At Any Cost? The hidden costs of charging for public transport

Today’s piece by Alex Berthelsen of Planka.nu, Sweden’s largest public transport NGO, is part of World Streets wide-open international brainstorming series on “free public transport”. The most recent article in this series appeared here last week under the title “Why Free Public Transport is a bad idea“, inviting our readers to share their critical thoughts on this important, contentious but ultimately quite subtile subject. The flood gates immediately opened and within days we heard a variety of responses, negative and positive, from thirty readers logging in from more than a dozen different countries. You can access their comments and all the articles in this series via http://worldstreets.wordpress.com/category/free-public-transport/.  And as always your critical comments and suggestions are welcome here.At Any Cost? The hidden costs of charging for public transport

There are a lot of obvious advantages that free public transport has to offer. But one that is often overlooked is the savings that can be made by not having to sell, validate and check tickets. Many public transport operators does not know what it costs them to uphold their fare-system, and some of them does not even admit that it is a cost. “It’s such a small amount of money that it’s not even worth counting,” is a reply you might get if asking a public transport operator about their costs associated with having fares.

In Stockholm, Sweden, this was the question asked, and the public transport operator, SL, gave the standard reply, so the organisation I work with, Planka.nu (Sweden’s biggest public transport NGO), started to count and measure as many things as we could come up with that were associated with having fares in the public transport. The result was quite shocking, even for such free public transport advocates as us.

It is important to remember that the costs of having a fare-system are more than just the direct expenses such as tickets, vending machines, personnel, and barriers. Things such as queues, unsatisfied customers and violence are also costs directly associated with having fares, even though they are harder to measure in economic terms. Below I will go through a few of the biggest costs of the ticket system in the Stockholm public transport system, to give you a clue to what we could save by making the public transport free at the point of entry.

The Barriers

The barriers in the public transport system in Stockholm takes up well over 2700 square meters of valuable station space, space that could be exploited commercially or used for such nice things as bigger resting spaces for the workers or for putting up “cultural billboards”. Besides this the barriers costs about 2 million € per year in maintenance and 5 million € per year in reinvestment.

The barriers, and the mandatory showing of tickets to the bus driver creates unnecessary queues, bottlenecks and are an endless source of irritation for both the commuters and the workers in the public transport. According to the public transport operator in Stockholm, the queues are “not even worth measuring”, but we did it anyways. On bus line 4 which runs through central Stockholm the time wasted on checking tickets adds up to 35 (yes, thirty-five) percent of the total time the bus is operated. On the Stockholm Central station, the productivity loss of people queuing amounts to more than 3 million € per year, imagine how much money the loss would be if measured across the whole system and not just on one station!

The Workforce

By using the existing workforce, but giving them tasks that are meaningful for both them as well as the commuters we could switch personnel from pointless tasks such as guarding barriers and checking tickets into meaningful jobs such as helping commuters with information, or driving buses and trains. The total amount of money we could spend on people doing good instead of pointless things would be 40 million € per year, this would be a direct gain for the public transport and these 40 million € should be counted as an expenditure solely associated with the fare-system.

By making the public transport free we are also effectively getting rid of a lot of situations where violence occur. According to the public transport union in Stockholm, a majority of all reported threats and incidents of violence directed at workers are connected to the fare system, and according to the public transport ombudsman, almost all threats and incidents of violence directed at passengers are exercised by the personnel involved in selling and checking ticket. The value of reducing violence between passengers and personnel might be a bit hard to measure in economic terms, because it is priceless!

The Math

In this article I have shown that over 45 million € per year is wasted on the fare-system in the public transport in Stockholm, and this is not counting negative externalities such as queues, more people driving cars, unsatisfied costumers, violence, etc. 45 million € is around 10 percent of the total income from selling tickets in Stockholm, but that is obviously “not even worth counting” according to the public transport operator. Talk about disrespect for how they use the commuters hard-earned money!

Imagine a company or NGO that did not know their income and expenditures! This is, unfortunately, quite common in the glorious world of public transport. Instead of maximizing the public good that the public transport should be, our public transport operators are busy with finding new and innovative ways of trying to maximise their income by selling more and more expensive tickets to people who are just doing the right thing and choosing an exemplary means of transportation.

There are some good examples though, where public transport operators have actually studied the costs of selling tickets. One of those is Island Transit on the Whidbey and Camano islands in Washington. Before they opened their systems they did the math and realized that the costs of selling tickets would be approximately the same as the income from selling tickets. So they decided to make their system fare-free instead.

When faced with the arguments for free public transport, many people respond by saying that it should not be free, but that it should be much cheaper. The problem with that argument is that if you make the public transport cheaper, an even larger share of the income from tickets will go directly to upholding the fare-system. This problem creates a situation where you either have expensive tickets, fewer users and a smaller share of the income going to upholding the fare-system, or cheap tickets, more users and a larger share of the income lost on selling tickets.

Against this I can only put the proposal of making the public transport free, something that would both mean more riders filling up the current empty seats as well as no money wasted on the fare-system — in the words of Irwin Kellner, chief economist for MarketWatch (a part of the Wall Street Journal), free public transport would be “a win-win solution, if I ever saw one.”

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About the author:

Alexander Berthelsen is editor of Carbusters Magazine. He’s a Swede currently living in Prague, Czech Republic where he’s doing a one-year internship at World Carfree Network. Back in Sweden he’s active in Planka.nu for whom he, amongst other things, wrote a report in Swedish on “At Any Cost?” last year. (This article is based on the Swedish report “Till varje pris?” (“At any cost?”) released in March 2009. http://planka.nu/vad-tycker-vi/rapporter/till-varje-pris.). He can be reached via alexander.berthelsen@gmail.com or http://twitter.com/alexberthelsen.

Planka.nu is Sweden’s largest public transport NGO, they started up in 2001 as free public transport activists but has since expanded their work into many different areas of urban politics. They just released their second English report “The Traffic Hierarchy”. URL: http://planka.nu Email: sthlm@planka.nu

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For more on Free Public Transport in World Streets – http://worldstreets.wordpress.com/category/economic-instruments/free-public-transport/

One thought on “At Any Cost? The hidden costs of charging for public transport

  1. Berthelsen makes a comparison between Island Transit on Whidbey Island and the Stockholm transit system. I know them both quite well. There is a world of difference. Whidbey is an example of a system that shouldn’t charge for the reasons he gives and the reasons I gave a week or two ago. For them overloading and fare revenue are not signlificant. Stockholm is an example of a system that should charge, for the reasons so many others on this listserve have explained. Stockholm rail lines are already seriously overloaded at times and fare revenue is highly important.

    Berthelsen is absolutely right that checking tickets and collecting fares can waste time, but it is possible to eliminate this hassle and wasted time and still charge by going to an honor system, with proof-of-payment when challenged.

    Eric Bruun

    Reply

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