Apple brings far-reaching benefits to state
A newcomer to the area himself, Kenan Institute chief economist Gerald D. Cohen forecasts a largely positive impact when tech giant Apple moves into Research Triangle Park.
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In April, the California-based company that created the iPhone and Macintosh computers announced that it was building a new campus and engineering hub in the Research Triangle Park in 2023 and bringing 3,000 new high-paying jobs to the region.
According to the North Carolina Department of Commerce, Apple received a Job Development Investment Grant of up to $845.8 million spread over 39 years. In exchange, the project is estimated to grow the state’s economy by nearly $79.8 billion over the grant period, with the 3,000 new jobs generating $1.97 billion in new tax revenues.
Gerald Cohen
As part of the incentives package Apple accepted from the state, the jobs will offer salaries that average $187,001. But the impact the tech giant will have on the local and state economy goes far beyond the salaries of its new employees, says Gerald D. Cohen, chief economist for the Kenan Institute of Private Enterprise.
“You have the network effect of creating high-quality jobs and the multiplier effects of the workforce spending money in the community, and then you have the kind of investment effects that dovetail nicely with the other two,” Cohen said. “You’re creating a workforce of the future, a well-educated, connected labor force that can then get jobs and bring even more investment into the community.”
Cohen, who recently relocated to North Carolina from New Jersey, has worked in both the public and private sectors focusing on the intersection between financial markets and economic fundamentals. In the Obama administration, Cohen helped formulate and evaluate the impact of policy proposals on the U.S. economy as deputy assistant secretary for macroeconomic analysis at the U.S. Department of Treasury.
The Well asked Cohen to talk about the benefits predicted from the deal that brought Apple to RTP as well as its potential long-range impact.
What is the “network effect” of Apple’s new jobs?
Apple’s commitment to come to RTP illustrates that there are high quality people here, and it causes other businesses to come because they say, “Oh, this is a location which has a great talent pool. Let’s go there. They also have the educational institutions that can help us develop those pools. The people who graduate from college here will want to stay in the area, so we can hire them, and they won’t have to move.”
What is the “multiplier effect”?
The influx of new Apple employees will cause more employment down the line. More Apple employees means they will be going to local restaurants and supermarkets and car dealerships, for example. And those places will need to hire more people. And then the workers at the restaurants where the Apple employees go will go to other restaurants and supermarkets and car dealerships and so on, so this kind of ripple or multiplier effect can be really beneficial. You’re also more likely to see more nonstop flights between RDU and California, especially northern California, where Apple has its headquarters, and maybe more international destinations.
Will the higher salaries of Apple employees have an impact on local salaries and wages?
Yes, this infusion of money should raise the average minimum wage or market wage locally. If you have people with high salaries coming in and spending money, then that means that restaurant worker salaries are going to go up. And so the market will push those minimum wages higher. And most economists think the best policy is not the government setting that minimum wage. It’s the market setting that minimum wage.
Apple’s new RTP campus will bring 3,000 new high-paying jobs to the region.
What will be the impact on the local housing market?
The influx of high wage workers is going to put upward pressure on housing prices and lower housing affordability in the region. Unfortunately, the positive multiplier impact may not be enough to maintain affordability for some lower income households, which means longer and more expensive commutes.
What about the impact of the $200+ million that Apple will spend to support schools and infrastructure spending as part of the incentives package?
These are the investments that Apple is making into the community. And again, those are very important or beneficial because they help spur education, connectivity — all the things that economists think help build positive economic outcomes. So if you have better educational systems, if people have connectivity, that gets people jobs and that increases people’s standards of living.
Is North Carolina’s deal with Apple an example of a good use of incentives?
I haven’t done the math on this, so I can’t confirm the North Carolina Department of Commerce numbers. But their estimate indicates that the benefits are meaningfully higher than the costs of the tax breaks that they’re giving.
However, part of the challenge of incentives is that it becomes a competition between regions. And companies are going to play regions off against each other. They’re going to try to get the best deal. If we had better coordination between local governments, you probably would get better deals at lower costs. But competition causes the regions to try to be really efficient. That’s the benefit of competition. The cost of competition is that you can just play this game where you’re constantly ratcheting up the tax breaks, and it costs governments more and they get into bidding wars.
