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The Amazon Problem: How a Canadian HQ2 Prompts Concern

Here’s a hot take for you: 50,000 new jobs, billions in revenue and millions in infrastructure improvements may harm the Canadian employment ecosystem.

Ever since Amazon announced their reality show-esque search for a second headquarters (dubbed the HQ2), North American cities have lined up to submit bids. And why not? The numbers Amazon shared regarding how their first headquarters in Seattle has changed the face of the city are astounding, from spending $43 million each year on transit for employees to creating 53,000 additional jobs—on top of the actual Amazon employees—through indirect investments.

Dozens of articles, think pieces and blogs have been written on why every eligible city in Canada deserves the new Amazon HQ2. Suggestions like Calgary, Kitchener-Waterloo, and even a joint bid from Detroit and Windsor have made the rounds, among the big contenders like Toronto and Vancouver.

However, some of the brightest minds in technology have shared their thoughts across various media outlets, expressing why Amazon’s move to Canada may cause massive headaches for not only the city they choose but the country as well.

Anthony Lacavera, a venture capitalist and founder of Globalive Holdings, told BNN his thoughts about a potential northern Amazon HQ2.

“Look at the Canadian tech sector today: Microsoft, Google, Facebook and now potentially Amazon, all establishing very significant presences in Canada,” explains Lacavera. “That presence is going to lead to cultivating the growth of great Canadian talent – but once someone rises to the top, their career path is to go to the U.S.”

“It’s the biggest Trojan horse of all time, yet we’re excited and rolling out the red carpet and tax dollars to help bring them here? I think it’s insanity,” he concludes.

In Amazon’s request for proposals, they distinctly say they are looking for cities that will offer tax credits, reduced governmental fees, and land or workforce grants. In other words, some of these cities may potentially pay Amazon to deplete their resources, whether it be land, talent or otherwise.

Bilal Khan, CEO of the Toronto-based innovation hub OneEleven, told the CBC the big argument comes from the choice to either embrace a massive company or focus on homegrown talent.

“Our primary focus needs to be around the long-term economic growth of Canada, and that is going to be predominantly focused on how do we help Canadian companies grow and become the next Amazons and Googles,” said Khan.

As a professor of urban studies at Simon Fraser University, Peter Hall also spoke with the CBC and weighed in on how a company the size of Amazon may take up already-scarce land and property offerings in his city, driving up the cost of living even more.

“I think it’s hard to see how Vancouver could capture enough of the benefits and how Vancouver could avoid enough of the negative spinoffs,” said Hall.

In Seattle—the home of Amazon’s headquarters since 2010—residents have coined a name for how the company has affected the city: “Amagedden.” It reflects everything from surging real estate prices to terrible traffic, and though Seattle is a relatively small city (population 700,000) compared to some of the potential suitors Amazon is considering, the effects cannot be ignored. Seattle’s office vacancy rate dropped from 20.1 per cent in 2009 to 9.8 per cent in 2017, indicating just how magnetic Amazon can be when it comes to drawing in other companies or startups.

And with new companies comes more people—rent in the Seattle metropolitan area is growing 7.2 per cent year-over-year, the fastest compared to any other metro area in the U.S., according to Skylar Olsen, a senior economist with Zillow. Home values in Seattle have risen close to double the national average.

Perhaps the biggest concern for budding Canadian tech startups is how Amazon will usurp all the tech talent in the country, leaving these new companies with two options: hire lesser-skilled employees or match the salaries that Amazon—potentially the first-ever company to reach a trillion dollar market cap—offers their workers.

The Ontario Minister of Economic Development, Brad Duguid, spoke to the Globe and Mail about the talent problem. Oddly enough it is his office that is responsible for bids to Amazon from Toronto, Ottawa or Kitchener-Waterloo.

“While we’re graduating 40,000 tech grads every year and they’re among the most sought-after in the world, we’re in the process of expanding that pipeline now,” said Duguid. “If we landed an investment the size of Amazon, we wouldn’t have the pipeline today to accommodate the need.”

Stephen Carlisle, president of General Motors Canada, approaches the problem undecided.

“What if Amazon dropped in here? That would be a big problem. A happy problem on the one hand, because it’s huge employment that’s aligned with a very bright future,” Carlisle told the Globe and Mail. “But, on the other hand, it would tend to crowd out, so I don’t know that we’ve got the capacity or the capability to keep up.

There are a lot of ways to unpack what an Amazon HQ2 in Canada means. No matter what, it will mean a massive economic boon to the city and province it is in, in addition to having an impact on the country’s GDP. But it may not be worth the Canadian brain drain of talent to a U.S.-based company, or the massive markups in local property fees. No one will know until the e-commerce behemoth has selected a bid, built their second home and become, perhaps begrudgingly, a new fixture of the tech landscape.

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