Is big business souring on Seattle?

Support comes from Helen Keller International. Helen Keller believed that the welfare of each is bound up in the welfare of all, a conviction that continues to guide the organization's work worldwide, helping families amidst rising food costs, climate shocks, and under-resourced health systems. More at HelenKellerINTL.org slash KUOW. You know, every day on Up First, NPR's Golden Globe-nominated morning news podcast, we bring you three essential stories. At the heart of each story are questions. What really happened? What really mattered? What happens next? At NPR, we stand for your right to be curious and to follow the facts. Follow up first wherever you get your podcasts and start your day knowing what matters and why. Hey, it's Monica Nicholsberg. Yeah, and Joshua McNichols too. Every week, you tune into Booming to learn about what's going on in the local Pacific Northwest economy. Think back to some stories that stuck with you. Maybe it was our piece on the disappearing middle-class economy and our favorite diners. Yeah. Or maybe the story about how light rail could turn Seattle into the new Copenhagen. Or the bookstore episode. You got a lot of positive feedback for that one. You know, we are here every week because we're powered by an entire newsroom of local journalists following stories across the city. And everything you hear on KUOW, this podcast, every other podcast, every article, every newsletter, Every community event relies on the support of our community. This May, if you want to support Booming and other podcasts like it, celebrate Public Media Giving Days with us. Together, you'll support a thriving future for local public media. Yeah, and public support has always been the backbone of public media. So here's what we're asking for. We're inviting you to join KUOW as a donor to power this podcast and local news by making a gift. And it's a way to sort of pay it forward in your community. It's not just for any one of us individually. It's ensuring that everyone, and not just the people who can afford it, have access to high quality news. Whether it's $5, $10, or $20 a month, your support allows us to tell stories that help you navigate the local economy. Stories that you really can't get anywhere else. All you have to do to get started is tap the link in our show notes or visit KUOW.org to make a gift. Yeah, tap that link. And thank you for supporting this podcast. Seattle's top employer after laying off thousands of people. I'm probably more worried right now about the business climate in Washington than at any point over the last 30 years. It's hard to tell whether these high-profile moves companies are making are signs of a wider exodus or if they're outliers. But there may be lessons from the past that can provide clues to what the future will hold. I'm Monica Nicholsberg. And I'm Joshua McNichols. And this is Booming. Today, is big business souring on Seattle? We look at one of the city's most infamous tax battles to learn more. That's coming up. Oh my God. These are our new offices? Yeah. Well, this is just the lobby. We're up there on the second floor, but yeah. These are so nice. The fireplace. Oh, I am a sucker for an intuitive kitchen layout. So, Monica, I'm hearing a lot of debate and conversation right now about this area where we live being anti-business. You know, people are worried about new taxes and they're worried about the way that some politicians talk about big business. That is why I am proud to join them on their picket line and proud to say loud and clear, I am not buying Starbucks and you should not either. So how seriously should we take this concern that Seattle is not a business-friendly place anymore? Well, there are a lot of unknowns here. What we do know is that Starbucks is planning to open a corporate office in Nashville for up to 2,000 employees. Now, this is a common destination for companies that want to have a Southeast logistics outpost. But it also does have a lot of people worrying if the political climate here is maybe alienating some of the people who run these big companies. You know, I saw in the Seattle Times that this office will put Starbucks within a day's drive of half of the country's consumers. So you can see why they want to have a distribution hub there. Also, there's a lot of talent in Nashville and the city seems to be sort of rolling out the red carpet for businesses. But I can also see how the timing of this announcement with all of the new taxes being debated in Washington state could lead people to draw conclusions that the two things are related. Yeah. Companies like individuals usually move for more than one reason. Right. So we should be careful about drawing conclusions. But we've been in a kind of similar position before. It sounds like we're going to get into some history here. You know I love history. So almost a decade ago, Amazon and the Seattle City Council got into this protracted political battle that led the company to open an outpost in Nashville and a second headquarters in D.C. Nashville again. So some clear parallels there. Yeah, though, again, we should note that there are some big differences. Amazon was mostly sparring with the city of Seattle, whereas the taxes and policies that some in the business community are spooked about today are more happening at the state level. And Amazon isn't Starbucks. The companies are different in a lot of ways. Right. Also, Amazon isn't growing nearly as fast today as it was back then for a whole range of reasons that we've already covered on this show, like data center spending, layoffs, automation. But the company says that when it is hiring in this region, it's prioritizing Bellevue over Seattle. So you see a possible connection between that situation and today. I think it's at least worth examining what happened back then to see what we can learn about what's happening now. Because these questions about whether this region is still a good place to do business, they go way back. And I caught up with someone who's been tracking this since the beginning. His name is Jeff Schulman, and he's the chair of the Marketing and International Business Department at the University of Washington's Foster School of Business. He's also the former host of the Seattle Growth Podcast, and he's studied Amazon's impact on Seattle for years. So here's our conversation. Jeff, thanks for being here. Thanks for having me. So you have been watching Amazon and how it's shaped the city and city politics here for a long time. Yep. As have I in my reporting capacity. And I know that there is never a dull moment, including right now when we're seeing this real shift in where Amazon is thinking about its growth. But before we get into all of that, let's start with the positive. How has being Amazon's hometown benefited Seattle? I think that beauty is in the eye of the beholder. What positive for some residents or businesses is negative for others And so I think it important to just start overall that what they did to Seattle was dramatic They were a catalyst for a cultural economic and physical transformation of Seattle The buildings all changed The people have changed and flooded with money that was good for people who were able to tap into that and then problematic for others who could no longer afford to live in Seattle. And so some residents see their neighborhoods completely decimated. And so that's positive for others, brand new shiny buildings, new restaurant or shop, and then really dramatically negative for others who feel like it's a death in the family. You know, they used to gather there. They used to come together in a community there. And so there are no positives or negatives. There's positives for some people, negatives for others. And those depend on who you're talking to. Maybe a better way to frame it is that it just created winners and losers in a more dramatic way than we'd seen before. Yeah, I think a lot of people say, oh, Amazon is just, you know, for the high paying, wealthy jobs that they've created and people come from all over and take them. But there was a cascading effect. You know, Amazon created opportunity that then other people wanted to be near Amazon. So they also put jobs here. And then those people who had those jobs spent a lot of money at the restaurants and at the bars, at the shops. And so then there were business owners, small business owners here who benefited from it. I even talked to musicians who got to perform in Amazon's headquarters. So there was money for musicians, money for event companies, you know, put on events for Amazon. So there was a lot of opportunity that went around beyond just the Amazon employees here. I moved to Seattle in 2014 at a time when Amazon was growing really, really quickly right in the heart of the city. And covering it at that time, I remember there was a lot of political drama. But that was many years ago at this point. So remind me exactly what all happened. Yeah, so coming out of the Great Recession, as Amazon's pouring a lot of jobs and money into our downtown, they almost also became an enemy. Seattle is in the throes of a stunning and unprecedented affordable housing and homelessness crisis. An enemy of some people in our government as they're thinking, hey, you're responsible for all this change that is leaving my constituents unhappy. Sky high rents and soaring home prices. And so they were singled out for several things. And that kind of created what could have been a symbiotic relationship as our city and the company grow together. Amazon on Wednesday said it would spend $2 billion to create affordable homes. I am in business now because Amazon is in business in Seattle. Almost created an antagonistic relationship where they felt singled out and wondered, you know, are they going to have to pay more than what they thought was their fair share? They made donations to candidates that they wanted to see win about half a decade ago or so. City council candidates. Amazon has just dropped an extra million dollars in a Seattle city council race spending more than any other business or union on local elections. They really want to invest in their hometown. And that didn't work. So almost all of them that the public figured out that they supported, almost all of them lost. And so there's been a complicated relationship between Seattle and Amazon. And I think it all stems from just, again, this dramatic transformation that occurred as they were growing. And what could have been a more symbiotic relationship sadly became one of more conflict than either would have liked. Right. And then, of course, there were the tax battles. Yep. There was a head tax that was launched originally and Amazon threatened to cancel one of their buildings, the Rainier Tower, I believe. Amazon's vice president said in a statement that the head tax was forcing the company to question its growth in Seattle. Republican State Senator Joe Fain tweeted, if you don't like where Seattle is headed, you do have options. And so that then was reversed at the time. President Harrell, vote for aye. Seven in favor, two opposed. And interestingly enough, Amazon did not really go into that building anyway. And so we've had kind of a complicated history as we've seen some politicians make Amazon the boogeyman and really rally an anti-Amazon cry. And now we're seeing that that might have worked. And we're seeing that they've invested beyond Seattle. They've invested out in Bellevue. They've invested in cities around the country. and that growth doesn't seem like it's going to be here in the next 10 years like it was the previous 10. Yeah, and I want to get into that, but I also just want to mention that even though the head tax died pretty dramatically, the city of Seattle did end up passing a payroll tax on the city's largest employers, and Amazon is the biggest payer of that tax. Covering this, the thing that you would hear kind of behind the scenes is like, we can't just be Seattle's ATM. Amid all of this, Amazon started saying privately and then less privately that it's going to focus its future growth, like you said, on Bellevue on the east side of Lake Washington. There's obviously a political calculus to that. It puts pressure on the city council when they're considering taxes that the business community doesn't like. So given the sort of political element here, how seriously should we take this risk of job loss? I mean, could you see a future where Amazon has more employees on the east side than on the west? Let's also set the stage going back a little bit that this was at a time where Amazon was growing so rapidly and it was just impossible to get all the talent that they needed just in this city alone. And so they had this HQ2 process where they were going to have a second headquarters. How could I forget the HQ2 process? Welcome back. It has been a year since Amazon announced the company is searching for a second headquarters, yet the location is still a mystery. 238 cities applied. Atlanta, Los Angeles, Philadelphia, Boston. And it was all the rage. Cities all around the country were rolling up the red carpet, sharing all these incredible economic incentives. Please, please, please put your jobs here. Amazon is going to bring $5 billion in investments to this magic city and 50,000 jobs with an average annual compensation of $100,000. And then in contrast, we have city council members literally having tax Amazon rallies. So it's not even just like, hey, let's tax. We need more tax revenue. But it's singling out Amazon as kind of a negative here. And so the contrast was pretty severe at that time and made, I believe, and I would have to guess, made them question, like, where do they want to grow and can they have a sustainable future here in Seattle when there is open antagonism to them at some levels within our government? And so I think back then we saw them start to diversify. And then now I think I could absolutely see a future where Amazon is really in Bellevue more so than Seattle. I mean, you see what helped Amazon grow here in Seattle. And it was just people wanted to live here. People wanted to work here. People wanted to play here. And you still see that. But you're also seeing that in Bellevue more than previously. And you're also seeing that when Amazon came to Seattle, Google came to Seattle, Meta came to Seattle. But all of these tech companies are also expanding in Bellevue as well. And so there's not the same penalty that they would experience for growing in Bellevue as they would have historically when people wanted to live and not have to cross the bridge. I remember when I was covering the HQ2 process, Amazon announced it was picking Washington, D.C. and New York City. And there was a huge protest in New York that there were folks saying the same things you hear here that we don want Amazon driving up our housing costs and they not a good neighbor and they shouldn be getting tax incentives Welcome to Amazon Take that welcome mat that was rolled out for you yesterday Put it back in the package it came in and send it back to Seattle where it belongs And Amazon ended up pulling out of that project. So I think it just goes to show how tricky it is to be a very fast-growing, fast-moving technology company that's not locating out in the suburbs where there's plenty of parking and space, but right in the middle of a city. You face pushback sometimes. Yeah. And that's the interesting thing is that if you ask people at Amazon as they're asking for economic incentives or asking to not be taxed, singled out for taxes, they're looking at it and thinking, we're doing you a favor. Most companies had these big suburban campuses and people would come and they would eat on the suburban campus. And it was just they took all the people and the money and came out. And now here, Amazon put all these jobs in the center of Seattle where people they purposely didn't give them lunch and people would be out in Seattle spending their money at Seattle businesses, then staying out afterwards for happy hours. And so they brought a lot of money into the city and they're wondering, why are you mad about it? Yeah, and then the contrasting example is Microsoft, which is on the east side and has the very traditional big tech campus. But now it seems that Amazon is saying, look, that didn't work out. Seattle is not the place where we want to grow. Our real HQ2 is going to be Bellevue and the east side. And I guess the reason I'm asking about the political calculus here is because we're not in an environment anymore where Amazon is growing at the rate that it was when a lot of these political battles were happening. I think it's easy to say we're just not going to add any more jobs in Seattle when you don't actually really want to add any more jobs anyway. I mean, Amazon's headcount across the state of Washington declined for the first time last year. So how real is this threat to move jobs out of Seattle? Well, I think if you look at what worked and made this Seattle grow so much is that people wanted to be in these dense urban environments where they could live, work, play all without a car or without going too far. And Amazon fed into that. That's why they wanted to be downtown because now, hey, you get to work at Amazon. You get to live downtown, work downtown, play downtown. And that's all. It's very convenient. Now, after the pandemic where people, a lot of the small businesses shuttered, and so there's not as much activity and enjoyable things to do downtown as there was six, seven years ago. It's less appealing for Amazon. It's less appealing for Amazon's employees. And so it's this, we had a virtuous cycle where people, Amazon put the jobs here, people moved here, then they put more jobs here and more small businesses came. Now we're seeing the unvirtuous cycle. I don't know what the right word is there. But this vicious cycle is where they're not putting people here. The small businesses can't survive like they used to before. And so we're seeing it's not as attractive. And so, yeah, I think this threat is very real. And if Amazon becomes a larger presence in Bellevue, I mean, that could create some of the same kinds of issues that we've seen here in Seattle, right? A real estate crunch, traffic. Won't Amazon just face the same kinds of tax fights that drove the move in the first place over there? Because eventually you would think that people would start looking to Amazon to pay a higher share of taxes to mitigate some of those challenges that come with having this big, wealthy company in the middle of your city. What's to stop history from repeating itself on the east side? Yeah, that's a great question. I think part of it is we're not going to see the same pace of change and growth that we saw. That's the tech industry is now where it used to be how many people you're hiring was a sign of strength that helped their stock prices and helped build confidence. Now it's how many people you're laying off is really being rewarded in the stock market. And so there's a retraction across tech. And I just don't think we're going to see that thousands and thousands of jobs coming every year that we saw during the boom here. It's so interesting to think of that as a moment in time, because I remember at the time it seemed like tech was going to keep growing forever. Yeah. And I think this is just a lesson that, you know, if you don't like the way things are, wait. I mean, things are always changing. It felt while we were in year six, year seven of the boom that this would never end. Then COVID hits, then the tech layoffs hit. And now we're like, oh, maybe that wasn't so bad having money moving into Seattle. and businesses opening up every time instead of closing. And I think that will come again because you look at what makes Seattle so fantastic, the sea to ski environment, the beautiful water, the mountains. We have a very beautiful downtown and I think people will want to live here again and people will want to work here again and people will want to put jobs here again. But what those jobs are in the age of AI, what those jobs are as Amazon starts shifting its priorities, that remains to be seen. Big picture, how should we be thinking about Amazon's changing footprint in this region? Everything goes back to how did we grow? And that gives us a little roadmap for what's going to happen as we unwind in that growth. And so when Amazon put a lot of jobs here, then Meta wanted to be here. Google wanted to be here. We became the cloud capital of the world. Like this is one of the biggest industries and it is Seattle is the place for cloud computing. And so now with AI, being so important. We were kind of hoping would Seattle become the AI capital of the world. And we're seeing that a little bit more in the Bay Area than here. We're not just thinking about Amazon's jobs going somewhere else. We're also thinking about other companies saying, I want to poach that talent without making the person move. Let me put the jobs where they are. And so it could be a little scary here in Seattle until we find what is it the next thing that's going to be magnetic to talent in the region. And we're already starting to see some early examples of this. I was just at OpenAI's ribbon cutting. They're putting their Seattle office in Bellevue. And XAI, there are records that indicate that they're also going to put their outpost in Bellevue. So that could be the new AI corridor here rather than Seattle. Yeah. And some people will be applauding that because that's going to be highly paid jobs and they're going to be from all over the world. So they're going to have their own way of doing things and their own culture. And And so we'll see this kind of cultural transformation happen in Bellevue that we saw here in Seattle. So for some people, they're going to say, yay, I get my city back. And other people are going to say, hey, we still got to pay for the fire department. We still got to pay for schools. We still got to pay for everything. And how are we going to do that with all the money on the east side? Well, that melting pot of perspectives, not just on tech, but in general, is one of the things that makes this place interesting. Yeah. And I think we just have to remember, Seattle is a highly educated workforce. It is a dynamic city. It has a lot to offer. And there's just an incredible amount of creativity in this city. And so as long as people still have the sandbox to create new things and to chart new paths, I think we're going to find we'll bounce back from this. But in the short run, people are going to get what they asked for. And I'm not sure they're going to like it as much as they thought they would. Well, we will be keeping an eye on all of that. Jeff, thanks for being here. Thanks for having me. Support comes from Helen Keller International. Millions of families around the world are at grave risk but solutions are within reach Helen Keller proven cost solutions reach children and families in greatest need More on how to help at HelenKellerINTL slash KUOW Music festivals and fan conventions, art walks, author events, and reading parties. The next few months are amazing for arts and culture in the Seattle area. And every week, KUOW's arts and culture podcast, Meet Me Here, will give you the inside scoop. From inspired recommendations to surprising chats with artists, you'll discover what's truly special about Seattle's creative communities. Listen to Meet Me Here on the KUOW app or wherever you get your podcasts. Monica, it's so interesting to think back on that time. You know, the HQ2 search in particular, I was in New York when some of those protests were happening. So it's funny, we didn't run into each other. I had gone to D.C. for the first announcement, got on a train, got off the train in New York, took the subway straight to Queens where the protest was happening. And then I stood on my suitcase so I could like see above the crowd. Oh, I love it. I love it. So, you know, what do you think we can learn about Starbucks and this debate that we're having right now about whether Seattle and Washington are still good places to do business from that history? I think there are three big things that I took from this conversation. One is it's easy to feel like everything is changing right now, but this is actually just the latest in a series of debates that stretched back more than a decade. When I thought about when I moved to Seattle and the fact that that's more than a decade from now, it was a little bit of a jump scare. Second, there's always been this tension, right? Educated, talented workforces tend to cluster in cities with a vibrant, you know, cultural scene with stuff that they want to do. And companies want to be where those workers are. But sometimes that means clashing with the governments that they elect. Yes. But the third thing is these companies do have more freedom than ever to choose where they want to be. The rise of remote work means that they don't have to be where their workers are necessarily. And the current labor market means that companies are not really as willing as they used to be to bend over backward for talent. So if the political rhetoric pushes them too far, like happened with Amazon, I think that can become a factor in their calculus of where to put jobs. And what are the consequences if that happens? Well, the tax base can shrink. We started to see signs of that maybe happening last year when the payroll tax that relies heavily on Amazon had a big shortfall. Yeah, that tax has proved kind of volatile. You know, what's happening here feels like it represents a broader trend of economic populism. I mean, it kind of reminds me of the negative reaction we're seeing around the country to data centers and AI. Yeah. And in Seattle, the city council is now exploring a data center moratorium. That's true. This tension between big tech and some local governments is a reflection of what's happening more broadly in the economy. We have this affordability crisis. People see wealth and power concentrating in very few hands, and it feels like it's only going to become more extreme with the rise of AI. And there's a reaction. All around the country, we're seeing these new ideas of ways to tax wealthy individuals and corporations. Sometimes I wonder if there could be some upsides for cities if the Amazons of the world spread themselves out more. Amazon evolved from a company with a headquarters in one city to a company with many smaller headquarters in many places. Here in the Seattle area, some of the concern was just that Amazon grew so much so quickly that we didn't have time to respond to some of the negative effects like skyrocketing housing costs. And it seems like if it were spread out more and grew a little slower in each place, maybe it wouldn't be such a big shock to people. You know, it kind of reminds me of when you need to change the water in an aquarium. If you change the water all at once, the changes can kill the fish because there's too much of a temperature shift and chemistry shift. It's a shock to the system. Yeah. But if you change it gradually, the fish has time to adjust and maybe can survive. So, you know, in Amazon's case, that extra time spent filling the aquarium could give us extra time to build more housing or adjust how we raise taxes. It gives policy time to catch up with the major changes. There are definitely people who feel that way. And we may get a bit of a natural experiment here as Amazon does slow down in Seattle and grows in other places. Yeah. There are also people who just feel like Seattle was better off before Amazon planted its flag in the middle of the city. But then there are those who point to the benefits of having these companies in your city. You can raise millions more in tax revenue to pay for things for everybody. They tend to do a lot of philanthropy, and they do bring in these high-paying jobs, which are things that cities with less prosperity than Seattle are trying desperately to attract. Yeah. It seems like Amazon and Seattle were kind of ahead of this trend that we're seeing play out across the country, and it shows the trade-offs of these kinds of policies. Yeah. And then Bellevue is this interesting case study of a blue city that's trying to take a more pro-business approach. So definitely going to keep an eye on what's happening there, too. Yeah. Yeah. Well, thanks for bringing us that interview. Yeah, happy to. That's it for Booming. Thanks so much for listening. And I got to say, we're getting a lot of feedback on the bookstore episode. People love sharing the books they're reading. Mel mentioned that The Last Town on Earth, which is the book I'm reading, was a favorite of theirs. They read it during the pandemic because it is about a pandemic. Yeah, that's why Emily St. John Mandel got a big boost at that time, too. Yeah. She wrote Station Eleven. Yeah, and another person said he was going to swing by the library on his way home and get that book for his wife. That was Rick. If you want to get in touch with us, you can email us at booming at KUOW.org or leave us a voicemail at 206-221-7158. We always love to hear from our listeners. Also, special thanks to people who are donating to the show. You may have heard us at the very beginning asking for you to go to KUOW.org slash booming to support us there. It helps keep this podcast going. Thanks. Our producers are Lucy Suchek and Alec Cowan. Our editor is Carol Smith. I'm Monica Nicholsberg. I'm Joshua McNichols, and we'll see you next time. Support comes from Helen Keller International. Helen Keller believed that the welfare of each is bound up in the welfare of all, a conviction that continues to guide the organization's work worldwide, helping families amidst rising food costs, climate shocks, and under-resourced health systems. More at HelenKellerINTL.org slash K-U-O-W. Food prices have jumped 27% in the last five years, and your grocery bill isn't getting cheaper anytime soon. Shopping at a wholesaler like Costco could be the solution, but only if you're smart about what you buy. I'm Claire McGrane. And I'm Tia Popescu. We're co-hosts of Control F, a KUOW podcast that uses data to reveal the hidden stories in our daily lives. On our latest episode, we break down the pros and cons of buying in bulk. Listen to Control F on the KUOW app or wherever you get your podcasts.