What happens to cities when companies like Amazon move in, and how to prepare
As the great white north becomes a more appealing hot spot for big tech, housing prices and labour market stress remain top of mind for Canadian cities.
Prime Minister Justin Trudeau announced Monday that e-commerce giant Amazon would be opening a new office in downtown Vancouver, which would bring approximately 3,000 additional jobs to the city.
While this is largely good news for the city, some have questioned whether it could make cost of living and labour shortage concerns in Vancouver even worse. Experts agree that if Big Tech continues moving into Canadian cities, it’s likely that we’ll see a rise in housing prices and a higher demand for skilled labour than the country may be able to immediately provide.
Here’s how Canadian cities courting companies like Amazon can prepare for the economic impact ahead of time.
Build homes ahead of time to avoid worsening the housing crunch
According to Tsur Sommerville, a real estate and economics professor at the University of British Columbia, cities that are proactive about building housing ahead of time can mitigate the shortages experienced by tech hubs like Seattle and San Francisco.
“You know, the balance between the benefits and the cost is somewhat connected to what cities do. If you follow San Francisco and Seattle, particularly San Francisco, and you’ve got lots of high-income young people and you don’t build anything, then you have a real housing crisis,” Somerville said.
WATCH: Trudeau in Vancouver to announce Amazon expansion
He adds that while certain cities — such as Austin Texas and San Antonio, Texas — have done a better job of proactively building housing units to meet the demand, cities like Toronto and Vancouver could do a lot better, considering their burgeoning status as global cities.
“If you don’t increase the number of housing units, higher-income people will force lower-income people out,” he said. “When you have income inequality and you increase the number of people at the higher end, it puts pressure on folks at the low end, particularly in housing markets. The less able the markets are able to respond and to build more units, the greater that problem is.”
WATCH: Amazon announces it is bringing 3,000 new jobs to Vancouver
Failing to address housing concerns ahead of time, explained Somerville, may make it harder for the city to benefit from the positive impacts of high-skilled labour and higher-paying jobs, which include more free cash flow and more jobs created as an offshoot of increased high-paid labour in the city.
“It’s something that you definitely want, but I think there’s a need to be aware of supply-challenged cities and what that does to housing markets, and governments need to be proactive,” he said.
WATCH: Trudeau welcomes Amazon expansion, 3,000 new jobs to Vancouver
Immigration, education can help reduce stress on labour market
Craig Patterson, director of the school of retailing at the University of Alberta, states that since Vancouver’s tech space is already growing so rapidly, bringing in a tech giant might further exacerbate the high-skilled labour shortage for other companies.
“Some existing tech companies might lose some staff. You’ve got some small startups. Amazon might be able to pay their employees more securely,” Patterson notes. “I think there is a bit of a shortage of labour right now. Amazon could disrupt the tech labour market a bit.”
He adds, however, that Canada’s increasingly open attitude towards immigration is a good thing for the tech sector, as it can help mitigate these labour demands.
WATCH: Amazon announces expansion to Vancouver includes 3,000 new jobs
“Canada is pro-immigrant, which is really great for tech,” he said. In addition, however, the fact that the tech landscape is “booming in Vancouver right now,” may also reduce the need for major firms like Amazon to rely on immigration to fill these roles.
In its announcement on Monday, Amazon said that it would be looking to Canadian university graduates to fill these roles as well.
WATCH: The downside of winning Amazon HQ2: Start-ups fear the giant’s crush
“We chose to build and grow in Canada because we recognize the diverse and exceptionally talented workforce here,” said Jesse Dougherty, Amazon’s general manager of web services. “As a homegrown British Columbian and a software engineer, I am so proud of living and working in a city that is recognized worldwide as a first-rate global tech hub.
“We’ve hired many graduates from schools right here in British Columbia,” he said, citing the University of British Columbia and Simon Fraser University as well as the universities of Toronto, Waterloo and McGill.
WATCH: Toronto only Canadian city to make Amazon HQ2 shortlist
The new office is expected to open in 2022. In addition, Amazon is expected to announce its second North American headquarters, dubbed HQ2, sometime this year, with Toronto as the only Canadian city on the list of 20 finalists.
-With files from the Canadian Press.
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