twenty cities across the country have entered the sweepstakes to be the home of Amazon’s second headquarters (HQ2). This is a high-stakes contest that will have significant long-term impact on the region and city chosen.

Mayors and leaders from each respective region have gone all-out to make their city the destination of choice for Amazon. While I can’t say with any degree of conviction where Amazon is going to locate, I can offer some perspectives on some of the driving factors that are influencing Amazon on this decision.

{mosads}The decision of where to locate a second headquarters will, in my opinion, be based on a number of criteria, some financial and others non-financial.

The financial considerations will be driven by the amount of economic incentives that each locality offers, as well as other considerations, such as the cost of living, average wages and average level of rent and real-estate costs. 

Amazon enters this race in a strong bargaining position as every municipality that has made the shortlist has tabled a comprehensive set of financial incentives to secure Amazon’s commitment.

As every city-candidate has offered a package of financial incentives, this actually reduces this as a determining factor in Amazon’s selection process. Amazon knows it will get a financial package wherever it goes, so the deciding factors will most likely be something else.

As one of America’s high-growth companies, Amazon will continue its expansion in ways foreseen and unforeseen. While the company started off as an online retailer of books and media, it has expanded its product categories to what seems like everything under the sun since then.

In addition, it is expanding its presence in the services space with Amazon Web Services and going into food retailing with its recent acquisition of Whole Foods Market. Amazon has also announced that it will create its own package delivery service akin to UPS. To accommodate this growth, Amazon will need people, and lots of them.

That being said, herein lies the key to understanding where Amazon will locate HQ2. Despite the depth and breadth of the U.S. labor pool, the size of the talent pool who have the specific skills Amazon requires is actually a lot smaller than one would imagine.

Amazon is well-recognized as “the” place to work if you want to learn how to conduct e-commerce. Amazon’s employees are highly coveted by recruiters and any company engaged in online commerce, be it Walmart or an internet startup, eagerly pursue Amazon employees.

At Walmart, you will find many Amazon veterans occupying important positions in their e-commerce division. For recruiters, the Amazon pedigree signifies you’ve learned from the best and got your card punched at Amazon U.

In order for Amazon to grow, it’s going to have to identify, grow and retain its talent pool. Amazon’s future growth will very much be determined by how well it does in the war for talent. Evidence is mounting that the United States is in the midst of a labor shortage.

The baby-boom generation is starting to retire in large numbers, and those numbers will accelerate in the years ahead. Demographic evidence in the United States indicate shrinking high school- and college-age populations. Americans are delaying marriage and having fewer babies.

Our birth rate is not sufficient to maintain our overall population. It has been estimated that by 2025, the United States will be in the midst of a severe labor crisis. In many school districts across America, elementary schools are closing and school systems are consolidating.

Kimberly Clark recently announced the closure of several diaper factories in response to falling birthrates. A variety of industries across the industrial landscape are signaling a severe shortage of workers. The homebuilding, construction, trucking, manufacturing industries abound with stories of labor shortages and the inability to produce due to the shortage of available workers.

As Amazon surveys the landscape for potential sites, it will place a priority on those municipalities that will give them an edge in the war for talent. High-performing school systems and great universities and colleges will supply the talent that Amazon needs.

A location that will enable Amazon to recruit, grow and retain their workers will figure prominently in the ensuing years. Intangibles that are a part of the social ecology, such as vibrant and diverse dining opportunities, recreational and entertainment options, experiential and cultural activities are some of the primary ingredients of a fulfilling lifestyle for America’s educated elites.

Ample housing stock and convenient commutes will factor prominently in the final analysis. Amazon is well-aware of the demographic changes that are evolving in the United States. Its selection for its HQ2 will enable it to accommodate such shifts in the most beneficial manner.

Arthur Dong is a professor at Georgetown University’s McDonough School of Business.