Does March Madness Really Hurt the Economy

Every March, millions of workers slack on the job to follow college basketball’s championship tournament. Challenger, Gray & Christmas CEO John Challenger’s famous annual survey predicts this year’s March Madness will cost $1.8 billion in lost productivity from Selection Sunday to the end of the first round. Sounds pretty scary. Fortunately for the economy, he blows the story way out of proportion.

For now, let’s assume Mr. Challenger’s numbers are accurate. His $1.8 billion is based on 45 percent of non-farm workers wasting 20 minutes each day during the first week of the tournament. That represents about 2 percent of all workers’ total productivity during that week. That can hurt a bottom line.

But the entire tournament only lasts 11 working days, out of about 250 in a year. If March Madness costs the economy $1.8 billion, we’re only talking a little over one-hundredth of one percent of GDP—$1.8 billion out of $14.26 trillion.

Of course, a lot of workers don’t even follow the tournament, so Challenger’s estimate might be too high. Television ratings hit an all-time low in 2008, and recovered only slightly in 2009. Eight out of nine televisions in use during game time will be tuned elsewhere.

Of course, part of the reason tv ratings are down is that more people are watching games online. The NCAA streamed 8.6 million hours of video from last year’s tournament. That’s up 75 percent from 2008, and could grow even faster this year. But even assuming every single one of those hours was streamed to an office computer, it’s still not a big deal.

According to Microsoft, 58 million people filled out brackets last year. Let’s assume that jumps to 60 million this year. That’s about 14 minutes and 20 seconds of streaming video per bracket-filler. And that’s not per day—that’s over the entire tournament. Even with streaming video’s skyrocketing popularity, that’s still just one minute and six seconds of game-watching per working day. That could double this year, and still not matter.

If economic growth goes negative this quarter, it would be pretty hard to blame it on March Madness.

Mr. Challenger protests, “Those who insist there will be no impact are kidding themselves.” He’s right. But if he thinks the actual impact is anywhere near $1.8 billion, Mr. Challenger is also kidding himself.

That’s because he assumes that if people weren’t following the tournament, they would otherwise be working. Truth is, workers will waste some of their time whether it’s March Madness or not.

Employers know this. They are not stupid. Down time is already factored into wages. People are paid according to how much they are expected to produce. And it is expected that they will not spend their entire 40 hours on the job actually working.

Nobody knows whether filling out brackets or talking trash to coworkers is additional slacking, or a substitute for other forms of slackery. Workers regularly waste time forwarding bad Internet humor to friends and family. They make personal calls on office time. They gossip with coworkers, and take long lunches.

Even if Challenger is right about the $1.8 billion lost to March Madness, we don’t know if it’s a net productivity loss or not.

My hunch is that there is a net loss, but it is a lot smaller than $1.8 billion. People probably do reduce their other derelictions of duty, but not enough to compensate for all the time they spend following games. Some people might even hustle to meet their deadlines and still make time to catch their alma mater’s game, leaving zero effect on productivity.

March Madness can also be great for office morale. And good morale often translates into to productivity gains.

Besides being good clean, mostly illegal fun, office bracket pools help employees get to know each other a little better, even if only to trade friendly insults. The best pools will give the last-place finisher his five dollars back, just to rub it in.

True, brackets come at a cost, and not just the $5 entry fee. They take time to fill out. That time could be spent working—or forwarding LOLcat pictures. No one knows the exact balance. But the worst possible impact is about .01 percent of GDP and more likely it’s far, far less. Let the people have their fun.