Analysis: Why we missed the cut on Amazon's HQ2

(And why it might be for the best)
Posted at 5:05 PM, Jan 18, 2018
and last updated 2018-01-20 09:14:13-05

CINCINNATI -- We have the world's soupiest chili (Skyline), America's favorite hippo (Fiona) and Buffalo's favorite quarterback (Andy Dalton). So, obviously Amazon Inc. made a big mistake by not naming Cincinnati as one of 20 finalists for its $5 billion second headquarters.

For the sake of self-improvement, let's consider for a moment why we missed the boat while comparably sized cities like Columbus, Indianapolis and Pittsburgh are still in the game.

Based on the experts we've talked to so far, three reasons emerge:

  • Our work force isn't growing fast enough
  • We need to improve on transportation
  • We might be better off losing

Many experts are befuddled by Amazon's list because it has big cities and smaller towns in every part of the country. Some cities have high taxes, expensive labor and real estate; others are just the opposite. Amazon said it wanted public transit but chose several towns where that seems to be a non-factor. For all the discussion about towns with progressive social policies, many of the 20 survivors are red state stalwarts.

So, what is Amazon thinking?

"Everybody that is opining, of course, is guessing. Nobody knows," said economic development consultant Jim McGraw, CEO of KMK Consulting Company LLC.

There are some theories. One is that Cincinnati just isn't vibrant enough to fill Amazon's order for 50,000 new jobs.

"To hire 50,000 people, you need to have either a very large existing labor force or a rapidly growing population. Neither of those things is true for Cincinnati," said Aaron Renn, a senior fellow at the Manhattan Institute and an economic development columnist for Governing magazine. Cincinnati is "not as big as a Philadelphia and it's not growing as fast as Austin, Columbus or Nashville."

Comparing our regional rivals, Pittsburgh has the biggest labor force, with civilian employment of 1.2 million people -- 90,000 more than Cincinnati. Indy and Columbus both stand at about 1 million, but Renn said Columbus enjoyed population growth of 7.1 percent between 2010 and 2016, while Indianapolis grew 5.9 percent.

Cincinnati's growth was 2.2 percent in the same period. Pittsburgh's population declined, but it has one of the world best magnets for tech talent in Carnegie Mellon University.

Cincinnati Councilman P.G. Sittenfeld said the Amazon competition shows three areas for potential improvement.

"Transportation, talent attraction and retention, and an overall growth strategy," he said. "We need to raise the game in all three of those buckets."

Cincinnati USA Regional Chamber CEO Jill Meyer agreed that transportation improvements were a competitive edge for Columbus, Pittsburgh and Indianapolis. Columbus offers free bus rides for downtown workers. Indianapolis passed a regional transit tax in 2016 to expand bus service. Pittsburgh is a test city for Uber's driverless rideshare service.

"We have lots of ongoing conversations right now about the importance of investing and re-envisioning our transportation system to get more people to work, more people to education and health care," Meyer said. "We're having those conversations now … but they are a few years ahead of us."

Finally, McGraw suggested Cincinnati should look at missing the cut as a win, not a loss. Because Amazon has already committed to an 1,100-acre cargo hub at the CVG Airport in Hebron, it's possible that it cut Cincinnati just to diversify its investments.

Renn makes a similar argument in that the next stage of Amazon's competition could get pricey.

"It didn't cost very much to put together an initial bid," he said. "Now, these 20 cities are going to be investing a lot more time and a lot more money. So, the fact is, if you're going to be one of the losers, you're better off to get out early."