Viewpoint: Why Amazon should 'one-click' Massachusetts for its second HQ

By Frank Conte Editor and publisher, David G. Tuerck President, Beacon Hill Institute

Cities and towns from across the the nation have filed bids to win an enormous prize: Amazon’s plan for a second North American headquarters and its 50,000 projected employees. There were 26 proposals from Massachusetts alone, including the city of Boston’s Suffolk Downs proposal and Worcester’s generous package of $500 million in tax breaks. Proposals coming out of Pittsfield, Lawrence, Leominster and New Bedford geographically round out the Bay State’s candidates.

In terms of logistics, Massachusetts offers at least two large metropolitan areas, each with airports nearby and each with a public transportation system. The Bay State also offers the cultural amenities that Amazon seeks for its employees. Amazon employees can rest assured that their children will be enrolled in a first-rate public education system. The company’s commitment to renewable energy aligns well with current state policies.

Corporations often expect generous tax breaks from state and local governments as the price of setting up shop. Massachusetts need not break the bank to lure Amazon, however.

The success of a world-class corporation like Amazon rarely rests on tax breaks or free land. It rests on access to human capital: a highly educated, skilled workforce that can provide the innovation a company needs to thrive, in fields such as online retailing, cloud computing and robotics. According to one well-known measure of how well the individual states stack up in terms of their ability to provide access to this kind of capital, Massachusetts comes out on top.

The Beacon Hill Institute’s latest State Competitiveness Report ranks Massachusetts first among the fifty states for its ability to compete for business and skilled workers. Massachusetts has held first place according to this measure for the last six years.

The Institute measures competitiveness in terms of whether a state provides policies and conditions that ensure and will sustain a high level of per-capita income. The index is the sum of eight separate sub-indexes, each of which provides a separate measure of competitiveness. Of these sub-indexes, Massachusetts ranks first in human resources and technology – criteria stressed in Amazon’s request for proposals. Massachusetts achieves this ranking, for example, by virtue of the fraction of its students who show proficiency in mathematics, the volume of engineering graduates and the number of people employed in high tech. Massachusetts ranks second in terms of venture capital per capita and fourth in IPO dollars per capita. These assets comprise the ecosystem in which Amazon thrives.

New Hampshire is betting on its reputation as a tax-free state to put its bid over the top. Compared to Massachusetts, however, the Granite State ranks 8th in competitiveness and has jumped up and down over the years. It grants far fewer science and engineering degrees, as a fraction of its population, than does Massachusetts. Its exports per resident are far lower than Massachusetts’. Moreover, its broadband penetration per 1000 residents is 39th, compared to the Bay State’s 14th place ranking. As a measure of how connected a state’s workers and firms are with the rest of the world, Massachusetts’ “openness” far outstrips most other regions in the U.S. In the BHI index, low taxes matter but other factors matter too. When added up, the several factors making up the BHI index put Massachusetts ahead of the pack.

Massachusetts is not endowed with oil, gas, mineral deposits or agricultural bounty. Human capital has become its natural endowment. The workforce is the major reason the Bay State remains attractive to innovative industries, from pharmaceuticals and software to venture capital and health care.

If Amazon wants to maintain its reputation for productivity and innovation, Massachusetts is a clear choice.

Frank Conte is editor and publisher of David G. Tuerck is president of the Beacon Hill Institute, a Massachusetts-based think tank.

This article appeared in the November 5, 2017 online and the November 10, 2017 print edition of the Boston Business Journal.