Snow job: How much does a snow day cost?
The most common method for calculating the economic cost of snow day is to divide the predicted productivity of that day by the number of workers who will be unproductive. However, while this appears pretty simple, there are numerous immeasurable factors that render even the best calculations laughably inaccurate. In the end, the best that one can do is take a good look at the variables involved and sigh meaningfully while imagining the economy taking yet another hit.
In the United States, when analysts talk about the cost of a snow day, the conversation usually starts with the price of snow removal. Unfortunately, even that relatively straightforward calculation is fraught with peril.
To begin with, some areas, like Massachusetts, have an entire infrastructure that is built around the removal of snow. Other areas, like Washington DC, have a snow removal system that has sometimes seemed to be composed of a single disgruntled civil servant toting a bag of Morton's salt.
Beyond that, fluctuations in snowfall also make a huge difference: the first snow of the season usually finds municipalities well stocked with salt, their snow-clearing machines gassed up and ready to go. By the end of the season, many areas are scrambling for salt, sand, and kitty litter while trying to find the cash to keep their machines on the road. Add in unbudgeted hours, overtime, and assorted incidentals, and you have the accounting equivalent of a Gordian knot.
Even in New York, one of the more snow-encrusted American cities, the numbers are hard to figure. The Business Insider recently suggested that snow removal costs the city $1 million per inch; however, as soon as they quoted that figure, they immediately retracted, noting that the whole thing is highly variable.
Once we get away from removal costs, the price of snow days gets really wonky. For example, a month ago, when Europe was crushed by a massive snowstorm, newspapers quickly began to assess the cost of the unplanned holiday. The storm, which some hailed as the worst in twenty years, shut down highways, airports, and rail yards, killing business and leading many Brits to question whether the country, which had famously worked throughout the London Blitz, had lost its resolve.
Initial estimates, which placed the price at millions of dollars, were quickly revised upward. One in five people stayed home from work, decimating productivity. Ultimately, the cost in lost wages and business were pegged at somewhere in the neighborhood of $4.3 billion.
When the economy is doing well, calculations about the cost of a snow day tend to fall by the wayside; the underlying assumption is that the economy can absorb a day off and the subsequent bump in consumption will more than make up for the one day loss. In the current economic situation, however, the cost of a few hours worth of snowball fights and sledding seem much more significant.
Unfortunately, calculating the cost of a day off can be difficult, if not impossible, particularly with economic productivity currently dropping . . . well, precipitously. With people staying home, one could argue that a day off will encourage consumption in some sectors, even as it reduces consumption in others. For example, while restaurants may suffer from a day off, grocery stores will probably experience a slight bump.
In the case of the federal government, where wages are relatively consistent, it's possible to at least hazard a guess about the cost of a day off. When President Bush gave federal employees a holiday on December 26, the Washington Times calculated that the taxpayers were stuck picking up the bill for $450 million in lost productivity. Of course, even that minor comparison is severely problematic. For example, the employees who enjoyed Bush's holiday probably spent at least some time outside, consuming resources and pouring money into the economy. Today, on the other hand, many homebound workers will probably not venture much beyond their front doors. Similarly, while people on the East Coast may be forgiven for thinking that this storm is affecting everyone, the truth is that much of the country is probably hard at work as we speak.
According to the Financial Forecast Center, America's GDP in March should be somewhere in the neighborhood of $646.27 billion per day. The 17 states that are hardest hit by this storm contain approximately 38% of the U.S. population; assuming that 20% of workers won't show up for work today (based on the British average), we'd hit a figure of $48.8 billion in lost productivity. That number, however, is admittedly outrageous; after all, it assumes all sorts of things, from a consistent distribution of productivity across the country to a completely consistent distribution of workers taking off, to a consistent snowfall across the coast, to an American work ethic that perfectly mirrors Britain's.
On the other hand, this number fails to account for the wretched decisions that financial services companies would be making today if their employees actually did show up. In that context, one can only imagine how much money would have been saved had Richard Fuld taken off for all of 2007. With that in mind, it's possible that a snow day may be exactly what the economy needs right now.