Thursday, February 11, 2010

How much does a 'snow day' cost?

Daily Finance tackles the unanswerable question of how much a 'snow day' costs the economy?  So here is my back of the enevelope stab of our version of that for the city of Pittsburgh.  This is not the cost of dealing with the snow directly, but the cost of having so many things closed.

The entire regional economy is roughly a $120 billion dollar economy annually. You hear about GDP for the nation, that is the Pittsburgh version depending on what definition you use for the region.. blah blah. Just trust me for a number to start with.

How much of that is economic activity in the city proper? The city has just over an eighth of the region’s population, but more than a quarter of all jobs are located in the city. If you look at payroll, jobs located within the city proper account for over a third of all payroll earned in the city. That's an important factoid in itself... but for the sake of argument let’s call the city economy $40 billion a year. We can quibble over a billion here or there.

How much is that per day? If you divided by 365 you would get roughly $120 million/day. But of course a weekday is worth more than a weekend day. If you divided by just the number of weekdays you get a number of $160 million/day. So somewhere between the two is the total economic value added generated in the city each day.

Now it gets hard. Even on Monday it’s not like everything in the city shut down. May seem like that was the case, but it probably wasn’t close. Hospitals and health care: all mostly operating. Lots of stores were still open and doing booming biz. Some things, say auto towing, were having a banner day in a positive sense. Lots of stuff Downtown stayed open, or had workers toiling away from home or elsewhere which would not be a total loss. 

Anyway, as a pure guess let's say half of of the output generated within the city was lost each day.. at most. The Daily Finance article actually quotes a snow day as resulting in 20% of workers not showing upfor work.  At half the lost GDP comes in between $60 to $80 million a day.  If we say city was virtually shut down this way for 3 days you get a mythical number pushing $250 million.

Not that simple of course.  A big question is how much of that lost output could be made up later on.  So that number probably errs on the high side, but it's a number.  How big a number?  Net of debt costs, that $250 million is on par with the entire operating budget for the city of Pittsburgh for the entire year. Only a small small fraction of that budget is dedicated to either personnel or equipment dedicated to snow removal directly or indirectly. Would be an argument for being a little less stingy with the snow cleaning budget.  Of course whatever that would cost would be seen as an immense extravagance that the city budget could never be able to afford these days.


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