MTA's Lowball Offer Could Cost City More Than a Strike

If you've been obsessively hitting "reload" on news sites for the latest transit news, you've seen the figure umpteen times by now: A transit strike, according to the city comptroller's office, would cost the city $400 million for its first day of commuter chaos, and $250 million per weekday thereafter.

Impressive numbers, but what do they mean? First off, this is "economic impact," not actual tax revenue—just because a quarter-billion dollars less business gets conducted doesn't mean the municipal treasury is that much poorer. Also, it's hard to know how to compensate for what economists call the substitution effect: Every dollar unspent today is a dollar that New Yorkers have left over for tomorrow.

Deputy city comptroller Marcia Van Wagner says she tried to control for money that's just moved around. She largely ignored Christmas spending, for example, since people would just delay their trips to Macy's until a strike was over. Instead, she focused on things like unpurchased theater tickets or restaurant meals, and lost productivity from workers who stay home.

Still, even these are subject to substitution—employees who take personal days during a strike will need to make them up later on, and unspent theater-ticket money would eventually burn its way through consumers' pockets. Economic impact analysis, Van Wagner readily admits, is more of an art than a science: "These are frankly just numbers we sort of made up. Some people try to sugarcoat their economic impact figures, but I'm not going to do that."

Moreover, made-up figures can cut both ways. The difference between the MTA's two percent-a-year offer and the union's eight percent per annum could, for a union of 34,000 workers, easily amount to $100 million more in workers' pockets each year. Tack on a "multiplier effect"—economist jargon for the fact when you buy a can of tuna fish, your local bodega owner likely turns around and spends that money as well—and the MTA's lowball contract offer could cost the city, say, $200 million in annual economic impact. Somehow, though, I don't expect to see that figure emblazoned across the front page of tomorrow's Post.


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