Policy Documents

High Cost or High Opportunity Cost? Transportation and Family Economic Success

Margy Waller –
November 8, 2005

Research evidence suggests that having a car is a worthwhile investment in better outcomes for low-income families. Recent reports quantify the additional money required to own and operate personal vehicles, as compared to the lower cost of traveling on public transit. However, this method of accounting fails to consider  the fact that poor workers without a car may not be able to  search for or accept a better-paying job because public transit doesn’t go there, causing these workers to lose lost income or benefits as a result. This report outlines opportunity costs experienced by transit-dependent poor households, and concludes that when all costs are considered along with benefits of private vehicles, it makes sense to press for more assistance and policies that reduce car ownership costs for poor workers.  

The typical parent who leaves welfare for work earns about $8 an hour. Many are eligible for publicly-funded work supports like child care, food stamps, Medicaid, and the Earned Income Tax Credit, but few poor families get all the support they are eligible to receive. In addition, as they struggle to meet family needs, poor parents face transportation complications, including lengthy commutes on public transit. For these financially stressed families, the cost of buying and maintaining a car can create difficult financial tradeoffs. Yet, the opportunity cost of going without one weighs heavily on these poor households.  

In poor households with at least one car, transportation takes up about 23 percent of total expenditures, just slightly more than higher income households. Nevertheless, most seek access to a car. In addition to reducing commute time and improving employment and housing options, cars provide flexibility for planning trips that require multiple stops, as well as safety when transit service is limited or at night. 

Surveys of welfare recipients find that these parents often cannot purchase a car, either because they cannot afford the initial investment or because the cost of maintenance and insurance is prohibitive. While only 8 percent of all urban households do not have a car, 27 percent of households with annual incomes below $20,000 do not. Moreover, the fact that a household has access to a vehicle does not mean all adults of working age have reliable access to the car. Members of poorer households are likely to have to share a car, while non-poor households tend to have more than one car for each potential driver.  

Still, most people commute by car. In 2000, fewer than 5 percent of workers took public transportation to work, while nearly 88 percent commuted by car. Despite significant public investment in public transit, usage continues to decline as a percentage of urban travel. Nevertheless, poor workers are more likely to commute by public transit – especially bus - than are higher income workers.  

The General Accounting Office (GAO, now the Government Accountability Office) determined that during the 1990s almost three-fourths of all welfare recipients lived in central cities or rural areas, while in over 100 metropolitan places three-fourths of all jobs were located in the suburbs. Even when there is bus service, it often does not go to suburban job locations. When public transit does go from city to suburbs, hours of service do not always match commute needs of entry-level workers who are assigned night and weekend shifts. In rural areas, public transportation options are scarce and have limited hours of service. In both cases, public subsidy is relatively high because public transportation can rely heavily on rider fares only when there are many paying riders getting on and off at frequent stops. It would be prohibitively expensive to expand public transportation sufficiently to meet the needs of all low-income workers.