Tatiana Costa
Professor Richard Hamilton
Applied Macroeconomics
December 9, 2017
Effects of Sports on the Economy
Throughout the past decade, sports have become an enormous part of the United States in many different ways. The influence they have had on our economy is adequately large. The sports industry keeps growing day by day and with that also comes a change in the economy. With the growth that the sports industry has had and will continue to have, comes a lot of benefits. Not only for the people who enjoy watching, but even for those who take part behind the scenes in helping it all happen. As someone who loves sports and is majoring in the world of business, I believe that i can credit much from the influence sports has had on the economy.
Sports have been around in the United States since the 1800s, but it was not until the early 1900s that they started to become to gain their limelight. Soon after the sports were popularized, it felt that they became a part of American culture. In the mid 1900s, sports became such a major aspect of the American culture which influenced new sports facilities to be built and sports teams to be placed all throughout the United States. More specifically in the major cities of the United States such as, “Baltimore, Charlotte, Chicago, Cincinnati, Cleveland, Milwaukee, Nashville, San Francisco, St. Louis, Seattle, Tampa, and Washington D.C.” (Zimbalist & Noll). By the end of the 1990s, the twelve populated cities mentioned above had new stadium facilities that were in the process of opening and becoming a main place of attraction and fan fun. The costs of those facilities would be at least $200 million each (Noll). This would not include the other projects that were being planned and/or renovated.
In the past several decades, building stadiums and sports facilities has definitely affected the economy of that specific city more than the economy of the United States as a whole. Of course, these stadiums did not build themselves and they are definitely not going to be built for free. This is where the subsidies start to come in for these stadiums to be built. One of the biggest subsidies that is given comes from the federal government. This subsidy “allows state and local governments to issue tax-exempt bonds to help finance sports facilities” (Noll). In other words, the amount of debt is lowered because of the fact that the interest rate is lowered as well. Therefore, the amount of money the teams and cities had to pay was less than what they had to pay before constructing and using that stadium.
Surprisingly, not a lot of changes have happened from the 1900s until now. For instance, in the past, building stadiums and sports facilities would have an affect on the economy primarily because it would create jobs for people and bring the unemployment rate down. This would benefit our economy because it would help the markets rise and raise the amount of money flowing in our economy. Similarly, in today’s economy, there is an abundance of jobs created anytime a new sports venue or stadium is built.
The sports industry itself brings about 456,000 jobs to the United States. These jobs are found in fifteen different industries as well. Those industries range from jobs in colleges, universities, and professional sports to jobs in fitness and recreational sports centers. Clearly, the sports industry has a plethora of jobs to offer to the citizens of the United States. In addition, these jobs don’t only include positions where degrees are necessary. Some of these are jobs that allow high school and college students to apply and start their career earlier. This also makes it easier for unemployed people who don’t have a degree to find a job and start building their career; it gets them out of the percentage of people unemployed, thus lowering the unemployment rate in the United States.
There are six main job occupations that become available when a new team and sports venue is created. Those positions include athletes and sports competitors, coaches and scouts, umpires, referees, and other sports officials, entertainers and performers, sports and related workers, gaming and sports book writers and runners, and agents (Burrow). All of these occupations are generated simply by having sports as a part of the culture of the United States. Naturally, in order to have a team or club, you need athletes and competitors to compete in that. In order to have those players be on your team and work for you, you need to pay them a certain amount of money for their labor. The players then use that money to buy items on the market and put that money that they earned back into the cycle. This essentially translates into the circular flow graph and continues the cycle. The same thing happens for all of the other positions as well. In essence, not only do these six main positions alone create many job openings for unemployed people, they also keep money flowing in our economy which helps the cycle of the circular flow graph persistent.
Moreover, the jobs previously mentioned in the last paragraph produce other jobs in themselves. Due to the fact that many of the job occupations mentioned usually generate a lot of money, many of the people working those jobs might want assistants or other people to help them out. Athletes might want their own personal trainers for off seasons, agents might want their own assistants to help them get their own done, and so on and so forth. None of these even include the jobs created by these teams constructing a stadium. They need architects to design the stadiums, construction workers to build the stadiums, and after all of that they need staff to work and operate the stadium or sports venue. Like the other occupations, these will also fall into the circular flow chart and continue that process as well.
The money teams have spent to have their games broadcast live on the air for any available sports fan to see, does not go unnoticed. It contributes and aids in bringing cash flowing to the economy. When a major sports event such as the Super Bowl, World Cup, or Olympics is underway, many companies pay in the high millions to have their commercials aired. In the past year or so the views for the Super Bowl have increased ranging from 22.4 million viewers to what is now in the 100 milion range. (McCrystal). Having more viewers results in a money gain for the economy due to the fact that the more people that observe such event, the more companies must pay to have their commercials air.
Big name companies know that with people watching, they are more than likely to gain customers, while the economy knows that they will make more of a profit as well. For example, a big name brand such as Budweiser, would make a notably obvious reference to a historic event or even throw in horses and puppies to charm it’s audience. In this year’s Super Bowl, “The ad, is a 60-second spot, which will presumably cost Budweiser in the range of $10 million to air on game day,” as stated by Ryan McCrystal, author of the article, “Super Bowl Commercials 2017: Ad Costs Review, Value Before Patriots vs. Falcons.” With that being said, they are helping the economy by using a sports event as an outlet for promotion to reel in their own customers as well as bringing views to sports games.
Although the sports industries have a lot of positive effects on the economy, there are also some negative aspects of it, especially with big events like the Superbowl and the Olympics. Three of the those negative effects all have to do with costs such as the impact costs, the displacement costs, and opportunity costs (Gong). All of these costs have a lot to do with the impact these events have on regular tourists who travel to these big cities hosting these events. Although such occasions bing a lot of attention from sports fans, many of the normal tourists choose not to come to these cities and spend money because they don’t like the type of environment. They will go and spend their money on other places that don’t have a lot of chaos and commotion going on, therefore taking away from the money that the United States could be inserting into their own economy.
On top of that, many people do not take into consideration the costs that will come with having such big events. The traffic jams that will happen because everyone will be trying to get to the same place might cause accidents and other incidents that will cost people money. These sort of occurrences also cost the government and the cities money. They need added security and everything things of that sort to help keep everything normal and moving regularly, although that is very unlikely to happen. The United States will certainly realize all of these positive and negative effects when they host the Olympics in Los Angeles in 2028.
Nonetheless, while companies promote during sporting events and bring the economy money through the use of commercials, sports teams merchandise also brings in the big bucks. Over the summer I took on a job at Red Bulls Stadium where I worked in the merchandise shop. On game days people would flood the Bull Shop and hover over the merchandise searching for the right size and the apparel they so greatly desire. I have seen people spend as much as six hundred dollars on apparel alone. Many people love to dress in sports apparel due to the fact that it is comfortable and what better way than to represent their countries’ or their preferred team? “Sporting goods store sales in the United States alone amount to more than 45 billion U.S. dollars annually. This includes many different product types such as athletic footwear, exercise equipment, licensed sports merchandise athletic apparel,” as quoted by Steven Fuller in the article, “Statistics on the Sporting Goods Industry.” Customers such as the ones I have seen bring money to the big name companies like Nike and Adidas because of the teams that are sponsored by such brands.
Although many people might assume that sports on the rise would bring downfall to the economy, in contrast it brings a steady flow of cash and profit. By becoming a massive aspect of the American culture, sports has had an immense influence on the way our country benefits from them. Many believe that due to the excessive amount of money and funds taken to construct stadiums and facilities, that it is a waste of money. However, there is more than meets the eye. People are always willing to spend any amount of money on entertainment and sporting events in our country which will always generate enough revenues to exceed the amount our nation has spent.
Work Cited
Burrow, Gwen. “Not Just a Game: The Impact of Sports on U.S. Economy.” Emsi, 9 June 2017, www.economicmodeling.com/2013/07/09/not-just-a-game-the-impact-of-sports-on-u-s-economy/.
Gong, Qi, " e Positive and Negative Economic Contributions of Mega-sporting Events to Local Communities" (2012). UNLV eses, Dissertations, Professional Papers, and Capstones. 1362. http://digitalscholarship.unlv.edu/thesesdissertations/1362
McCrystal, Ryan. “Super Bowl Commercials 2017: Ad Costs Review, Value Before Patriots vs. Falcons.” Bleacher Report, Bleacher Report, 12 Apr. 2017, www.bleacherreport.com/articles/2691166-super-bowl-commercials-2017-ad-costs-review-value-before-patriots-vs-falcons.
Noll, Roger G. Sports, Jobs, and Taxes: the Economic Impact of Sports Teams and Stadiums. Brookings Institution Press, 1997.
Zimbalist, Andrew, and Roger G. Noll. “Sports, Jobs, & Taxes: Are New Stadiums Worth the Cost?” Brookings, Brookings, 28 July 2016, www.brookings.edu/articles/sports-jobs-taxes-are-new-stadiums-worth-the-cost/.