Any proposal Colorado makes to host Amazon’s second headquarters campus will have to address a critical bottleneck: finding enough workers for the tech giant in what is already one of the tightest labor markets in the country.
Seattle-based Amazon expects to hire 50,000 mostly highly skilled workers at an average wage of $100,000 a year, according to its request for proposals for the new campus. Those hires will probably come over a long stretch — 15 to 20 years — but Colorado would have to draw labor from an economy already struggling to fill current openings despite some of the strongest in-migration rates in the country.
“People have asked me about our low unemployment rate,” Gov. John Hickenlooper said of the bid that the state’s economic development office is putting together to win Amazon’s second headquarters.
He acknowledges that the jobless rate is historically low at 2.4 percent, second only to North Dakota. But the Colorado governor adds that the technology workers central to Amazon’s plans are in short supply everywhere, and the industry faces unemployment rates below 2 percent.
San Francisco, Boston and Austin, Texas — cities that might make the short list of metro areas best suited to host Amazon —- face tech worker shortages, Hickenlooper said Monday at a news conference on workforce development. What will set cities apart will be their ability to draw talent — and in that regard, the northern Front Range stands out.
“The region has demonstrated its ability to attract a very high level of digitally literate millennials — the gold standard,” said Mark Muro, director of policy at the Metropolitan Policy Program at Brookings. “In that vein, Denver is the rare metro that really can attract the right kind of talent in volume.”
Although migration has been depressed nationally, a combination of lifestyle, an urban tech feel, recreational opportunities and vibrant neighborhoods has helped make the region a magnet for people on the move, he said.
Where the region falls short, however, is in producing enough local talent in computer science, programming and other skill sets where Amazon needs expertise, Muro said. Brookings, in a study released in March, found that 46 percent of digital services jobs created between 2013 and 2015 were concentrated in just 10 metro areas. Denver, wasn’t in that group, and lagged places such as Dallas, Boston, Austin and even Phoenix. It created half as many tech jobs as Seattle, Amazon’s current home.
“The region would have to get much, much better at local talent production, and I would worry that you don’t have an awesome research university,” Muro said.
Colorado’s colleges and universities simply aren’t graduating students in large enough numbers, especially in the specific majors where technology companies are looking to hire, said Gary Horvath, a Broomfield economist. But that is not a new problem for the state, and it was an issue when Sun Microsystems, Level 3 Communications, IBM, Vestas and the various federal labs went on hiring sprees.
“The state’s higher-education system has not been able to provide the workforce for many of our companies, current and new,” he said.
Horvath estimates that Colorado’s four-year public universities and colleges grant about 38,000 degrees. In the 2015-16 school year, about 7,000 were in business majors and 1,121 in computer majors, mostly from the University of Colorado and Colorado State University systems.
“While both schools will supply workers to Amazon, it is clear that Amazon will have to attract talent from outside the state, provide its own training programs, work with the workforce system or work with private-sector educators to train their workforce,” Horvath said.
He estimates in the early years, Colorado would only be able to provide 10 to 20 percent of the workers Amazon needs and that more programs are needed to boost that. One option Hickenlooper said the state is exploring is collaborating with the University of Wyoming, University of South Dakota and others in the region known for strong programs in electrical engineering, computer science and other tech skill sets. He also said the state, if chosen, will lean heavily on Amazon to help it meet worker demand.
A shortage of skilled graduates could result in Amazon hiring away workers from other employers. While that would boost wages and is simple capitalism, it could leave existing employers in a tough spot and could generate ill will. In short, Colorado will need to import more workers, and that carries implications for everything from homes prices and rents, to congestion on roads, to schools and already strained government budgets.
“I think Colorado will be able to attract workers as long as there are other places with higher unemployment rates,” said state demographer Elizabeth Garner.
Last year, just over half, 52 percent, of the 134,500 people aged 25 or older who moved from out of state into Colorado had a bachelor’s degree, Garner said, citing the American Community Survey. The survey estimated that 120,500 people aged 25 or older left the state. Of those leaving, 45 percent had a college degree.
Across metro Denver, there were only 34,500 unemployed workers actively looking for a job in August, according to the Colorado Department of Labor and Employment. A lack of available workers is leaving thousands of job unfilled and acting as a drag on the state’s economy, economists have warned.
Metro Denver increased its nonfarm payrolls by 50,000 jobs in 2014 and again in 2015. Last year, it added only 35,600, and as of August the annual pace of job gains was running around 28,400. And the niche that Amazon will hire heavily in represents a slice of the total. Of all the payroll jobs in Colorado last year, only 10 percent paid $99,900 or more, according to Alexandra Hall, the state’s chief labor economist.
Add in all the spending Amazon will bring through its vendors, suppliers, contractors and employees, the company will generate between 1.2 and 1.9 secondary jobs, Horvath estimates.
Brian Lewandowski, associate director of the business research division at CU-Boulder’s Leeds School of Business, cautions that while Colorado’s labor markets may be tight now, they may not always remain that way. Amazon, wherever it places its second headquarters, will hire across both good and bad cycles in the economy.
“It is hard to pinpoint what that would mean for the unemployment rate in Colorado,” he said.
