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Florida's Future Is Bright Even Without Amazon

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Amazon finally announced which city is getting its new headquarters—or “HQ2”—and the biggest surprise is that they split it between two locations—the Crystal City area of Northern Virginia and Long Island City in Queens. Florida’s lone finalist, Miami, didn’t make the cut this time, but the economic future of Miami and the rest of the state still looks bright.

Amazon’s choices aren’t particularly surprising. The company already has a large presence in New York City and the D.C. area. Both locations were also on many prognosticators’ short lists of favorites. When Amazon first announced plans for a new headquarters, it specified several criteria including access to a large, high-skill labor market. The table below contains relevant population, education, and employment data for the Miami, Washington, D.C., and New York City metro areas. The employment and wage data are specifically for the types of computer and mathematical occupations Amazon is looking to fill.

Author's figure, data from U.S. Census and BLS

Of the three metro areas, Miami has the fewest people and the smallest percentage of adults with a bachelor’s degree or higher, at 30.1%. This is eight percentage points below New York and a whopping 19 below Washington, D.C.

Miami also has far fewer workers in computer and mathematical occupations, and this is not just due to its smaller size. The fourth row of the table shows metro area employment in computer and mathematical occupations per 1,000 jobs, and again Miami is at the bottom with 22—less than one-third of D.C.’s 74 and below New York’s 32.

Finally, since wages are a measure of worker skill and productivity, note that the median hourly wage in Miami for computer and mathematical workers is only $34.30, which is 32% less than the wage in Washington, D.C. and 26% less than the wage in New York.

It’s clear that Miami’s workforce is not as Amazon-ready as Washington, D.C.’s or New York’s, which is likely a big reason why Miami wasn’t chosen for HQ2. As economist Michael Farren said regarding Amazon’s decision:

…the decision to split HQ2 seems premised on being able to hire enough skilled workers to support Amazon's stratospheric growth into the future; Amazon wants to be able to hire the best of the best from each location.”

HQ2 would have brought big changes to Miami’s economy and Florida more broadly but missing out is not all bad news. Like the other locations vying for HQ2, Virginia and New York offered Amazon hundreds of millions of dollars in taxpayer subsidies and incentives. But unlike the other locations, New York and Virginia must follow through. For Virginia that means $573 million, while New York is on the hook for over $1.5 billion.

One of the key concepts in economics is opportunity cost—the idea that doing one thing means you can’t do another. In the HQ2 case, the tax dollars that New York and Virginia give to Amazon can’t be used on other things. Farren’s recent Mercatus Center study, coauthored with Anne Philpot, provides some examples of what states and cities could do with the money they were going to give Amazon.

Instead of giving Amazon $6.75 billion over 15 years—the average state subsidy offered—Florida could cut its corporate tax rate by 17.9%, fund over 46,000 full-tuition college scholarships annually, or fund five years of statewide road maintenance. At the local level, the average city subsidy ($2.15 billion over 15 years) could educate over 11,000 K-12 students annually in Miami or increase the city’s police force by 538 officers, or 19.2%.

Amazon may have helped Florida’s and Miami’s economy, but these alternative investments are more appropriate uses of tax dollars that can increase the skill-level of Florida’s workforce, maintain important infrastructure, or make Florida a more attractive place for all businesses.

As for the future, Florida is in good shape. The state’s major metro areas are growing rapidly and a recent amendment to the state’s constitution requires a two-thirds majority in both chambers of the state legislature to increase taxes. This makes it likely that Florida will continue to be a fiscally prudent state and avoid the financial fiascos that have struck more careless states such as Illinois and Connecticut.

It’s well-established that tax handouts to individual firms aren’t a recipe for long-run economic success, so while missing out on Amazon may seem like a loss, both Miami and Florida will ultimately have stronger economies as a result of using tax dollars more wisely. Simple, clear, and stable tax policies and regulations that treat businesses equally are important for economic growth, and as long as Florida stays on that path, it will be a great place to live and work.

 

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