World Cup Economics

[Courtney Knapp]

Every spring, studies come out decrying the millions of dollars in productivity lost during March Madness by bracket-crazed employees in the United States. And every four years, the same type of statistics make global rounds during the World Cup:

"Estimates abound for the projected cost of lost productivity caused by employees taking a break from work to keep up with the action. The Center for Economics and Business Research (CEBR) in London pegs the number at $4.8 billion worldwide, with the greatest losses in Europe at $2.8 billion and South America at $1.62 billion." (2006)

 "70 percent of Mexican workers will watch the 2010 World Cup from their work places, which will cause a 20-percent drop in productivity, the public relations regional director of Manpower, Lizbeth Toscana, said yesterday." (2010)

"According to research by Active Health Partners, the absence management consultants, absenteeism is likely to rise 20 per cent on England's first-round match days, moving higher if the team progress. The increase in workers failing to turn up to work will cost British employers as much as £100m a day, it said." (2006)

With more than 80 percent of the world's population expected to watch the World Cup, the month long tournament is a(nother) distraction to workers, an excuse for soccer-related absenteeism, and a strain on office resources as fans use network bandwidth to live-stream the matches at work.

However, these studies should be taken with a grain of salt. The amount of guesswork necessary in these estimates make it difficult to accurately gauge the cost of productivity lost due sporting events (or Twitter or Google's PacMan logo for that matter). Most of these estimates are hype and fuzzy math or ignore the built-in costs of everyday interruptions (see past articles by Carl Bialik, Jack Shafer, and Jeffrey Miron among others).

If you are interested in the statistical side of the World Cup, I recommend you read the Goldman Sachs 2010 World Cup Research Report [pdf]. In addition to the well-researched economic summaries and a primer on the potential hosts of the next two World Cups, Goldman Sachs predicts that Brazil will take home the cup on July 11.

The April 2010 UBS investor's guide (which correctly picked Italy as the 2006 winner) has also predicted Brazil as the World Cup winner while JPMorgan, using the same quantitative models used to predict stock returns, predicts England will win it all.

I also recommend The Market Watch World Cup Blog for news and commentary on the economics and politics behind the event.