We think of the movements of high-tech firms as illustrative of totally new phenomena but it resonates as well with earlier industrial history. The “gilded age” of America, when industries expanded rapidly, produced a growing appetite for labor. Automation in production also expanded output and revenue, but also a growing need for workers.
It was not a surprise to any that industries established themselves in cities where immigrants were large in number and where owners of capital could exploit inter-ethnic labor competition to their own benefit. They also worked against unions, while instigating much conflict among various racial and ethnic groups. Olivier Zunz’s and David Ward’s accounts of these decades in American history are highly informative, allowing us to see how a manipulated market and anti-labor behavior created the urban conditions inherited by future generations. However, in the midst of these challenges, there were some key constant facts: industries actually produced commodities, relied on immigrant labor, and engaged in global markets to attract investment and to sell American products.
The quest for a “return to normalcy” after World War I interrupted these economic practices, shifting the nation to its nationalist narratives, and empowered the anti-immigrant voices to legislate some of the most restrictive policies in the history of U.S. immigration, not realizing the need for the global labor to expand the American economy. World War II, however, provided a lesson to Americans that in addition to industrial labor and farm workers, the nation needed to attract the brightest and the most educated workers (as was evidenced by foreign scientists working on the Manhattan Project) from across the globe to build its military-industrial complex and its affiliated technology sector. The 1965 Immigration Act, called the “Brain-Drain” Act, targeted global skilled labor and brought a growing number of doctors, engineers, nurses, and savvy technology experts to our shores. Once again, many of the emerging industries built themselves close to major immigrant urban gateways. However, the investment gradually favored the West Coast.
Labor in the Information age
Fast forward a few decades to our time, and the major immigration gateways are California, New York, Texas, and Florida, each with its own unique mix of immigrants and skills. Apple, Google, Microsoft, Boeing, Hewlett Packard, Intel, Oracle, and many others are on the west coast. Others can be found in Texas (Dell) and New York. However, the latter did not land a major tech company for some time. That changed recently. Amazon and Google, whose west coast presence is larger than life and associated with creating numerous urban challenges, including housing affordability and transportation, chose New York for their expansion. Amazon is placing its second headquarters in New York and outside Washington, Google is ramping up its New York presence while Apple is moving to the suburbs of Austin, Texas.
There is no doubt that New York and Austin both attract immigrants and have declared themselves as welcoming cities for immigrant communities. The Mayor of Austin, Steve Adler, made that abundantly clear in 2017 by expressing the city’s commitment to protecting its immigrant population. New York City has been equally vocal in supporting its sizable immigrant communities. This is good news for the industries that rely on foreign labor to build and expand their companies. Given the labor needs of the growing tech industries, locating in major immigrant cities seems only logical. However, beneath this generalized narrative is the reality of the differences between California, Washington, Texas, and New York economic hubs.
Historically, labor has followed capital. Investment in “production” infrastructure was costly and had to rely on a continued pipeline of labor and, in our case, foreign labor. Once an immigration gateway was identified and investment was made, the cycle would continue. As such, if Detroit provided jobs, labor (including migrants from the south) continued to move there. Major universities also played a similar role in attracting investment (particularly for R&D companies) to specific localities. Students and other global labor moved to these areas and created an increasing density of specialized expertise. Between the 1970s and 2000s, however, production moved to the sources of labor in developing countries searching for lower wages and lower production cost, ending the dominance of Rustbelt cities.
Instead the new information age continued to rely on universities and existing immigrant gateways to run its innovation engines, and helped create new high-tech hubs such as the Silicon Valley. California’s massive past investment in higher education system, along with other major universities up and down the Pacific coast attracted immigrants, investments and a large number of new skilled labor from the Eastern hemisphere.
Tech companies such as Apple and Texas Instruments produced goods and relied on well-educated engineers coming out of Stanford, MIT, and IIT (in India). They had to invest in infrastructure and their labor. Major metro areas, particularly the suburbs, were perfect places for building tech facilities. They appealed to the in-coming foreign and native labor alike. The Bay Area and its suburban Silicon Valley would come to epitomize the new economy. Similarly, the suburbs of north Dallas would become synonymous with Texas Instruments.
In this phase of development, tech companies tended to follow the best of old corporate practices of valuing the larger immigrant communities and knew what it meant to keep their tech labor loyal and happy. All one has to consider is the way Texas Instruments, for example, supported its South Asian workers and their communities. These companies manufactured goods, paid well, and did not see their employees as largely replaceable coders.
Things changed dramatically with the rise of the second wave tech companies that peddled information. As offsprings of the internet economy (whose basis lay in federal technology development) they produced nothing (or disproportionately less) and sold everything. They understood that in the mass-consumption late capitalist economy, information and a large number of workers were needed to manage and distribute goods produced anywhere (and preferably at the lower cost).
Amazon and other similar online service providers are by-products of the new tech era. They act as the new instruments for rapid consumption, undoing retail and marketing practices of the past generation. Shopping malls, outlet malls, gallerias, and eventually grocery stores and their spatial footprints are becoming gradually less important. The new economy, epitomized by Amazon, neither requires nor offers loyalty to its employees. They need the largely youthful “creative class,” to give a few stressful years of their lives to innovate, pad their CVs and leave for the next job, hopefully in less expensive places. Living in expensive cities, the tech workers cannot commit to buying houses, building communities, or saving much, but can be seen as essentially gaining credentials. They work hard, live fast, and burn out in a few years, ending up often in more suburban and other less costly areas.
As for the their warehouse labor counterparts, they are almost entirely placed in suburban, exurban and even small town locations, with lower costs. Amazon needs regional warehouses and an army of deliverers. The tech workers live in the center and everyone else outside. For every Seattle, there are multiple DuPonts (a city at the edge of the metro area in Pierce County).
Yet over time most tech workers cannot afford to live in Seattle, certainly not if they hope to buy a house or raise a family. Those tech workers who do not want to leave the region have to seek homes in the lower cost areas of the metro region, raise their families in less dense neighborhoods, suffer traffic jams, and age in their cars.
The Bay area and Seattle metro regions are geographically reconfigured due to the operational and scale demands of the new tech economy. Amazon can bargain for the best deals and tax breaks, as do many corporations, while employees pay for higher cost housing, transportation, and/or by sacrificing their health. The new information peddling economy creates nomadic labor pools, who have to embrace place-less-ness to survive. They move where their skills take them. This is probably what some interpret as lack of company loyalty among millennials. In addition to being a less than accurate perception, if there is any lack of loyalty, it begins with the labor cycling companies that hire them. We all now live in the age of late late capitalism: a world of multinational corporations that rely on global labor markets and boundless consumption; an era in which white collar labor finally realizes that they are no more privileged in the eyes of capital than factory-floor labor, who at least often had recourse to unions.
In Search of New Geographies
Google does produce goods, but as everyone has noticed, the company is increasingly interested in selling everything (consumer goods, airline tickets and other travel-related services, etc.) also. What kind of labor do companies such as Amazon and Google need? And why New York (for Amazon and Google) and suburban Austin (for Apple)? Before an attempt is made to answer these questions, please note that neither Google nor Apple made jurisdictions spend significant sums of money on a beauty competition, financed by citizens. The competing cities can indeed use their research reports to plan their own economic development, but it should distress regions if other major multinational corporations use a similar model for locating their new headquarters.
The choice of New York as an immigrant gateway, a source of potential labor, and a global finance node makes perfect sense. New York may not be known as a tech center, but it is well-known for its financial sector. However, the West Coast has a much higher global recognition as a tech hub. But is this true? Based on data from the Bureau of Labor Statistics, between 1990 and 2017, the State of New York and New York MSA did not witness a significant growth in the number of employees in the “information” sector. During the same time period, the Seattle-Tacoma-Bellevue MSA witnessed 3.2 times growth in its number of employees in the information sector. The San Jose-Sunnyvale-Santa Clara MSA grew 3.7 times and Austin-Round Rock MSA grew 2.7 times. New York is strong if you look at the volume of employees in the information sector, but this tends to include many media, entertainment, advertising and other functions long centered in Gotham. In contrast, looking at just actual core STEM work, EMSI data suggests that between 2010 and 2017, jobs in Computer and Mathematics (which includes all IT jobs) grew by 23.9% in the New York MSA, while Seattle MSA witnessed a 42.6% growth, San Jose MSA by 53.9%, Austin MSA by 61%, and San Francisco MSA by 67.5%. In terms of concentration of jobs in Computer and Mathematics, New York MSA was still lower on the list, topped by San Jose MSA, Washington-Arlington-Alexandria MSA, Seattle MSA, and Austin MSA, ranked respectively 1 through 4. New York MSA was 29th on the list of 2017 concentration. What does all of this mean?
By trajectory of growth and immigration, California, Washington, and Texas could be great candidates for establishing first or second headquarters of any tech company. However, New York makes more sense when the volume of employees in the information and other allied sectors are concerned, and not necessarily engineering, computer and mathematics jobs. The sheer size, market potential, proximity to European markets, and a strong transportation hub could be a significant explanation for locating Amazon’s and Google’s headquarters in New York. After all, one can assume that Amazon and Google are mainly interested in distribution and not production of goods.
It is a very different story for Apple, as well as other goods-producing tech firms like Intel, Hewlett Packard and Dell. Austin’s rapidly growing suburbs (the new facilities are in Williamson County outside the city core) provide opportunities for production, access to immigrant labor with a diversity of skills, and a pro-business environment that are attractive. Apple could help produce a diversity of incomes and job opportunities for the Austin area, and Texas in general.
As for Amazon, the story may be different and that’s where an important caveat enters the consideration. Amazon’s labor practices, ranging from work regimes to job stability, have been newsworthy over the last few years. Despite its large earnings, Amazon only recently agreed to up its minimum wage to $15 an hour in October 2018, after much pressure from the likes of Vermont Senator Bernie Sanders. This is a company whose market cap reached one trillion dollars in September 2018. In April 2018, the Los Angeles Times reported that the median pay for Amazon workers was $28,446. To be clear, this means that half of the 560,000 Amazon employees, at the time, were paid less than $28.5K. While this number includes part-time and employees across the globe, the labor practices of Amazon has been widely criticized in the U.S. and in other countries (for example, Australia).
For New York, it won’t bode well if Amazon continues with its labor practices, both by wages and stressful work regimes. As Seattle has realized, Amazon can produce significant housing and transportation challenges that will require additional planning attention and public funds, beyond any public subsidies/tax incentives the company receives (In July, 2018, Washington Business Journal reported on the impact of Amazon on the Seattle metro, indicating that “Megacommutes", a commute of 90 minutes or more one-way to work, have catapulted Seattle to the No. 3 position in the country. The Journal also reported the doubling of housing prices over a six year period.)
Meanwhile, Apple expands its presence in Austin and brings an array of engineering, R&D, and non-tech jobs to contribute to its main purpose for being: the production of computing devices and information communication technologies. As an immigrant friendly city, Austin is poised to benefit from the expanded presence of a company that did not put hundreds of cities through a beauty competition, asking them to offer their best incentive/subsidy packages. Hopefully, 2018 will be the last year a company asks cities to compete for its first, second, and third headquarters. With all of their marketing and tech-savvy employees, companies should be able to do their own market analysis without the expenditure of public funds. Equally, cities should begin to ask companies that create undue housing and transportation costs to help ameliorate it. Employees should not be the only ones paying for their employers’ choices.
Ali Modarres is the director and Professor of Urban Studies at University of Washington, Tacoma. He formerly served as the editor-in-chief of Cities: The International Journal of Urban Policy and Planning and has written on the role of bazaars in shaping the urban morphology of Middle Eastern cities.
Photo credit: SounderBruce [CC BY-SA 4.0], from Wikimedia Commons
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