Category: Labor
New York Isn’t Special
A week ago, we published a short note on driver-only metro trains, known in New York as one-person train operation or OPTO. New York is nearly unique globally in running metro trains with both a driver and a conductor, and from time to time reformers have suggested switching to OPTO, so far only succeeding in edge cases such as a few short off-peak trains. A bill passed the state legislature banning OPTO nearly unanimously, but the governor has so far neither signed nor vetoed it. The New York Times covered our report rather favorably, and the usual suspects, in this case union leadership, are pissed. Transportation Workers Union head John Samuelsen made the usual argument, but highlighted how special New York is.
“Academics think working people are stupid,” [Samuelsen] said. “They can make data lie for them. They conducted a study of subway systems worldwide. But there’s no subway system in the world like the NYC subway system.”
Our report was short and didn’t go into all the ways New York isn’t special, so let me elaborate here:
- On pre-corona numbers, New York’s urban rail network ranked 12th in the world in ridership, and that’s with a lot of London commuter rail ridership excluded, including which would likely put London ahead and New York 13th.
- New York was among the first cities in the world to open its subway – but London, Budapest, Chicago (dating from the electrification and opening of the Loop in 1897), Boston, Paris, and Berlin all opened earlier.
- New York has some tight curves on its tracks, but the minimum curve radius on Paris Métro Line 1, 40 meters, is comparable to the New York City Subway’s.
- The trains on the New York City Subway are atypically long for a metro system, at 151 meters on most of the A division and 183 on most of the B division, but trains on some metro systems are even longer (Tokyo has some 200 m trains, Shanghai 180 m trains) and so are trains on commuter rail systems like the RER (204 m on the B, 220 m on the A), Munich S-Bahn (201 m), and Elizabeth line (205 m, extendable to 240).
- New York has crowded trains at rush hour, with pre-Second Avenue Subway trains peaking at 4 standees per square meter, but London peaks at 5/m^2 and trains in Tokyo and the bigger Chinese cities at more than that. Overall ridership, irrespective of crowding, peaked around 30,000 passengers per direction per hour on the 4 and 5 trains in New York, compared with 55,000 on the RER A.
New York is not special, not in 2025, when it’s one of many megacities with large subway systems. It’s just solipsistic, run by managers and labor leaders who are used to denigrating cities that are superior to New York in every way they run their metro systems as mere villages unworthy of their attention. Both groups are overpaid: management is hired from pipelines that expect master-of-the-universe pay and think Sweden is a lower-wage society, and labor faces such hurdles with the seniority system that new hires get bad shifts and to get enough workers New York City Transit has had to pay $85,000 at start, compared with, in PPP terms, around $63,000 in Munich after recent negotiations. The incentive in New York should be to automate aggressively, and look for ways to increase worker churn and not to turn people who earn 2050s wages for 1950s productivity be a veto point to anything.
Quick Note on Capital City Income Premiums
There’s a report by Sam Bowman, Samuel Hughes, and Ben Southwood, called Foundations, about flagging British growth, blaming among other things high construction costs for infrastructure and low housing production. The reaction on Bluesky seems uniformly negative, for reasons that I don’t think are fair (much of it boils to distaste for YIMBYism). I don’t want to address the construction cost parts of it for now, since it’s always more complicated and we do want to write a full case on London for the Transit Costs Project soon, but I do want to say something about the point about YIMBYism: dominant capitals and other rich cities (such as Munich or New York) have notable wage premiums over the rest of the country, but this seems to be the case in NIMBY environments more than in YIMBY ones. In fact, in South Korea and Japan, the premium seems rather low: the dominant capital attracts more domestic migration and becomes larger, but is not much richer than the rest of the country.
The data
In South Korea and Japan, what I have is Wikipedia’s lists of GDP per capita by province or prefecture. The capital city’s entire metro area is used throughout, comprising Seoul, Incheon, and Gyeonggi in Korea, and Tokyo, Kanagawa, Chiba, and Saitama in Japan. In South Korea, the capital region includes 52.5% of GDP and 50.3% of population, for a GDP per capita premium of 4.4% over the country writ large, and (since half the country is metro Seoul) 9.2% over the rest of the country. In Japan, on OECD numbers, the capital region, labeled as Southern Kanto, has a 14.5% premium over the entire country, rising to around 19% over the rest of the country.
In contrast, in France, Ile-de-France’s premium from the same OECD data is 63% over France, rising to about 90% over provincial France. In the UK, London’s premium is 71% over the entire country and 92% over the entire country excluding itself; if we throw in South East England into the mix, the combined region has a premium of 38% over the entire country, and 62% over the entire country excluding itself.
Now, GDP is not the best measure for this. It’s sensitive to commute volumes and the locations of corporate headquarters, for one. That said, British, French, Korean and Japanese firms all seem to prefer locating firms in their capitals: Tokyo and Seoul are in the top five in Fortune 500 headquarters (together with New York, Shanghai, and Beijing), and London and Paris are tied for sixth, with one company short of #5. Moreover, the metro area definitions are fairly loose – there’s still some long-range commuting from Ibaraki to Tokyo or from Oise to Paris, but the latter is too small a volume to materially change the conclusion regarding the GDP per capita premium. Per capita income would be better, but I can only find it for Europe and the United States (look for per capita net earnings for the comparable statistic to Eurostat’s primary balance), not East Asia; with per capita income, the Ile-de-France premium shrinks to 45%, while that of Upper Bavaria over Germany is 39%, not much lower, certainly nothing like the East Asian cases.
Inequality
Among the five countries discussed above – Japan, Korea, the UK, Germany, France – the level of place-independent inequality does not follow the same picture at all. The LIS has numbers for disposable income, and Japan and Korea both turn out slightly more unequal than the other three. Of course, the statistics in the above section are not about disposable income, so it’s better to look at market income inequality; there, Korea is indeed far more equal than the others, having faced so much capital destruction in the wars that it lacks the entrenched capital income of the others – but Japan has almost the same market income inequality as the three European examples (which, in turn, are nearly even with the US – the difference with the US is almost entirely redistribution).
So it does not follow, at least not at first pass, that YIMBYism reduces overall inequality. It can be argued that it does and Japan and South Korea have other mechanisms that increase market income inequality, such as weaker sectoral collective bargaining than in France and Germany; then again, the Japanese salaryman system keeps managers’ wages lower than in the US and UK and so should if anything produce lower market income inequality (which it does, but only by about three Gini points). But fundamentally, this should be viewed as an inequality-neutral policy.
Discussion
What aggressive construction of housing in and around the capital does appear to do is permit poor people to move to or stay in the capital. European (and American) NIMBYism creates spatial stratification: the middle class in the capital, the working class far away unless it is necessary for it to serve the middle class locally. Japanese and Korean YIMBYism eliminate this stratification: the working class keeps moving to (poor parts of) the capital region.
What it does, at macro level, is increase efficiency. It’s not obvious to see this, since neither Japan nor Korea is a particularly high-productivity economy; then again, the salaryman system, reminiscent of the US before the 1980s, has long been recognized as a drag on innovation, so YIMBYism in effect countermands to some extent the problems produced by a dead-end corporate culture. It also reduces interregional inequality, but this needs to be seen less as more opportunity for Northern England as a region and more as the working class of Northern England as people moving to become the working class of London and getting some higher wages while also producing higher value for the middle class so that inequality doesn’t change.
Public Transportation and Gig Workers
An argument about public transportation fares on Bluesky two weeks ago led to the issue of gig workers, and how public transportation can serve their needs. Those are, for the purposes of this post, workers who do service jobs on demand, without fixed hours or a fixed place of work; these include delivery and cleaning workers. App-hailed drivers fall into this category too, but own cars and are by definition driving. When using public transit – and such workers rarely get paid enough to afford a car – they face long, unreliable travel times, usually by bus; their work travel is completely different from that of workers with consistent places of work, which requires special attention that I have not, so far, seen from transit agencies, even ones that do aim at service-sector shift workers.
The primary issue is one of work centralization. Public transit is the most successful when destinations are centralized; it scales up very efficiently because of the importance of frequency, whereas cars are the opposite, scaling up poorly and scaling down well because of the problems with traffic congestion. I went over this previously talking about Los Angeles, and then other American cities plus Paris. High concentration of jobs, more so than residential density (which Los Angeles has in droves), predicts transit usage, at metro area scale.
Job concentration is also fairly classed. In New York, as of 2015, the share of $40,000+/year workers who worked in the Manhattan core was 57%; for under-$40,000/year workers, it was 37%. It is not an enormous difference, but it makes enough of a difference that it makes it more convenient for the middle class to take transit, since it gets to where they want to go. In metro New York, the average income of transit commuters is the same as that of solo drivers; in secondary American transit cities like Chicago, transit commuters actually make more, since transit is so specialized to city center commutes.
Worse, those 37% of under-$40,000/year workers who work in the Manhattan core are ones with regular low-paying jobs in city center, rather than ones doing gig work. The difference is that gig workers work where the middle class lives, rather than where the middle class works (for example, food service workers at office buildings) or where it consumes (for example, mall retail workers). They still generally take transit or bike where that’s available (for example, in Berlin), because they don’t earn enough to afford cars, but their commutes are the ones that public transit is the worst at. They can’t even control where they work and move accordingly, because they by definition do gigs. In theory, it’s possible for apps to match workers to jobs within the right region or along the right line; in practice, the situation today is that the apps can send a worker from Bytom to Gliwice today and a worker from Gliwice to Bytom tomorrow, based on vagaries of regional supply and demand, and the Polish immigrant who complained to me about this with the names of those two specific cities wishes there were a way to match it better, but at least currently, there isn’t.
The upshot is that gig worker travel is, more or less, a subcase of isotropic, everywhere-to-everywhere systems, with no distinguished nodes. This has all of the following implications:
- Travel by rail alone is infeasible – last-mile bus connections are unavoidable, as are uncommon transfers, with three- and at times four-legged trips.
- The bus network has to have the usual features of a modernized, redesigned network, with high all-day frequency and regular transfers – suburb-to-city-center buses alone don’t cut it when the work is rarely in city center, and a focus on rush hour service is useless for workers who mostly travel outside peak hours. This also includes reforms that improve buses in general, regardless of the route taken: proof of payment, bus lanes, stop consolidation, bus shelter, signal priority at intersections.
- For the most part, the buses that take gig workers to work are the same that could take residents of those neighborhoods to work, in the opposite direction. However, in areas with weaker transit than Berlin or New York, much of the middle class drives, making buses within usually lower-density middle-class areas infeasible. In contrast, those buses are still likely to be used by gig workers doing service work in the homes of those drivers.
The last point, in particular, means that one of the more brutal features of bus redesigns – cutting coverage service in order to focus on the more useful routes – can be counterproductive. This is, again, not relevant to large enough cities that their middle classes mostly don’t live in coverage route territory (even Queens doesn’t need this tradeoff, let alone Brooklyn). But in New Haven, for example, Sandy Johnston long pointed out that some of the bus routes just don’t really work, no matter what, because the areas they serve are too low-density, so the only way forward is to prune them.
This more brutal treatment can still be understandable at times. If the route is being straightened rather than eliminated, as we discussed for Sioux City years later, then it provides all workers with faster service – the meanders if anything are to big job centers that are a few hundred meters off the arterial, and gig workers are less likely to be using those meanders than regular service workers. Moreover, if the part being pruned is genuinely low-density, then it may well also have low density of destinations for gig workers. However, if the part being pruned has moderate density, and is just considered low density because the residents are rich enough they never take the bus, then it’s likely to be useful for gig workers, and should when possible be retained, likely with no extra peak service, only base service.
Evidently, routes like that are sometimes understood to have this class of rider, though perhaps not in this language. This is most visible in suburban NIMBYism against buses: a number of middle-class American suburbs oppose the introduction of bus service that may be useful for regular riders, for fear that poor people might use it to get to their areas; in Massachusetts, those suburbs are fine with buses making one stop in the periphery of their town, triggering a paratransit mandate under the state’s interpretation of the Americans with Disabilities Act (in most states it’s within 0.75 miles, but in Massachusetts it’s town-wide), but oppose any further penetration by regular transit.
To be clear, most of the things that would disproportionately benefit gig workers also benefit the network writ large: faster buses with off-board fare collection and (in denser urban areas) bus lanes would make a great difference, and so would shifting service away from the peak. But the network design principles at granular enough a level to discuss pruning marginal routes really do differ, and it’s important to get this right and, at the very least, avoid empowering aggrieved rich people who hire maids and then do local activism to make it harder for their maids to get to their houses.
To be clear on another point, none of these reforms would make traveling to clean a randomly-selected apartment in a residential neighborhood pleasant. But they could, through smoother bus travel time and transfers, replace a 1.5-hour commute with a 1-1.25-hour one, which would make a significant, if not life-altering, improvement in the comfort levels as well as productivity (and thus pay) of gig workers. It mirrors many other egalitarian social interventions, in producing a moderate level of income and quality of life compression, rather than a change in the rank ordering by income.
American Myths of European Poverty
I occasionally have exchanges on social media or even in comments here that remind me that too many people in the American middle class believe that Europe is much poorer than the US. The GDP gap between the US and Northern Europe is small and almost entirely reducible to hours worked, but the higher inequality in the US means that the top 10-20% of the US compare themselves with their peers here and conclude that Europe is poor. Usually, it’s just social media shitposting, for example about how store managers in the US earn the same as doctors in Europe. But it becomes relevant to public transit infrastructure construction in two ways. First, Americans in positions of authority are convinced that American wages are far higher than European ones and that’s why American construction costs are higher than European ones. And second, more broadly, the fact that people in positions of authority really do earn much more in the US than here inhibits learning.
The income gap
The United States is, by a slight amount, richer than Northern Europe, which for the purposes of this post comprises the German-speaking world, the Nordic countries, and Benelux. Among the three largest countries in this area, Germany is 16.5% poorer than the US, the Netherlands 8.3% poorer, Sweden 14.3%. This is more than anything an artifact of shorter working hours – Sweden has an ever so slightly larger GDP per hour worked, the other two are 6-7% poorer per hour worked. All three countries have a much higher 15-64 labor force participation rate than the US, but they’re also older, which in the case of Germany actually gets its 15+ rate to be a hair less than the US’s. But there’s much more part-time work here, especially among women, who face large motherhood penalties in German society (see figures 5-7 in Herzberg-Druker, and Kleven et al). Germany is currently in full employment, so it’s not about hidden part-time work; it’s a combination of German-specific sexism and Europe-wide norms in which workers get around six weeks of paid vacation per year.
One implication of the small gap in income per hour is that wages for the same job are likely to be similar, if the jobs pay close to the mean wage. This is the case for tunnel miners, who are called sandhogs in the United States: the project labor agreements in New York are open – the only case in which itemized costs are publicly available – and showcase fully-laden employment costs that, as we document in our construction costs reports, work out to around $185,000/year in 2010 prices; there is a lot of overstaffing in New York and it’s disproportionately in the lower-earning positions, and stripping those, it’s $202,000/year. I was told that miners in Stockholm earn 70,000 kronor/month, or about $100,000/year in PPP terms (as of 2020-1), and the fully-laden cost is about twice that; a union report from the 2000s reports lower wages, but only to about the same extent one would expect from Sweden’s overall rate of economic growth between then and 2021. The difference at this point is second-order, lower than my uncertainty coming from the “about” element out of Sweden.
While we’re at it, it’s also the case for teachers: the OECD’s Education at a Glance report‘s indicator D3 covers teacher salaries by OECD country, and most Northern European countries pay teachers better than the US in PPP terms, much better in the case of Germany. Teacher wage scales are available in New York and Germany; the PPP rate is at this point around 1€ = $1.45, which puts starting teachers in New York with a master’s about on a par with their counterparts in the lowest-paying German state (Rhineland-Pfalz). New York is a wealthy city, with per capita income somewhat higher than in the richest German state (Bavaria), but it’s not really seen in teacher pay. I don’t know the comparative benefit rates, but whenever we interview people about European wage rates for construction, we’re repeatedly told that benefits roughly double the overall cost of employment, which is also what we see in the American public sector.
The issue of inequality
American inequality is far higher than European inequality. So high is the gap that, on LIS numbers, nearly all Western European countries today have lower disposable income inequality than the lowest recorded level for the US, 0.31 in 1980. Germany’s latest number is 0.302 as of 2021, and Dutch and Nordic levels are lower, as low as 0.26-0.27; the US is at 0.391 as of 2022. If distributions are log-normal (they only kind of are), then from a normal distribution log table lookup, this looks like the mean-to-median income ratios should be, respectively, 1.16 for Germany and 1.297 for the US.
However, top management is not at the median, and that’s the problem for comparisons like this. The average teacher or miner makes a comparable amount of money in the US and Northern Europe. The average private consultant deciding on how many teachers or miners to hire makes more money in the US. A 90th-percentile earner is somewhat wealthier in the US than here, again on LIS number; the average top-1%er is, in relative terms, 50% richer in the US than in Germany (and in absolute terms 80% richer) and nearly three times as rich in the US as in Sweden or the Netherlands, on Our World in Numbers data.
On top of that, I strongly suspect that not all 90th percentile earners are created equal, and in particular, the sort of industries that employ the mass (upper) middle class in each country are atypically productive there and therefore pay better than their counterparts abroad. So the average 90th-percentile American is noticeably but not abnormally better off than the average 90th-percentile German or Swede, but is much better off than the average German or Swede who works in the same industries as the average 90th-percentile American. Here we barely have a tech industry by American standards, for example; we have comparable biotech to the US, but that’s not usually where the Americans who noisily assert that Europe is poor work in.
Looking for things to mock
While the US is not really richer than Northern Europe, the US’s rich are much richer than Northern Europe’s. But then the statistics don’t bear out a massive difference in averages – the GDP gap is small, the GDP gap per hour worked is especially small and sometimes goes the other way, the indicators of social development rarely favor the US, immigration into Western Europe has been comparable to immigration to the US for some time now (here’s net migration, and note that this measure undercounts the 2022 Ukrainians in Germany and overcounts them in Poland).
So middle-class Americans respond by looking for creative measures that show the level of US-Europe income gap that they as 90th-percentile earners in specific industries experience (or more), often dropping the PPP adjustment, or looking at extremely specific things that are common in the US but not here. I’ve routinely seen American pundits who should know better complain that European washing machines and driers are slow; I’m writing this post during a 4.5-hour wash-and-dry cycle. Because they fixate on proving the superiority of the United States to the only part of the world that’s rich enough not to look up to it, they never look at other measures that might show the opposite; this apartment is right next to an elevated train, but between the lower noise levels of the S-Bahn, good insulation, and thick tilt-and-turn windows, I need to concentrate to even hear the train, and am never disturbed by it, whereas American homes have poor sound insulation to the point that street noise disturbs the sleep.
Learning to build infrastructure
The topline conclusion of any American infrastructure reform should be “the United States should look more like Continental Europe, Turkey, non-Anglophone East Asia, and the better-off parts of Latin America.”
If it’s written in the language of specific engineering standards, this is at times acceptable, if the standards are justified wholly internally (“we can in fact do this, here’s a drawing”). Even then, people who associate Americanness with their own career success keep thinking safety, accessibility, and similar issues are worse here, and ask “what about fire code?” and then are floored to learn that fire safety here is actually better, as Stephen Smith of Market Urbanism and the Center for Building constantly points out.
But then anything that’s about management is resisted. It’s difficult to convince an American who’s earning more than $100,000 a year in their 20s and thinks it’s not even that much money because their boss is richer that infrastructure project management is better in countries where the CEO earns as much money as they do as an American junket assistant. Such people readily learn from rich, high-inequality places that like splurging, which are not generally the most productive ones when it comes to infrastructure. Even Americans who think a lot about state capacity struggle with the idea that Singapore has almost as high construction costs as the US; in Singapore, the CEO earns an American salary, so the country must be efficient, right? Well, the MRT is approaching $1 billion/km in construction costs for the Cross-Island Line, and Germany builds 3 km of subway (or decides not to build them) on the same budget and Spain builds 6 km, but Europe is supposedly poor and Americans can’t learn from that.
The upshot is that even as we’re seeing some movement on better engineering and design standards in the United States, resulting in significant cost savings, there’s no movement for better overall management. Consultant-driven projects remain the norm, and even proposals for improving state capacity are too driven by domestic analysis without any attempt at international learning or comparativism. Nor is there any effort at better labor efficiency – management in the US hates labor, but also thinks it’s entirely about overpaid workers or union safety rules, and doesn’t stoop to learn how to build more productively.
Janno Lieber Lies to New York About Costs and Regulations
After being criticized about the excessive size of subway stations designed on his watch, MTA head Janno Lieber fired back defending the agency’s costs. In a conversation with the Manhattan Institute, he said about us, “They’re not wrong that the stations are where the MTA stations add cost. But they are wrong about how they compare us – the cost per mile is misleading” (see discussion on social media here). Then he blamed labor and the fire code. Blaming labor is a small but real part of the story; this is common among the white-collar managers Eric and I have talked to, and deserves a separate explanation for why this concern is overblown. But the issue of the fire code is fraud, all the way.
I’ve previously seen some journalists and advocates who write about American construction costs talk about fire safety, which is mentioned occasionally as a reason designs cannot be changed. It’s not at all what’s going on, for two separate reasons, each of which, alone, should be grounds to dismiss Lieber and ensure he never works for the state again.
The first reason is that the fire safety regulation in the United States for train stations, NFPA 130, has been exported to a number of other countries, none of which has American costs or the specific American tradition of overbuilding stations. China uses NFPA 130. So does Turkey. Spain uses a modification. We can look at their designs and see that they do not build oversize stations. I’ve seen an environmental impact analysis in Shanghai, with the help of a Chinese student studying this issue who explained the main planning concerns there. I could write an entire blog post about China (not a 10,000-word case report, of course), but suffice is to say, if the train is projected to be 160 m long, the station dig will be that plus a few meters – and Chinese stations have mezzanines as I understand it. Spanish and Turkish stations have little overage as well; building a dig twice as long as the station’s platforms to house back-of-the-house spaces is unique to most (not all) of the Anglosphere, as design consultants copy bad ideas from one another.
Even the claim that NFPA 130 requires full-length mezzanines is suspect. It requires stations to be built so that passengers can evacuate in four minutes in emergency conditions, rising to six minutes counting stragglers (technically, the throughput needs to be enough to evacuate in four minutes, but with latency it can go up to six). The four minute requirement can be satisfied on the lettered lines of the subway in New York with no mezzanines and just an access point at each end of the platform, but it’s close and there’s a case for another access point in the middle; no full-length mezzanine is required either way. If the stations are any shorter, as on the numbered lines or in other North American cities, two escalators and a wide staircase at the end of each platform are more than enough, and yet the extensive overage is common in those smaller systems too (for example, in Vancouver, the Broadway extension is planned with 128 m long digs for 75 m trains, per p. 9 here).
“Fire safety” is used as an excuse by people with neither engineering background nor respect for anything quantitative or technical. Lieber is such a person: his background is in law and he seems incurious about technical issues (and this is also true of his successor at MTA Capital Construction, public policy grad Jamie Torres-Springer).
Perhaps due to this lazy incuriosity, Lieber didn’t notice that the MTA has extensive influence on the text of NFPA 130, bringing us to the second reason his claim is fraudulent. NFPA 130 is not to blame – again, it’s the same code as in a number of low- and medium-cost countries – but Nilo Cobau explains that the NFPA process is such that big agencies have considerable input, since there aren’t many places in the US that build subways. Nolan Hicks pointed out in the same thread, all linked in the lede paragraph, that the MTA has a voting member and two alternates on the board that determines NFPA 130 and hasn’t requested changes – and that Montreal, subject to the same codes, built a station with little overage (he says 160 m digs for 150 m platforms).
The handwaving of a fire code that isn’t even different from that of cheaper places is there for one purpose only: to deflect blame. It was a struggle to get Lieber and other New York leaders to even admit they have high costs, so now they try to make it the fault of anyone but themselves: fire safety regulations, organized labor, what have you.
Labor is a real issue, unlike fire safety, but it’s overblown by managers who look down on line workers and have generally never been line workers. Lieber graduated law school, was hired by USDOT at either junior-appointed or mid-level civil servant role, I can’t tell which, and then did managerial jobs; his successor as head of MTA Construction and Development, Jamie Torres-Springer, graduated public policy. These aren’t people who worked themselves up from doing engineering, architecture, planning, or ethnographic work; add the general hostility American white-collar workers have toward blue-collar workers, and soon people in that milieu come to believe that just because their top 5%er wages are much higher than they could earn anywhere else in the world, the sandhogs also earn much more than they could anywhere else in the world, when in truth New York sandhog and Stockholm miner wages and benefits are very close.
Occasionally the point that it’s not wages but labor productivity seeps in. There, at last, we see a real problem with labor. Eric and I found that about a third of the sandhogs on Second Avenue Subway didn’t really need to be there. Further cuts could be achieved through the use of more labor-efficient techniques, which the MTA is uninterested in implementing. The rest of the American labor premium comes from excessive staffing of white-collar supervisors, including representatives from each utility, which insists that the MTA pay for the privilege of having such representatives tell them what they can and cannot do in lieu of mapping the utilities and sending over the blueprints. All included, labor was around 50% of the cost of Second Avenue Subway, where the norm in Italy, Turkey, and Sweden is around 25% (note how higher-wage Sweden is the same as lower-wage Italy and much lower-wage Turkey); excessive labor costs contributed a factor of 1.5 premium to the project, but the other factor of 6 came from excessive station size, deep mining of stations (which thankfully will not happen at 106th and 116th Street; it will at 125th but that’s unavoidable), lack of system standardization, and a litany of project delivery problems that are generally getting worse with every iteration. Lieber personally takes credit for some of the privatization of planning to design-build consultancies, though to be fair to him, the project delivery problems predate him, he just made things slightly worse.
A New York that wants to build will not have incompetent political appointees in charge. It will instead hire professionals with a track record of success; as no such people exist within the American infrastructure construction milieu, it should use its own size and prestige to find someone from a low-cost city to hire, who will speak English with an accent and know more engineering than American legal hermeneutics. And it will not reward people who defraud the public about the state of regulations just because they’re too lazy to know better.
The Importance of Tangibles
I’m writing this post on a train to Copenhagen. So many things about this trip are just wrong: the air conditioning in the car where we reserved seats is broken so we had to find somewhere else to sit, the train is delayed, there was a 10-minute stop at the border for Danish cops to check the IDs of some riders (with racial profiling). Even the booking was a bit jank: the Deutsche Bahn website easily sells one-ways and roundtrips, but this is a multi-city trip and we had to book it as two nested roundtrips. Those are the sort of intangibles that people who ride intercity trains a lot more than I do constantly complain about, usually when they travel to France and find that the TGV system does really poorly on all the metrics that the economic analysis papers looking at speed do not look at. And yet, those intangibles at the end of the day really are either just a matter of speed (like the 10-minute delay at the border) or not that important. But to get why it’s easy for rail users to overlook them, it’s important to understand the distinction between voice and exit.
Voice and exit strategies
The disgruntled customer, employee, or resident can respond in one of two ways. The traditional way as understood within economics is exit: switch to a competing product (or stop buying), quit, or emigrate. Voice means communicating one’s unhappiness to authority, which may include exercising political power if one has any; organizing a union is a voice strategy.
These two strategies are not at all mutually exclusive. Exit threat can enhance voice: Wikipedia in the link above gives the example of East Germany, where the constant emigration threat of the common citizenry amplified the protests of the late 1980s, but two more examples include union organizing and the history of Sweden. With unions, the use of voice (through organizing and engaging in industrial action) is stronger when there is an exit threat (through better employment opportunities elsewhere); it’s well-known that unions have an easier time negotiating better wages, benefits, and work conditions during times of low unemployment than during times of high unemployment. And with Sweden, the turn-of-the-century union movement used the threat of emigration to the United States to extract concessions from employers, to the point of holding English classes for workers.
Conversely, voice can amplify exit. To keep going with the example of unions, unions sometimes engage in coordinated boycotts to show strength – and they request that allies engage in boycotts when, and only when, the union publicly calls for them; wildcat boycotts, in which consumers stop using a product when there is a labor dispute without any union coordination, do not enhance the union’s negotiating position, and may even make management panic thinking the company is having an unrelated slump and propose layoffs.
The upshot is that constantly complaining about poor service is a voice strategy. It’s precise, and clearly communicates what the problem is. However, the sort of people who engage in such public complaints are usually still going to ride the trains. I’m not going to drive if the train is bad; I’d have to learn how to drive, for one. In my case, poor rail service means I’m going to take fewer trips – I probably would have done multiple weekend trips to each of Munich and Cologne this summer if the trains took 2.5 hours each way and not 4-4.5. In the case of more frequent travelers than me, especially railfans, it may not even mean that.
The trip not taken
On this very trip, we were trying to meet up in Hamburg with a friend who lives in Bonn, and who, like us, wants to see Hamburg. And then the friend tried booking the trip and realized that it was 4.5 hours Hbf-to-Hbf, and more than five hours door-to-door; we had both guessed it would be three hours; a high-speed rail network would do the trip in 2:15. The friend is not a railfan or much of a user of social media; to Deutsche Bahn, the revenue loss is noticeable, but not the voice.
And that’s where actually measuring passenger usage becomes so important. People who complain are not a representative cross-section of society: they use the system intensively, to the point that they’re unlikely to be the marginal users the railroad needs to attract away from driving or to induce to make the trip; they are familiar with navigating the red tape, to the point of being used to jank that turns away less experienced users; they tend to be more politically powerful (whereas my friend is an immigrant with about A2 German) and therefore already have a disproportionate impact on what the railroad does. Complaints can be a useful pilot, but they’re never a substitute for counting trips and revenue.
The issue is that the main threat to Deutsche Bahn, as to any other public railroad, is loss of passengers and the consequent loss of revenue. If the loss of revenue comes from a deliberate decision to subsidize service, then that’s a testament to its political power, as is the case for various regional and local public transport subsidy scheme like the Deutschlandticket and many more like it at the regional level in other countries. But if it comes from loss of passenger revenue, or even stagnation while other modes such as flying surge, then it means the opposite.
This is, if anything, more true of a public-sector rail operator than a private-sector one. A private-sector firm can shrink but maintain a healthy margin and survive as a small player, like so many Class II and III freight rail operators in the United States. But a national railway is, in a capitalist democracy, under constant threat of privatization. The threat is always larger when ridership is poor and when the mode is in decline; thus, British Rail was privatized near its nadir, and Japan National Railways was privatized while, Shinkansen or no Shinkansen, it was losing large amounts of money, in a country where the expectation was that rail should be profitable. Germany threatened to do the same to Deutsche Bahn in the 1990s and 2000s, leading to deferred maintenance, but the process was so slow that by the time it could happen, during the 12 years of CSU control of the Ministry of Transport, ridership was healthy enough there were no longer any demands for such privatization. The stagnant SNCF of the 2010s has had to accept outside reforms (“Société Anonyme”), stopping short of privatization and yet making it easier to do so in the future should a more right-wing government than that of Macron choose to proceed.
The path forward
Rail activists should recognize that the most important determinant of ridership is not the intangibles that irk people who plan complex multi-legged regional rail trips, but the basics: speed, reliability, fares, some degree of frequency (but the odd three-hour wait on a peripheral intercity connection, while bad, is not the end of the world).
On the train I’m on, the most important investment is already under construction: the Fehmarn Belt tunnel is already under construction, and is supposed to open in six years. The construction cost, 10 billion € for 18 km, is rather high, setting records in both countries. The project is said to stand to shorten the Hamburg-Copenhagen trip time, currently 4:40 on paper with an average delay of 21 minutes and a 0% on-time performance in the last month, to 2.5 hours. If Germany bothers to build high-speed approaches, and Denmark bothers to complete its own high-speed approaches and rate them at 300 km/h and not 200-250, the trip could be done in 1.5 hours.
Domestically, and across borders that involve regular overland high-speed rail rather than undersea tunnels, construction of fast trains proceeds at a sluggish pace. German rail advocates, unfortunately, want to see less high-speed rail rather than more, due to a combination of NIMBYism, the good-enough phenomenon, and constant sneering at France and Southern Europe.
But it’s important to keep focusing on a network of fast rail links between major cities. That’s the source of intercity rail ridership at scale. People love complaining about the lack of good rail for niche town pairs involving regional connections at both ends, but those town pairs are never going to get rail service that can beat the car for the great majority of potential riders who own a car and aren’t environmental martyrs. In contrast, the 2.5- and three-hour connection at long intercity distances reliably gets the sort of riders who are more marginal to the system and respond to seeing a five-hour trip with exit rather than voice.
What Does It Mean to Run the State Like a Business?
There’s a common expression, run it like a business, connoting a set of organizational reforms that intend to evoke private-sector efficiency. Unfortunately, the actual implementation as far as I’ve seen in public transportation agencies has always fallen short. This is not because the private sector is inherently different from the public sector – it is, but not in ways that are relevant here (for example, in marketing). Rather, it’s because the examples I’ve seen always involve bringing in an outside manager with experience in private-sector management but not in the industry, which tends to be a bad practice in the private sector too. Many of the practices bundled with this approach, like the hiring freeze, are harmful to the organization and well-run private firms do not engage in them.
So, instead, what would it mean to run public transportation like a business?
Internal workings
A public transit agency that wants to access the high productivity of frontier private-sector industries in the United States had better imitate common features to large corporations. These include all of the following:
1. Smoother HR. Jobs need to fill quickly, with a hiring process that takes weeks rather than months or years. HR should follow private-sector norms and not civil service exams, which represent the best reform ideas of the 1910s and are absent from the strongest bureaucratic public sector norms out there. Moreover, the pay needs to be competitive and largely in cash, not benefits. Some European countries (like Sweden) get away with having a fully laden cost of employment that’s about twice the gross salary because their tax structures have such high employer-side payroll taxes that this is more or less also the case for the private sector; but in the US, the private-sector norm is a multiplier of about 1.3 and not 2 and the public sector needs to do the same. Benefit cuts should go one-to-one to higher base pay, which should be competitive with high-productivity industries – public transit agencies should want to hire the best engineers, not the engineers who couldn’t get work in the private sector.
2. Promotion by merit and not seniority. Seniority systems in private businesses are a feature of relatively low-productivity countries like Japan, whereas the more productive American and Northern European private sectors promote by merit and have paths for someone to have decisionmaking power in their early 30s if they’re good. In contrast, American public transportation providers are bound by rigid notions of seniority at all levels – including even how bus and train drivers are scheduled (in the German-speaking world, schedulers set everyone’s work schedules on the principle of spreading out the painful shifts equally) – turning one’s 20s into a grueling apprenticeship, and even at my age people are always subordinate to a deadwood manager who last had an idea 20 years ago.
3. Hiring successful leadership, from within the industry if not through internal promotion. In some cases I can see hiring from adjacent industries, but so far this has meant national railroads like Amtrak and SNCF hiring airline executives, who do not understand some critical ways trains differ from planes and therefore produce poor outcomes. The practice of hiring people whose sole expertise is in turnarounds must cease; in Massachusetts, Charlie Baker’s foisting of Luis Ramirez on the MBTA was not a success. In the United States, the best example of a successful outside hire for leadership is Andy Byford, who Andrew Cuomo then proceeded to treat with about the same level of respect that he has for the consent of women in the room with him and for the lives of residents of New York nursing homes. This is really an extension of point #2: people with a track record of success in public transit should run public transit, and not hacks, washouts, and personal friends and allies of the governor.
4. Professional development. A planner earning $60,000 a year, who should probably be earning $90,000 a year, gets to regularly fly to a conference abroad for $2,500 including hotel fees to learn how other countries do things. The core of a high-value-added firm is its employees; the biggest risk when one invests in them is that they then take their skills and go elsewhere, but public transit is a local monopoly and if a New York planner takes their skills and moves to Philadelphia, on net New York has lost nothing, since SEPTA is complementary to its services rather than a competitor.
Note that this list avoids any of the usual tropes of hiring freezes, rank-and-yank systems, or the imposition of a separate class of managerial overlords who get to tell the experienced insiders what to do. These are not features of successful, high-productivity businesses. Some are features of failing companies, like the hiring freeze. Others are a feature of long dead industrial traditions, superseded by more modern ones: the class system in which the recently-hired MBA is always superior to the experienced worker, faithfully reproduced in most militaries with their officer-enlisted distinction, is inferior to the classless system in which people are hired and among them the most successful and most interested in a leadership role are more rapidly promoted.
Outside funding
The above points are about how a public transit agency should restructure itself. But the private sector has some insights about how external funding, such as federal funding in the US, should work.
Central to this is the venture capital insight that the quality of the team of founders matters at least as much as the proposal they bring in front of the VC team. If public transit agencies are to be run as frontier businesses (such as biotech or software-tech), then it stands to reason that federal funding should look at how the VC system funds them. In addition to following the above agency norms for their own hires, grantors like the FTA and FRA should then look at who exactly they’re funding. This means at least three things:
1. YIMBYer regions get more money than NIMBYer ones. New York can still get some money if it has exceptionally strong proposals, but overall, regions with stronger transit-oriented development, which in the US mainly means Seattle, should be getting more funding than regions without. This is on top of the purely public-sector negotiation process, common in the Nordic countries, in which an area that wants rail access to city center jobs is required to plan for more housing, even over local NIMBY objections. The Nordic process is a negotiation, whereas what I’m proposing here is a process in which the FTA and FRA get discretion to invest more money in regions that have pro-growth, pro-TOD politics without rezoning-by-rezoning negotiation.
2. Regions with recurrent corruption problems get defunded. If there’s a history of poor project management (for example, at California High-Speed Rail), or of actual corruption (as in Florida with Rick Scott), or of leakage of federal funds to unrelated goals such as creation of local jobs or overpriced betterments, then outside funding should not be forthcoming. There are other places that need the money and don’t abuse federal funds.
3. Regions with healthy ecosystems of transit advocacy get more money than regions without. NGOs are part of the local governance structure, and this means the FTA and FRA should be interested in the quality of advocacy. The presence of curious, technically literate, forward-looking groups like TransitMatters in Boston and 5th Square in Philadelphia should be a positive mark; that of populist ones like the Los Angeles Bus Riders’ Union with its preposterous claims that trains are racist should be a negative mark. This also extends to the local nonprofit grantors – if they are interested in good governance then it’s a sign the region’s overall governance is healthy and it will not only spend federal money prudently but also find new innovative ways to run better service that can then lead to a nationwide learning process. But if they are ignorant and incurious, as Boston’s Barr Foundation is (see incriminating article here by Barr board member Lisa Jacobson, falsely claiming Britain has no interest in equitable investment and the Netherlands has no interest in pedestrians), this suggests the opposite, and regions with such people in positions of power are likely to waste money that they are given.
Giving the state discretion
A lot of people are uncomfortable with the idea that the public sector should ever have the discretion to make its own decisions. In practice discretion is unavoidable; the American solution to the conundrum has been to bury everyone in self-contradictory paperwork and then any decision can be justified and litigated using some subset of the paperwork. So the same discretion exists but with far too high overheads and with a culture that treats clear language as somewhere between evil and unthinkable.
Because the idea of running the government like a business is disproportionately common among people who don’t like the public sector, programs that aim to do just that are bundled with programs that leash the state. The leash then means politicization, in which personal acquaintances of the mayor, governor, or other such heavyweight run agencies they are not qualified to work at, let alone manage; the professionals are then browbeaten into justifying whatever decision the political appointees come to, which is a common feature of dysfunctional businesses and a rare one at successful ones.
But successful businesses are not leashed. To run the government like a business means to imitate successful business ecosystems, and those are not leashed or politicized, nor are their core office workers subjected to a class system in which their own promotions are based on seniority and not merit whereas their overlords are a separate group of generalists who move from agency to agency. What it does mean is to hire the best people and promote the best among them, pay them accordingly, and give them the explicit discretion to make long-term planning and funding decisions.
No Federal Aid to Transit Operations, Please
This is the third in a series of four posts about the poor state of political transit advocacy in the United States, following posts about the Green Line Extension in metro Boston and free public transport proposals, to be followed by an Urban Institute report by Yonah Freemark.
In the United States, political transit activists in the last few years have set their eyes on direct federal aid for operating subsidies for public transport. Traditionally, this has not been allowed: federal aid goes to capital planning (including long-term maintenance), and only a small amount of money goes to operations, all in peripheral bus systems. Urban transit agencies had to operate out of fares and local and state money. Demands for federal aid grew during corona, where emergency aid to operations led to demands for permanent subsidies, and have accelerated more recently as corona recovery has flagged (New York’s subway ridership is only around 60% of pre-corona levels). But said demands remain a bad idea in the short and long terms.
In the early 20th century, when public transport was expected to support itself out of fares, operating costs grew with wages, but were tempered by improvements in efficiency. New York City Transit opened with ticket-takers at every subway entrances and a conductor for every two cars; within a generation this system was replaced with automatic turnstiles and one conductor per train. Kyle Kirschling’s thesis has good data on this, finding that by the 1930s, the system grew to about 16,000 annual car-miles (=26,000 car-km) per employee.
And then it has stagnated. Further increases in labor efficiency have not happened. Most American systems have eliminated conductors, often through a multi-decade process of attrition rather than letting redundant workers go, but New York retains them. The network today actually has somewhat less service per employee than in the 1930s, 14,000 car-miles as of 2010, because fixed costs are spread across a slightly smaller system. Compare this with JICA’s report for Mumbai Metro comparing Japanese cities: Tokyo Metro has 283,871,000 car-km (PDF-p. 254) on 8,474 employees (PDF-p. 9), which is 33,500/employee, and that’s without any automation and with only partially conductor-less operations; Yokohama gets 40,000.
Moreover, the timeline in the US matches the onset of subsidies, to some extent: state and local subsidies relieved efficiency pressure. In Canada, TTC saw this and lobbied against subsidies for its own operations in the 1960s, on the grounds that without a breakeven mandate, the unions would capture all surplus; it took until the 1970s for it to finally receive any operating subsidies.
Federal subsidies make all of this worse. They are other people’s money (OPM), so local agencies are likely to maximize them at the expense of good service; this is already what they do with capital money, lading projects with local demands for betterments figuring that if everyone else hogs the trough then they should as well.
Then there is the issue of wages. Seniority systems in American unionized labor create labor shortages even when pay is high, because of how they interact with scheduling and tiered wage structures. Bus drivers in Boston earn around $80,000 a year, a pay that German bus and train drivers can only dream of, but starting drivers are in probational status and have a lower wage (they are not even given full-time work until they put in a long period of part-time work). Moreover, because drivers pick their shifts in seniority order, drivers for about the first 10 years are stuck with the worst shifts: split shifts, graveyard shifts at inconsistent intervals, different garages to report to. New York manages to find enough bus drivers to fill its ranks but only by paying around $85,000 a year; other American cities, paying somewhat less, are seeing thousands of missed runs over the year because they can’t find drivers.
And outside aid does nothing to fix that. Quite to the contrary, it helps paper over these problems and perpetuates the labor gerontocracy. New York City Transit has learned to react to every crisis by demanding a new source of income; there is not enough political appetite for transparent taxation, so the city and state find ever more opaque sources of funds, avoiding political controversy over wanton inefficiency but creating more distortion than a broad income tax would.
Instead of subsidizing current consumption, a developmental state should subsidize production. Don’t pay money to hire more bus drivers; pay for automating subway systems, for better dispatching, for better planning around intermodal integration. Current American wages, not to mention the unemployment rate, scream “invest in labor-saving technology” and not “expand labor-intensive production.”
Cost- and Project-Centric Plans
I did a poll on Patreon about cost issues to write about. This is a close second, with 11 votes; other people’s money won with 12, whereas neighborhood empowerment got 8 and will not be on my docket.
There are infrastructure investment programs defined around the specific projects funded: Crossrail, Second Avenue Subway, Grand Paris Express, Nya Tunnelbanan, the Toronto RER, Marmaray. Then there are programs defined around costs, where one constantly hears the project defined by its budget rather than what it produces; these are all in the United States, and include the entire slates of Los Angeles and Seattle rail extensions, and to some extent also California High-Speed Rail and Gateway. The latter appears like bad practice for cost minimization.
What’s the problem?
In isolation, I’d have expected cost-centric plans to be more prudent with the budget – there’s less room for overruns. This is related to Swiss practice, which is project-centric but also requires projects to go to referendum on the precise amount, which has disciplined cost overruns in most cases and also kept absolute costs low. However, the fact of the matter is that the only places that use cost-centric plans have high costs, having recently risen from levels that were not so bad 20 years ago. So why?
My suspicion is leakage. This is getting to be less general and more specific to the situation of California and its sales tax measures, but the way it works is, there is an amount that proponents think they can go to ballot on, and then they work the slate of projects backward. In theory, this is supposed to discipline the planners into better behavior: the amount of money is truly fixed, and if costs go up, it delays the entire program. In practice, there is no prior discipline about what infrastructure should be included, and thus the slate is decided politically on a place-based plan.
Further leakage occurs when buying off additional interest groups. Soon enough, one useful if very expensive subway line, like the Purple Line Extension in Los Angeles or the Ballard-West Seattle LRT, is bundled into a huge program alongside bus operating subsidies, road money, and low-usage lines to lower-density areas.
I can’t prove that this is the result of budget-centric planning. The comparison examples I have – all high-cost, politicized North American projects – exhibit leakage as well, but less of it. The Green Line Extension in Boston had extensive local leakage in the first iteration of the project, like the Somerville Community Path, but it wasn’t paired with less useful infrastructure elsewhere. Second Avenue Subway Phase 1 was paired with East Side Access and the Broadway subway in Vancouver is paired with a SkyTrain extension deeper into Surrey toward Langley; in both cases, the less useful projects are nonetheless more useful on a likely cost per rider basis than any of the American West Coast leakage and compete with the more useful projects. ESA is probably going to end up $60,000/rider, not much worse than GLX and probably about the same as the Purple Line Extension depending on how much transit-oriented development Los Angeles permits.
Place-based extraction
Place-based politics is a scourge and should be eradicated whenever possible. What it does wherever it is not suppressed is create political identification among local and regional power brokers not with the piece of infrastructure but its cost. The reason is that evaluating transportation needs is too technocratic for the attention span of a local politician, whereas the budget is a straightforward measure of one’s importance.
Once local actors are empowered, they make further demands for irrelevant extras (“betterments”), or construction techniques that spend too much money to avoid real or imagined negative local impact. People with a local identity don’t care about public transit much – public transit takes riders to other localities, especially city center, whereas the locally-empowered minority of people who work locally has little use for it and drives everywhere.
Local empowerment is not unique to budget-based infrastructure. It was a major drag on GLX and at least a moderate one on SAS Phase 1, neither of which is budget-based. The Central Subway and BART to San Jose projects are both place-based vanity, for Chinatown and San Jose respectively, but even these projects are smaller in scope than the Los Angeles or Seattle ST3 leakage. There’s just more surface area for it when advocates lead with a budget, because then every local hack sees an opportunity to make a claim.
The place-based politics in the Northeast is much broader and more regional: SAS, a city project championed by then-Assembly speaker Sheldon Silver (D-Lower East Side), was balanced with ESA, a suburban project serving the base of Governor George Pataki (R-Peekskill, but the state Republicans were based on Long Island). Metro Vancouver’s place-based extraction follows the same schema: if Vancouver gets a useful SkyTrain extension, Surrey must get an extension too regardless of usefulness. Massachusetts is likely to be in a similar situation with the TransitMatters Regional Rail program: RR serves the entire east of the state, and must be balanced with a Western Massachusetts project, for which we propose the still-useful East-West Rail program connecting Boston and Springfield.
In contrast, the situation in California and metropolitan Seattle is much worse – useful lines in Los Angeles are paired with many layers of leakage, as different groups make claims on the pot of money. This way, Los Angeles doesn’t build as much useful transit as New York and Boston even though its construction costs are comparable to Boston’s and much lower than those of New York, and even though it makes large amounts of money available for transportation by referendum.
Are jobs a cost or benefit?
Like place-based extraction, the use of infrastructure as a jobs program is terrible everywhere in a modern developed country where construction is not a labor-intensive zero-skill job, and should be eradicated. And like place-based extraction, I think – and am less certain than on the other points – there is more surface area for this when the program is about a budget and not a piece of infrastructure.
The mechanism is the same as before: once money becomes available, local labor groups descend on it to make claims. Promises of job creation are thus always local, including beggar-thy-neighboring-state demands for local rolling stock construction. These occur for both budget-based plans (like the Los Angeles light rail fleet) and project-based ones (like the new Red and Orange Line cars for Boston, built in Springfield due to place-based extraction). However, it’s easier to make a claim when the political discussion is about how to spend $X and not how to optimally produce a desired piece of infrastructure.
The way forward
The American West Coast’s problem of budget-based planning is, thankfully, easy to solve, because it’s been solved in other parts of the same country. The Bay Area has less of it than Southern California and the Pacific Northwest (but it’s not free of it – many of the specifics of California High-Speed Rail’s failure come from Bay Area power brokers hoping to use it as a slush fund). The Northeast doesn’t have it at all. Los Angeles is likely to be forced in that direction anyway, because it’s running out of sales tax capacity – the already-approved measures are spoken for through the 2050s.
The impact is likely not a matter of straight construction costs in dollars per kilometer. Rather, it’s about leakage. Los Angeles and Seattle do not have unusually higher per-km costs by American standards; in the 2000s Los Angeles looked like the good part of America and in the 2010s Seattle did, but since both have converged to much higher figures. The problem is that a smaller share of the Los Angeles Measures R and M spending goes to useful expansion than the capital budget in places that have project-based planning. This is what needs to be fixed through transitioning to project-based planning, costs aside.
The Other People’s Money Problem
I did a poll on Patreon about cost issues to write about. This is the winning option, with 12 votes; project- vs. budget-driven plans came second with 11 and I will blog about it soon, whereas neighborhood empowerment got 8.
OPM, or other people’s money, is a big impediment to cost reform. In this context, OPM refers to any external infusion of money, typically from a higher-level government from that controlling an agency. Any municipal or otherwise local agency, not able or willing to raise local taxes to fund itself, will look for external grants, for example in a federal budget. The situation then is that the federal grantor gives money but isn’t involved in the design of where the money goes to, leading to high costs.
OPM at ground level
Local and regional advocates love OPM. Whenever they want something, OPM lets them have it without thinking in terms of tradeoffs. Want a new piece of infrastructure, including everything the local community groups want, with labor-intensive methods that also pay the wages the unions hop for? OPM is for you.
This was a big problem for the Green Line Extension’s first iteration. Somerville made ridiculous demands for signature stations and even a bike path (“Somerville Community Path”) thrown in – and all of these weren’t jut extra scope but also especially expensive, since the funding came from elsewhere. The Community Path, a 3 km bike path, was budgeted at $100 million. The common refrain on this is “we don’t care, it’s federally funded.” Once there’s an outside infusion of money, there is no incentive to spend it prudently.
OPM modifying projects
In capital construction, OPM can furthermore lead to worse projects, designed to maximize OPM rather than benefits. Thus, not only are costs high, but also the results are deficient. In my experience talking to New Englanders, this takes the form of trying to vaguely connect to a politician’s set of petty priorities. If a politician wants something, the groups will try pitching a plan that is related to that something as a sales pitch. The system thus encourages advocates and local agencies to invest in buying politicians rather than in providing good service.
This kind of behavior can persist past the petty politician’s shelf life. To argue their cases, advocates sometimes claim that their pet project is a necessary component of the petty politician’s own priority. Then the petty politician leaves and is replaced by another, but by now, the two projects have been wedded in the public discourse, and woe betide any advocate or civil servant who suggests separating them. With a succession of petty politicians, each expressing interest in something else, an entire ecosystem of extras can develop, compromising design at every step while also raising costs.
The issue of efficiency
In the 1960s, the Toronto Transit Commission backed keeping a law requiring it to fund its operations out of fares. The reason was fear of surplus extraction: if it could receive subsidies, workers could use this as an excuse to demand higher wages and employment levels, and thus the subsidy would not go to more service. As it is, by 1971 this was untenable and the TTC started getting subsidies anyway, as rising market wages required it to keep up.
In New York, the outcome of the cycle of more subsidies and less efficiency is clearer. Kyle Kirschling’s thesis points out on PDF-p. 106 that New York City Transit’s predecessors, the IRT and BMT, had higher productivity measured in revenue car-km per employee in the 1930s than the subway has today. The system’s productivity fell from the late 1930s to 1980, and has risen since 1980 but (as of 2010) not yet to the 1930s peak. The city is one of a handful where subway trains have conductors; maintenance productivity is very low as well.
Instead of demanding efficiency, American transit advocates tend to demand even more OPM. Federal funding only goes to capital construction, not operations – but the people who run advocacy organizations today keep calling for federal funding to operations, indifferent to the impact OPM would have on any effort to increase efficiency and make organizations leaner. A well-meaning but harmful bill to break this dam has been proposed in the Senate; it should be withdrawn as soon as possible.
The difference between nudging and planning
I am soon going to go over this in more details, but, in brief, the disconnect between funding and oversight is not a universal feature of state funding of local priorities. In all unitary states we’ve investigated, there is state funding, and in Sweden it’s normal to mix state, county, and municipal funding. In that way, the US is not unique, despite its federal system (which at any case has far more federal involvement in transportation than Canada has).
Where the US is unique is that the Washington political establishment doesn’t really view itself as doing concrete planning. It instead opts for government by nudge. A federal agency makes some metrics, knowing that local and state bodies will game them, creating a competition for who can game the other side better. Active planning is shunned – the idea that the FTA should have engineers who can help design subways for New York is unthinkable. Federal plans for high-speed rail are created by hiring an external consultant to cobble together local demands rather than the publicly-driven top-down planning necessary for rail.
The same political advocates who want more money and care little for technical details also care little for oversight. They say “regulations are needed” or “we’ll come up with standards,” but never point to anything concrete: “money for bus shelter,” “money for subway accessibility,” “money for subway automation,” etc. Instead, in this mentality the role of federal funding is to be an open tab, in which every leakage and every abnormal cost is justified because it employed inherently-moral $80,000/year tradesmen or build something that organized groups of third-generation homeowners in an expensive city want. The politics is the project.
Pedestrian Observations 