Tuesday, August 7, 2012

Skilled labor jobs, and the other greatest myths of Olympic economics

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The race is not to the swift, nor the battle to the strong it seems. In fact, as far as long term economic benefits go, the Olympics are a game not worth playing. Here are the five myths that most need debunking when it comes to lighting that eternal flame. 

1.      You’ll make the money back in tourism during the games

No you won’t. Mostly the tourists are coming anyway. They will simply change the timing of their visit to coincide with the games. Mable and Homer Tourbender from Rhode Island are going to go to London to see Buckingham Palace and meet Mary Poppins anyway. Now they’re going to do it while the games are on. They’re not going to make two visits. They were always going to make one visit. The net result – zero. What's more, the vast majority of attendees are your own locals, taking advantage of the opportunity of a lifetime. 


2.      OK, you’ll make the money back over the next few years in tourists

Been to a lot of professional synchronized swimming?
Photo: Tatiana Morozova / Shutterstock.com
Sounds logical. Trouble is it turns out there’s a huge amount of empirical evidence that points to the contrary. Studies of twin cities (cities nearby that are comparable to the host city in every respect other than hosting the games) suggest that the host city enjoys no greater increase in any trend afterwards.  Melbourne faired no worse than Sydney; Charlotte faired no worse than Atlanta. The only difference was the enormous bill that the twin city never had to pay.


3.      Local expenditure means local economic benefits

Yes OK, but beware the assumption that all the money spent locally is actually local. So you bought a product made in China and owned by a company head quartered in New York. How much is that really benefitting Atlanta? It’s not the $40 value of the sweatshirt, it’s the relatively small margin the shopkeeper is making. This applies to everything.


4.      You get all the new infrastructure to use in the future – that’s good right?

It is if you use it, yes. But exactly how valuable are the additional sporting facilities that you’re building?  Given that – rather obviously in all fairness – you didn’t need any of them enough to build them before you became an Olympic city, why will you need them afterward? Please see the Birds Nest in China (the birds have flown) or the many venues in Athens (that will soon resemble the Parthenon.)

There are sporting arguments that these facilities foster the future of non-central sports. For example, there are those who attribute the success of Britain’s gold medal (and Tour de France) winning cycling team to the development of major cycling facilities in Manchester ahead of the hosting of the Commonwealth games there in 2002. A case of ‘build it, they will come’? Maybe so, but just because there’s a sporting benefit, doesn’t mean there’s an economic one. All those sporting clubs and hopeful kids that spring up around your new velodrome aren’t paying you for it, and the cluster of people who come to watch aren’t filling the stadium for £100 a time once a week, which is what you need if you’re going to pay for it.   


5.      It creates a lot of skilled labor jobs during the infrastructure process

This, as you might expect, is my favorite one. You create  skilled labor jobs during the infrastructure process. And skilled labor jobs – mostly engineering jobs – don’t create jobs for the unemployed. They create new job options for those already employed. If you’re going to build a velodrome you need experienced welders, mechanics and design engineers. All of these guys are already working. What you’re actually doing is affecting local projects that were employing these people by encouraging them to leave those engineering jobs to join the higher profile Olympic jobs. As for the temporary Olympic jobs – security or administration at the games – they’ll all be gone as soon as the athletes are.


So here’s the bottom line. If you’re going to bid for the games, make sure you lose. There’s reasonable evidence to suggest that those who put out convincing $100m bids for the games actually get much better value for their money. They get the exposure of being associated with the Olympic brand, but they don’t actually have to build a planet sized swimming facility, which turns out to have all the long term value of… well, of a velodrome. 





Richard Spragg writes on various subjects including global engineering staffing and skilled labor jobs