OM in the News: GE Decamps Connecticut After 42 Years

In selecting Boston as its new home base, General Electric will join dozens of corporate giants forsaking the suburbs for urban centers, writes The Wall Street Journal (Jan. 14, 2016). The trend is accelerating, due to employers’ thirst for the kind of educated, technologically-savvy workers who are clustering in cities such as Chicago, San Francisco, and Seattle. Ire over Connecticut’s corporate taxes was a driver of GE’s relocation plans, but the realities of the labor market may have made such a change inevitable, especially given that the conglomerate is trying to pivot from being a maker of industrial products to a greater focus on software innovation. That shift requires access to a workforce with new and rapidly evolving skills who tend to gravitate toward urban areas.

Massachusetts had offered incentives worth up to $145 million to the conglomerate. GE, which since 1974 has been based in Fairfield, Conn., promised to bring about 800 jobs to Boston. The Massachusetts incentives include $25 million in city property tax breaks and $120 million in state spending on infrastructure, such as new roads and parking facilities.

The move comes amid a broader effort by GE to cut corporate costs and streamline operations for what it portrays as a new industrial era that will revolve around software innovation as much as bended metal–one that will make it a priority to attract the talented workers who prefer to live and work in cities. Several states, including Georgia, Rhode Island and Texas, worked to attract GE.

Boston boasts several world class universities, which could deliver GE a ready supply of employees as a firm that can compete in a knowledge economy. Its dense labor market also gives workers confidence that their skills will be in demand if they choose to leave one employer or if they are laid off.

Classroom discussion questions:

1. Evaluate the incentives offered by Massachusetts.
2. Are the actual number of jobs significant?