Tech-based firms leave big cities for small STEM hubs

Sub­urbs en­ter com­pe­ti­tion

The Washington Times Daily - - FRONT PAGE - BY JU­LIAN GRE­GO­RIO

Big­ger isn’t al­ways bet­ter for cities to at­tract work­ers in STEM (science, tech­nol­ogy, engi­neer­ing and math) ca­reers, and eco­nomic an­a­lysts say small towns can of­fer re­sources and unique ameni­ties that big cities can’t.

A re­cent rank­ing of the top 10 U.S. cities for STEM work­ers listed no me­trop­o­lises, such as New York or Los An­ge­les, but iden­ti­fied smaller, more pas­toral lo­cales such as Richard­son, Texas, and Al­bu­querque, New Mex­ico.

This would seem coun­ter­in­tu­itive, es­pe­cially as on­line re­tail giant Ama­zon — one of the coun­try’s largest tech-based firms — is search­ing for a site for its sec­ond head­quar­ters among big cities such as Chicago, At­lanta and Dal­las.

But smaller cities and sub­urbs can com­pete for STEM work­ers by ad­ver­tis­ing their fam­i­lyfriendly en­vi­rons, more af­ford­able homes, eas­ier com­mutes and prox­im­ity to na­ture.

“Gen­er­ally, cities that of­fer lower taxes, a lower cost of liv­ing, bet­ter ac­ces­si­bil­ity and a larger, rel­e­vant work force will at­tract com­pa­nies,” said Antony Davies, an eco­nomics pro­fes­sor at Duquesne Uni­ver­sity and se­nior af­fil­i­ated scholar with

the Mer­ca­tus Cen­ter at Ge­orge Ma­son Uni­ver­sity.

Big cities have out­spent their ru­ral cousins by putting to­gether spe­cial in­cen­tive pack­ages with lav­ish tax ex­emp­tions and hand­outs in the shape of money bags, Mr. Davies said. But cities as small as Gaithers­burg, Mary­land, and Franklin, Ten­nessee, are out­per­form­ing Sil­i­con Val­ley in some mea­sures.

The Com­merce De­part­ment says STEM oc­cu­pa­tions will con­tinue to be a key driver of the U.S. econ­omy. Over the past decade, em­ploy­ment in STEM fields grew by 24.4 per­cent, while em­ploy­ment in non-STEM fields grew by only 4 per­cent. STEM work­ers earned 29 per­cent more than their non-STEM coun­ter­parts in 2015.

Busi­ness lead­ers, schol­ars and elected of­fi­cials have noted a de­cline in STEM pur­suits in higher ed­u­ca­tion and ex­pressed con­cern about a lack of qual­i­fied work­ers in the fu­ture.

Al­bu­querque, with a pop­u­la­tion of about 600,000, lands thriv­ing tech com­pa­nies and piles of U.S. mil­i­tary con­tracts.

A rep­re­sen­ta­tive for the city said STEM is a key part of Al­bu­querque’s eco­nomic strat­egy. San­dia Na­tional Lab­o­ra­to­ries, the Uni­ver­sity of New Mex­ico STEM grad­u­ates and a hands-off ap­proach to in­tel­lec­tual prop­erty al­low Al­bu­querque tech com­pa­nies to thrive, the rep­re­sen­ta­tive said in an email.

City plan­ning spe­cial­ists say that small-town world­view drives suc­cess be­yond big-city lim­its.

“It’s the cul­ture of the city,” said Robert Shi­b­ley, dean of the school of ar­chi­tec­ture and plan­ning at the State Uni­ver­sity of New York at Buf­falo.

Mr. Shi­b­ley has worked with city plan­ners to re­vi­tal­ize Buf­falo’s econ­omy, which took hits in the 1980s and early 2000s when Beth­le­hem Steel posted losses and went bank­rupt.

The re­vi­tal­iza­tion ef­fort has largely suc­ceeded, Mr. Shi­b­ley said, be­cause plan­ners cap­i­tal­ized on Buf­falo’s com­par­a­tive ad­van­tages — the same way small cities have out­paced Sil­i­con Val­ley in tech­nol­ogy.

“There’s no ques­tion that if the busi­nesses you’re try­ing to at­tract are STEM-based, and you have a col­lege and uni­ver­sity con­fig­u­ra­tion that’s de­liv­er­ing STEM stu­dents to the mar­ket­place, you have an ad­van­tage if you get your busi­ness closer to that la­bor force,” Mr. Shi­b­ley said.

The same goes for Gaithers­burg, said Daniel J. Ab­dun-Nabi, CEO of Emer­gent BioSo­lu­tions.

Emer­gent BioSo­lu­tions’ head­quar­ters is near the District of Columbia but out­side the city’s bor­ders. The lo­ca­tion helps it reap the best of both worlds: prox­im­ity to fed­eral agen­cies and Con­gress, and ac­cess to Mary­land’s re­sources and prefer­able poli­cies.

While D.C. poli­cies may drive out busi­ness, Mr. Ab­dun-Nabi said, Mont­gomery County, which in­cludes Gaithers­burg, “un­der­stands the im­por­tance of earlystage com­pa­nies,” a sen­ti­ment re­flected in its tax code. The Uni­ver­sity of Mary­land and Uni­ver­si­ties at Shady Grove jus­tify the lo­ca­tion too, he said in an email.

Mont­gomery County is one of 20 ju­ris­dic­tions Ama­zon is con­sid­er­ing for its sec­ond head­quar­ters, along with North­ern Vir­ginia and the District.

‘Head tax’

Mr. Davies, the eco­nomics pro­fes­sor, said city poli­cies can make or break the lo­cal econ­omy, as his na­tive Pitts­burgh has shown.

Like Buf­falo, Pitts­burgh’s steel em­pire col­lapsed in the 1980s. But other in­dus­tries sprouted: tech­nol­ogy, health care and the arts.

“You can’t just go on hop­ing that the steel mill will open again or that the au­to­mo­bile plant will open again,” said Don Carter, a di­rec­tor of the Re­mak­ing Cities In­sti­tute at Carnegie Mel­lon Uni­ver­sity in Pitts­burgh.

Thanks to pri­vate en­ter­prise, phi­lan­thropy and uni­ver­si­ties that pro­duced mar­ket-ready grad­u­ates, Pitts­burgh resurged.

Mr. Davies com­pared it with Detroit. The auto in­dus­try fal­tered dur­ing the Great Re­ces­sion and the fed­eral govern­ment bailed it out, he said, but Pitts­burgh took a dif­fer­ent road.

To­day, “Detroit is a waste­land and Pitts­burgh is not only a thriv­ing city, but man­aged to weather the Great Re­ces­sion al­most un­scathed” com­par­a­tively, he said.

Still, Mr. Shi­b­ley said big cities fail to fore­see the de­struc­tion their poli­cies can wreak. Throw­ing all their as­sets at Ama­zon could back­fire as an in­flux of work­ers strain ex­ist­ing in­fra­struc­ture such as roads and sew­ers.

“Some cities should be care­ful what they wish for,” he said. “The thing that I would not want to do is to as­sume that I got Ama­zon and [the econ­omy is] all fixed.”

Mr. Davies com­pared the risk to putting all of a worker’s re­tire­ment money into one stock.

“So long as that sin­gle stock price rises, your re­tire­ment sav­ings does well. But if that sin­gle stock price tanks, you could lose your shirt,” he said.

The Liv­abil­ity web­site’s “Best Cities for STEM work­ers,” list bases its rank­ings on to­tal STEM jobs and work­ers’ in­comes.

Gaithers­burg, with a pop­u­la­tion un­der 60,000, owes some thanks to Mary­land be­cause the state takes less in taxes on in­come, busi­nesses, prop­erty and sales com­pared with the District of Columbia, where the city­wide min­i­mum wage con­tin­ues to rise.

“Dif­fer­ences in min­i­mum wages across cities will mat­ter a lot to busi­nesses that em­ploy many min­i­mum-wage work­ers and to busi­nesses that em­ploy union work­ers,” Mr. Davies said.

Econ­o­mists have stud­ied Ama­zon’s home city, Seat­tle, since it passed a $15 min­i­mum wage in 2015. The Seat­tle City Coun­cil irked its big­gest tax rev­enue provider in May when it passed a “head tax” that charged large em­ploy­ers such as Ama­zon and Star­bucks hun­dreds of dol­lars per em­ployee.

Busi­nesses called it a tax on jobs and threat­ened to leave. An Ama­zon ex­ec­u­tive said the coun­cil has a “spend­ing ef­fi­ciency prob­lem.” The coun­cil re­pealed the tax less than one month later.

Some Sil­i­con Val­ley cities now are con­sid­er­ing a “head tax.” Moun­tain View, Cal­i­for­nia, will hold a ref­er­en­dum in Novem­ber, and the Cu­per­tino City Coun­cil will hold one next year.

Yet lo­cal­i­ties in Mary­land con­tinue to wield the ad­van­tage in tax pol­icy. Ac­cord­ing to the Tax Foun­da­tion, Mary­land’s ef­fec­tive busi­ness taxes are lower than Delaware’s and West Vir­ginia’s and are nearly the same as Vir­ginia’s.

Tax rates in New York and Penn­syl­va­nia are al­most twice as high as Mary­land’s, and the state will reap the re­ward: Emer­gent BioSo­lu­tions just an­nounced a $50 mil­lion in­vest­ment and up to 60 new jobs over the next three years.

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