Sculpting the Statistics | On Culture | Chicago Reader

Sculpting the Statistics 

A closer look at the claim that local nonprofit arts groups are generating a billion dollars a year in economic activity

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Don't you just love statistics? The endearing way they'll do almost anything for you? Their awesome power to impress--with or without substance? Better than Paris Hilton at grabbing headlines and malleable as a shmoo, they're the favorite tools of anyone with an agenda. Last month, when the U.S. House of Representatives finally approved a record $35 million increase in funding for the NEA, Americans for the Arts claimed a victory, noting that their recent study, "Arts & Economic Prosperity III," had been a factor in winning the vote. While congressional opponents decried the NEA for "polishing trash," supporters cited research showing that nonprofit arts groups generate $12.6 billion in federal government tax revenues and 5.7 million full-time equivalent jobs.

And those weren't the most impressive numbers. As reported here last month, this study, released in two phases this spring, found that spending attributable to the nonprofit arts and culture industry has grown 24 percent in five years, now generating an amazing $166.2 billion in economic activity every year.

Chicago--the biggest fish in the study's pond--made such a good showing that Americans for the Arts came to the Cultural Center last month for the second part of its dog-and-pony show, the unveiling of regional results for the entire country. This is the third time they've done this study over the last 13 years but the first time Chicago's been included (New York and LA were not). According to the latest data, collected with the help of the Illinois Arts Alliance, the 115 nonprofit arts organizations surveyed in Chicago are pumping out $1.09 billion in economic activity annually.

And that, boasts an accompanying fact sheet from the IAA, is "more than the Gross Domestic Product (GDP) in every state in the country, except California." This bit of info would be a jaw dropper if true, but in Illinois the GDP in 2005 was more than $500 billion. Now the IAA says it made a mistake--which no one noticed for a month.

My favorite guide through this kind of thicket is a guy who's done more than a few of these studies himself: Mark Rosentraub, dean of the college of urban affairs at Cleveland State University. He says the flaw in a lot of economic-impact studies is something called the substitution effect: making the assumption that if people weren't going to the events being studied, they'd be doing nothing. Either you're at, say, Chicago Shakespeare Theater or you and your money have been sucked into a black hole where you won't be dressing, eating, driving, or spending a penny on anything.

In the real world, however, if you don't go to a nonprofit arts event, you're likely to do something else: have a leisurely restaurant dinner or take in a baseball game or visit the neighborhood pub. Money will be spent. Unless we're talking about audiences from outside the region--generally tourists--these are dollars that are probably circulating anyway, and one kind of event is merely being substituted for another.

To get to the billion-dollar Chicago figure, Americans for Arts blew off the substitution effect. They looked at the annual expenses for the organizations surveyed and added in all the additional funds that audience members were assumed to have spent on things for their night out: food, transportation, babysitters, even clothing. They treated it all like new money. After that they popped in a little input/output formula, calculating the value of dollars respent in the local economy, which allowed them to turn $21 million of reported local government revenue into $58 million and 14,000 jobs into 30,000.

Americans for the Arts research VP Randy Cohen admits the study doesn't account for the substitution effect: "We don't compare to other industries," Cohen says. "A lot of people will eat at home if they're not going out; they'll watch a DVD." (Never mind about the cash going to Jewel or the local video store, I guess.) "The other thing to think about," Cohen says, "is the high percentage of nonlocal attendees. I think that was the great story for Chicago." Americans for the Arts surveyed 925 audience members (out of a total audience for nonprofits in Chicago of 11.3 million) and found that 46 percent came from outside Cook County. Collateral spending (which includes hotels and souvenirs) was predictably higher among these nonresidents, who dropped an average of $46.26 for each cultural event, compared to $31.32 for residents. "If you didn't have that culturally vibrant community," Cohen says, "people would go to where there was one. No one really knows for sure one way or the other [about the substitution effect], but what's pretty evident is the majority of people going out to attend an arts event have a lot of event-related spending."

According to the study, Chicago's nonprofit arts groups are directly responsible for 7,807 "full-time equivalent jobs." That concept allows them to gloss over the fact that many of those employees are poorly paid part-timers without health care coverage or other benefits. Americans for the Arts doesn't provide a context for Chicago's $1.09 billion of purported total arts spending--we don't know whether it's a drop or a bucketful in the economy. But the job number offers a clue. At the last census there were 1.2 million employed people in the city; these highly touted nonprofit arts jobs amount to less than 1 percent.

Americans for the Arts president Robert L. Lynch, speaking at the Cultural Center, argued that the nonprofit arts are "supporting jobs, generating new revenues," and providing a "seven-to-one return on government investment" (thanks to that magic formula). "If the nonprofit arts went public, there would be a feeding frenzy on Wall Street," he said. That was a joke, but this wasn't: Americans for the Arts economic-impact studies "have been referenced in Congress over 100 times in the last five years." Maybe the ends justify the claims.

CAC: Boat Still Rocking

The Chicago Artists' Coalition was roiling again last week as Chicago Artists' News editor John Biederman left the monthly newsletter, characterizing his departure as a "forced resignation" and issuing a lengthy statement criticizing executive director Olga Stefan and complaining about her "abrasiveness" and management style. Biederman, who's worked for CAC off and on for nearly a decade, took over when former editor Katie Copenhaver quit a year ago, citing similar problems. He also charged that his resignation, submitted in late May, was kept from the CAC board for an entire month. A written statement issued by the board this week calls Biederman's actions "mean-spirited and unprofessional" and says it stands "unified in support of the Executive Director." Former executive director Arlene Rakoncay calls Biederman a "dedicated and devoted" employee and says she's so angry about the way the CAC staff (most of whom have quit) have been treated that she's not going to renew her membership when it's up. Board chair Susan Aurinko says CAC is "a different place now," and "there's no reason a resignation should be a three-alarm fire."

Art accompanying story in printed newspaper (not available in this archive): illustration by Laura Park.

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