Lessons from Amazon: Stop bribing businesses and make Iowa irresistible to workers

The Register's editorial | The Des Moines Register

Show Caption Hide Caption Andrew Cuomo details New York's Amazon deal Gov. Andrew Cuomo discusses Amazon's decision to come to Queens on Tuesday, Nov. 13, 2018.

Santa probably doesn’t need to put Amazon on his Christmas list this year. The $1 trillion company has already received promises of more than $2 billion in gifts from taxpayers in New York and Virginia, where it will locate new corporate centers.

For those keeping score, the New York bag of goodies amounts to about $48,000 per job created, according to the Wall Street Journal’s editorial board. “Apparently bodega owners in Brooklyn are supposed to be happy about subsidizing a third of the salaries of hipster techies,” the board wrote.

Pikers. Iowa gave up an estimated $400,000 per job in tax incentives last year to attract an Apple server farm to Waukee that would create an estimated 50 positions. New York Gov. Andrew Cuomo has been accused of giving away the store for about 25,000 jobs, but he has nothing on Iowa Gov. Kim Reynolds as a corporate sugar mama.

We don’t know exactly what Iowa was offering for a shot at the Amazon jackpot, but it clearly wasn’t enough. Iowa communities were reportedly among the 238 cities that had responded to Amazon’s call for proposals last year but didn’t make the short list of 20 cities released last year. Based on the descriptions of other states’ offers, the competition was far too rich for Iowa’s blood.

New Jersey and the city of Newark, for example, offered a total of $7 billion in incentives, the Wall Street Journal reported. That’s almost enough to run the state of Iowa’s $7.2 billion general fund budget for a year.

Ridiculous? No doubt. But the fact is that since 2003, Iowa has shelled out $343.3 million in direct payments to 1,167 companies and awarded nearly $1.7 billion in tax benefits. In exchange, the companies invested more than $30 billion and created over 72,000 jobs, according to Iowa Economic Development. The state also has hundreds of millions of dollars in exemptions and credits built into the tax code. Editor's note: This paragraph has been updated since the article was originally published to correct the time period of the economic incentives cited.

Meanwhile, Iowa has the second-lowest unemployment rate in the country and too few skilled workers to fill available jobs. That’s why a company like Amazon would never look at Iowa for the $100,000-a-year, high-tech and corporate executive positions it will need. It has nothing to do with tax benefits. Amazon was always going to locate where it could attract the right workforce. Creating a bidding war and getting gullible government leaders to throw away their tax base just lowers the cost of expansion — and makes it easier for the company to abandon those jobs if circumstances change.

The sad irony is that Iowa is spending so much on chasing smokestacks, it can’t afford to invest seriously in the things that would make this state irresistible to the workers businesses like Amazon need. Things like a world-class education system, which simply isn’t materializing under the Branstad-Reynolds starvation diet of barely inflation-level increases in state aid. Things like robust state universities, which are losing ground after several years of budget cuts. It’s worth noting that Virginia, as part of its deal with Amazon, announced plans to ramp up higher education programs.

Iowa still needs to work on basics like clean water and access to top-notch health care for the people who already live here, let alone trying to attract new workers. Towns like Iowa Falls, which is losing its last child care center, need access to quality child care so that parents can work.

Our state missed an opportunity to have a serious discussion about economic development policy before the election, although gubernatorial candidate Fred Hubbell tried. He advocated using state economic development resources to help local communities expand access to health care, such as by forgiving loans for medical professionals who work in underserved areas.

The idea still has merit, but Iowans need to demand attention or nothing will change. The controversy over the Amazon projects gives Iowa another opportunity to reconsider its economic development policies.

Advocates of the status quo will say that while every other state competes to provide business incentives, Iowa can’t afford to stop. And yes, Iowa might lose some business opportunities in the short term if it doesn’t join the bidding. But the fact that we have more jobs than qualified workers also gives us some breathing room. Policymakers can redirect resources and energy from business bribes toward making this state a place where educated young people want to stay and skilled workers want to live.

Then we won’t have to pay companies to move here.