Can you price yourself out of a job?

We were in New York City recently and my wife wanted to treat the family to something memorable so we went to a Broadway play.  We saw “Matilda,” which is a musical based on a children’s story by Roald Dahl.  The story is about a small girl who goes to a school run by an evil woman.  The girl discovers she has magic powers and uses the powers to set everything right.  While the plot did not hold my attention, the set design and scenery did.  The set was amazing.

Beyond the wonderful design was how items came in and out.  I was expecting a small team of crew members to be shuttling desks and other furniture onto the stage like most plays.  Instead, the entire set appeared to be mechanized.  Desks and chairs rose up from the floor.  Blackboards swung down from the ceiling.  Humans were eliminated from the process of scene changes.

As I sat there marveling at the automation I wondered why the producers so carefully eliminated the crew from the show.  It turns out Broadway crew members are part of a very powerful union called local 1 of the IATSE (International Alliance of Theatrical Stage Employees).  The Wall Street Journal had an interesting article that suggests the union has negotiated very well and that top crew members earn $300,000 to $400,000 per year.

Given these costs some simple calculations show it makes financial sense to eliminate the crew.  Let’s say it takes five people to shift scenery in the play at $250,000 per year and that it costs $1 million to automate the process so that these people are not needed.  If the producers think that the play will run for more than one year then it makes financial sense to eliminate the stage crew and create an automated set.  In the first year the producers can save a 1/4 million dollars by automating.  The union, by asking for very high wages, can indeed price their own people out of a job.

If Matilda goes on the road to other cities beside New York, my guess is that the scenery and set will be much less automated.  I predict this because road shows tend to stay in cities for much shorter times than plays run on Broadway.  Moreover, Forbes magazine points out that IATSE members outside of local 1 in New York City earn far less.

Have you encountered other situations where people have priced themselves out of work?

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