An Economist's Look at the NYC Public Transit Budget

Here is MTA's 2017 budget.  It will spend $17 billion dollars to keep the New York City region's buses and subways moving. That's a lot of $!  Look at the pie chart on page I-1.  Only 23% of the budget is spent on capital goods.  60% is spent on labor and 17% is spent on paying back past debts (these debts in turn must be mainly caused by past labor expenses).    On average, 8.8 million people ride this system each weekday (see page II-11).  The MTA has 69,000 total employees.  

Let's calculate the expenditure per average worker =  17 billion*(1-.4)/69000 =  $148,000 .  Now, this includes salary and benefits but doesn't that look a pinch high to you?  I will return to public sector unions in a moment.

Let's now calculate labor expenditure per passenger trip =

17 billion*(1-.4)/(8.8 million * 365)   = $3.18

Amazingly, I don't see enormous economies of scale here. I see an UberX fare.  Recall that MTA charges you $2.75 to ride the subway or bus so the MTA is losing $ on every trip people take!   Note that in my calculating $3.18 , I"m ignoring capital costs and I'm underestimating the value because ridership is lower on weekends and I'm assuming that weekday and weekend ridership is the same.

If MTA credibly threatened to privatize some of its bus routes,  the MTA's budget would be in much better shape.  Read our public service privatization paper and our bus procurement papers.   Public Sector Unions focus their efforts on large Progressive cities.  Lot's of rents to extract there.

1. Matthew E. Kahn, 2017. "Is Local Public Sector Rent Extraction Higher in Progressive Cities or High Amenity Cities?," NBER Working Papers 23201, National Bureau of Economic Research, Inc.
2. Rhiannon Jerch & Matthew E. Kahn & Shanjun Li, 2016. "Efficient Local Government Service Provision: The Role of Privatization and Public Sector Unions," NBER Working Papers 22088, National Bureau of Economic Research, Inc.
3. Li, Shanjun & Kahn, Matthew E. & Nickelsburg, Jerry, 2015. "Public transit bus procurement: The role of energy prices, regulation and federal subsidies," Journal of Urban Economics, Elsevier, vol. 87(C), pages 57-71.