NBA Lockout 2011: Potential Extended Work Stoppage Unlikely to Harm Phoenix Economy

The NBA lockout has lasted over 3 months now. No regular season games have been lost yet and it remains possible that the two sides will be able to reach agreement by Monday, the day commissioner David Stern has set to announce cancellation of regular games if no deal has been made.

Our conversation here has correctly placed blame on both sides, but there seems to be a general consensus that the real victims are the arena employees, concession stand vendors, etc: the "little guys" getting caught in the crossfire as the rich men fight for the right to stay about as wealthy as they are today. While it's true that specific jobs won't be needed during a prolonged lockout, it's not true that a local economy suffers overall, according to economists who have studied previous major sports league work stoppages and were cited in this piece by Neil deMause of Slate.com. 

The primary reason for this is simple: sports fans will spend their time and money on other activities during the absence of the NBA.

More......

Whenever a push is made to bring a professional sports team to a city, or to build a new sports venue to keep an existing one, the sales pitch often involves claims of economic growth that will be caused by the presence of the team. And it's true that the area around the venue thrives. Look at the new businesses in downtown Phoenix since USAC opened, followed by Chase Field, or the bars and restaurants that sprouted outside University of Phoenix Stadium. It seems obvious, doesn't it?

Well, not really. All that has happened is that commerce there has cannibalized commerce elsewhere. A study by Brad Humphreys and Dennis Coates used per-capita income as a measure of commercial activity and, said Humpreys, "There is no way the NBA lockout will have any significant economic consequences."

From Slate:

The economists looked at per-capita income data from metropolitan areas that were home to striking (or locked out) sports teams. They found that even when ticket sales stopped, average income in a city didn't change. At all. "Work stoppages in baseball and football have never had significant impacts on local economies," they wrote. As icing on the cake, they looked at NBA cities that had lost their teams and found the same thing: bupkis. "The departure of a franchise in any sport, particularly in basketball, has never significantly lowered real per capita personal income in a metropolitan area," Humphreys and Coates wrote.

OK, well that's just one measure used in one study. But there's more. Another study was conducted which used sales tax receipts as a measure of commerce, and it found the same thing.

The new study delivered the same results as the earlier one: When leagues shut down, sales tax receipts keep chugging along. In Miami, the disappearance of the Heat during the 1998-99 NBA lockout showed an extremely weak 0.00987 correlation with sales tax figures; the 2004-05 lockout of the Florida Panthers has an even slighter effect, at 0.00739. And almost as often, the direction of the signs ran the opposite way: The 1994-95 NHL lockout had a negative correlation of 0.00353 with sales taxes—if anything, people in Miami appeared to be spending more as a result of the Panthers being on the shelf.

One would think that businesses ceasing operations would be damaging to a local economy, but not if we dive into it a little deeper. Think of your own behavior. If you're not going to a Suns game, or watching them on TV, what are you doing? Probably using that time and money to go out to a movie or to have dinner in a restaurant, spending money on some other activity. NBA players, owners, arena workers and employees of bars around the arena are losing money, but movie theater employees, restaurant workers, etc are gaining. Your money is still going into the economy and employing people, only in different places.

In fact, if you consider how much of the money you spend at sporting events is going to such a small amount of extremely wealthy athletes and owners, one could argue that your money is better spent at small businesses like local restaurants, cafes, book stores or bars since that money is enriching a greater amount of busboys, wait staff, clerks and bartenders. And those lower-wage people are likely to spend that new-found cash more freely than a millionaire, making it more likely that the money continues flowing through the economy.

I don't intend to discount the real losses that will be incurred by arena workers and wait staff/bartenders of restaurants around USAC. But those types of jobs tend to be transitory by nature. Every sports team has an offseason and nights off. An extended lockout will magnify this, but the overall demand for many of those types of jobs won't decline, and the demand for other such jobs will increase in other parts of town.

All I ask is that if you see a poor NBA blogger, down on his luck due to the lockout, on the sidewalk with a "will write for food" sign, help a brother out and drop a quarter in his empty coffee cup.

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