“While the Triangle may benefit from the modeled benefits such as the direct jobs, the spillover ones in linked industries, and the induced ones, places far from the Triangle may not benefit, A project of this scale has the potential to widen regional disparities within the state, leading the rich regions to grow richer, the poor regions, poorer.” – Duke professor John Quinterno.

RALEIGH – There will be clear winners and losers, as well as a hard-to-predict set of spillover effects of Apple’s announced new Triangle facility, economists say.

Higher rents but more jobs. Traffic congestion grows but more economic activity. Increased housing costs but better paying jobs. Population growth and strain on schools. That’s to cite just a few.

“There’s a whole host of positive and negative spillovers,” said Greg Brown, UNC Kenan Institute Professor of Finance.  “The most immediate ones are the impact on all of the businesses and other people who will get income from folks working at Apple.”

The impact will be huge, possibly four or five times as large, per person, as a typical facility coming to the Triangle under an economic development incentive grant, if the average starting wage for the roles is as high as the company is proposing, said Brown.  “There’s no doubt that it will generate a lot of new economic activity in the Triangle.”

But the effects aren’t all positive.

People often are captivated by the reported positive spillover effects of large economic development packages, Brown explained. But they forget about the negative spillover effects that are born by individuals, such as the addition of 20-minutes onto a commute along I-40, or the additional costs required to adequately fund and staff public education, an area that sorely needs more investment from the state.

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Also, North Carolina is “paying” for the new Apple jobs with nearly $1 billion in tax incentives over 40 -years – a record amount for the state.

It’s really challenging to know whether $1 billion in economic incentives is worth it, without knowing exactly what we are foregoing, said Dr. Anne York, professor of economics at the school of business at Meredith College.

“Is this going to lead to $1 billion less in so-called wasteful government spending or is it $1 billion less in direct health and education spending,” said York.  “At the very least, Apple is making a significant investment in NC that will lead to other avenues for tax collection, such as state income taxes on these higher paying jobs and sales taxes from workers spending money in their local communities.”

Overall, it’s a clear win for the Triangle, but the costs of economic growth aren’t always evenly born, concluded Brown.  “If you’re someone working a lower paid retail job in the Triangle, having your rent go up a few hundred dollars is a meaningful expense for you.”

In a column written exclusively for WRAL TechWire, NC State economist Dr. Michael Walden was very positive about the Apple deal.

“A billion-dollar investment and 3,000 jobs represent just the start of the impact.  Supplier and support firms will also be attracted, and the spending from the new jobs will generate a larger retail base.   All included, the total “Apple effect” could be closer to 6000 jobs and over $1 billion of new annual spending in the state,” he wrote.

Winners and losers

A critic in some respects of Google’s recent 1,000 job expansion in Durham, Duke University Professor John Quinterno also spoke out about the Apple deal. There are winners AND losers, he said.

“Should the project come to pass at the scale outlined today, it would have transformative effects on the region,” said Quinterno, visiting professor of the practice in the Sanford School of Public Policy at Duke University and the founder and principal of South by North Strategies, a research consultancy specializing in economic and social policy.  “Those effects would not be uniform, however, and as with any economic development package of this magnitude, there would be clear winners and losers.”

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And that’s only if the project materializes as conceptualized and proposed, said Quinterno, citing studies of the state’s prior use of job development investment grants, or JDIGs, that found most incented projects don’t achieve the stated employment figures.

A project of this scale could benefit a wide range of people, said Quinterno, but it may also exacerbate economic and social inequities.  “Research has shown that many tech-based development projects can result in a good number of high-paying jobs supported by even larger numbers of low-paying support and service jobs,” he said.  “To the extent that the new high-paying earners use their resources to bid up the costs of essential services like housing, those people in lower-paying jobs will struggle to make ends meet even if they have a “new” job that is induced by the Apple project.”

The result is that these lower income earners may experience a deterioration in their well-being and may find themselves being displaced, which is not an unusual phenomenon in larger technology centers, said Quinterno.

Another factor to consider is the amount of public subsidy involved,.

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“The Department of Commerce said that this project could potentially receive as much as $846 million in Job Development Incentive Grants over a 39-year period. That is a transfer of taxpayer resources from all North Carolinians for the benefit of one publicly traded company and, at most, potentially 3,000 people who may directly work for the company in one specific region of the state,” Quinterno said.

Apple benefits; no other existing firm will benefit, summarized Quinterno.  “The public funds redirected toward Apple is money that will not be available for schools, roads, and other public investments in communities, both in the Triangle and far from it,” he added.

“While the Triangle may benefit from the modeled benefits such as the direct jobs, the spillover ones in linked industries, and the induced ones, places far from the Triangle may not benefit, A project of this scale has the potential to widen regional disparities within the state, leading the rich regions to grow richer, the poor regions, poorer.”

“It is intriguing that Apple is investing in two funds for schools and community initiatives in the Triangle and in infrastructure across NC, but the $100 and $110 million funds are a drop in the bucket to meeting those needs,” noted York.  Which leads to another question: will there be enough talent in North Carolina?

Among those funds are designated spending for utilities and infrastructure as stipulated by the terms of the Jod Development Investment Grant Apple signed with the state.

Talent: homegrown or imported?

It’s imperative that the state, and economic development professionals, figure out how to ensure that when announcements like Apple’s–or other recent announcements from Google, Robinhood, Invitae, or Gilead, to name a few–are made, how as many people from North Carolina benefit, said Brown.

The other solution is to import people, which would increase the economy, but doing so has less of an impact on who is already here, said Brown.

“Regarding who may benefit from the direct Apple jobs,” said Quinterno, “it does seem like the assumption is that many will be filled by outsiders.”

That would be suboptimal, because ideally, many or most of the jobs will be filled by North Carolinians, many of whom are or would in the next decade become graduates of local colleges and universities, said Quinterno, noting that if most of the best jobs go to transplants, the employment benefits, and thus economic benefits, to regular North Carolinians will be limited.

“It’s not like there are thousands of engineers sitting around in the Triangle twiddling their thumbs waiting for Apple or Google,” said Brown.  Every technology manager in the Triangle right now is likely thinking about talent, said Brown, wondering how they’ll be able to recruit and retain employees in a highly competitive labor market.

The North Carolina University System, and some private colleges, will have the ability to provide the required talent over the next decade, said Dr. John Connaughton, professor of financial economics at the Belk College of Business at the University of North Carolina-Charlotte. Meredith College has added curriculum in data science, said York, and works to provide opportunities for women to develop the required skills for STEM work, for example, as the private college envisions a future economy in which technology skills will continue to be in high demand. But will it be enough?

The opportunities to increase talent pipeline, and for the state government to incentivize this aspect of economic growth, will be available, said Brown, including considering innovative training programs in conjunction with community colleges, historically black colleges and universities, and at other, non-Triangle-based universities within the North Carolina System like UNC-Greensboro, North Carolina A&T, or others, he added.

“This is going to be a really important R&D facility for decades, and they’ve chosen to locate it in North Carolina,” said Connaughton.  A company doesn’t make this kind of decision, with the scale of its hiring and growth plans, across decades, without believing there’s a talent pipeline present to support growth, he argued.

A company like Apple isn’t coming without incentives, said Connaughton, even if there are few regional areas along the east coast that possess the educational infrastructure that a company like Apple–or Google before it–envisions it will need for future innovation and growth.  “We’ve got a foot inside the door of the second half of the 21st Century,” said Connaughton.

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