Is theater strike really costing NYC $17m a day?

Stagehands at most Broadway theaters are on strike, and here’s how Newsday reported the story today:

The stagehands’ union took its cause to the public yesterday, the second day of a strike that has shut 27 Broadway theaters and cost the city economy an estimated $17 million a day in the busy pre-holiday season.

Wondering where that $17 million figure comes from? According to Newsday’s sister paper, the L.A. Times, it’s an estimate by the League of American Theatres and Producers – in other words, the people the stagehands are striking against. Complaining about the economic impacts of labor uppityness is a time-honored tradition – the city did the same thing during the recent transit strike – but as in that case, it misses two main points.

First off, the $17 million figure is actually the cost to “Broadway” – in other words, the amount of lost ticket sales per day (and, perhaps, the lost spending by theater workers no longer drawing paychecks). The city only collects a small fraction of that in the form of income, payroll, and sales taxes, so the actual effect on city taxpayers is far smaller.

The bigger problem, though, is that it overlooks what economists call the “substitution effect”: People who don’t spend money one place will often spend it somewhere else. And Newsday should have known this, given that on the very same page as the dire warnings about economic ruin, it ran an article by reporter Daniel Massey headlined “Visitors find other things to do” (not online, apparently, or if it is I can’t find it in the mess that is the Newsday website):

A select few got into eight shows that continued to run because they are housed in theaters covered by separate contracts. Most improvised plans – eating, drinking, shopping and visiting the city’s non-theater attractions.

“It’s New York. What’s the problem?” said Lilach Yanai, 37, a computer programmer from Tel Aviv, who had planned to get tickets to a show, but instead said she would tour the New York Public Library and check out Van Gogh’s letters at the Morgan Library & Museum.

The only way the theater strike would have a significant effect on New York’s economy would be if it lasted long enough that tourists started cancelling their vacations here out of fear that they wouldn’t get to see “The Lion King.” Otherwise, what’s bad for Broadway will likely be good for 5th Avenue.

UPDATE (11/15): The city comptroller’s office has downgraded the estimated cost to the city economy to $2 million a day, based solely on the 18% of theatergoers who are making day trips into the city to see shows. (Actual impact on city tax revenues would be an even slimmer fraction of that.) The theater operators now say the $17 million figure is a “worst-case scenario.”