United States Department of Transportation
i
MALL Transit and Wider Economic Benefit Assessment
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2016-01-04
[PDF-321.37 KB]
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TRIS Online Accession Number:01701457
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Edition:Year 25 Final Report
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Abstract:This paper analyzes whether the public transit sector suffers from Baumol’s cost disease by assessing the evolution of labor productivity and average labor costs across transit agencies in the United States, as compared with other industries. We found that (i) labor productivity in the transit sector has been mostly stagnant over 1997-2013, even more so in bus operations than rail operations (0.0% and 0.7% average labor productivity growth rates, respectively), and even more so measuring output as vehicle revenue miles rather than passenger miles traveled; (ii) the transit sector is highly labor intensive as it represents on average 64% of total costs (operating and capital) for bus and 40% for rail; (iii) compensation per employee has risen at a faster pace than inflation in 85% of the agencies we analyzed; and (iv) compensation per employee has risen at a faster pace than the average local wage rate in 65% of the agencies we analyzed. These findings support the hypothesis that not only does the transit sector suffer from Baumol’s cost disease, but also that additional factors contribute to spiraling labor costs. Although there is no clear antidote to the disease, policymakers should recognize that as the economy becomes more productive overall, it can continue to support growing levels of transit service in recognition of its growing external benefits, despite its inherent nature of stagnant productivity growth.
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