I promised in my previous post that I would continue to write about transportation history, but I surfing the Internet led me to some stories about the London Tube system I could not pass up writing about. Having spent 9 weeks in London earlier this year, I have been following the London transit workers strike and public private partnership (PPP) meltdown of Metronet quite closely. As such, I found some very good stories and sites surrounding the London tube system:
1) This is a tremendous write up by City Journal on the meltdown on the Metronet PPP. This article should be required reading for anyone interested in transportation issues, especially here in Houston since Metro is entering a PPP type agreement with WGI.
2) This is a fairly new blogging website which is pro-rail transit, but they have some excellent links to stories about the Tube. They link to the City Journal story above. There is also this link which leads to #3.
3) This guy says the London Tube system has eaten up 12 billion pounds of subsidies ($24 billion) in the past five years. There are now over 1,400 managerial personnel on the payroll who make more than 50,000 pounds ($100,000) per year. Staff costs have gone up 52% in the past four years.
4) This is a story that appeared in this week's Economist.
Strikes are what you get when you have an urban area which decides to base its transportation strategy using a large public transportation component. The reason for this was made crystal clear when I was an undergraduate Economics student. For years I swallowed various sociological / social structure or political power type arguments about the role of labor unions in a society. My beliefs were all blown away with a single line which I read in my first year textbook. The author mentioned that the power which a labor union has is tied to the elasticity of demand for the labor that the labor union provides. The more inelastic the demand curve for the labor union's labor, the more power a labor union has for extracting economic rents for its members. That is why you see labor unions oppose the movement of money and capital for plants, free trade agreements and competition from non-unionized labor.
As for unions in transportation, all I can say is to repeat what the Economist says. A large component of the demand for travel in any urban area is inelastic, especially taking trips back and forth from home to work. Moreover, in cities like New York and London where a substantial percentage of the population take the subways to work and might be having a hard time affording a car due to housing costs or parking hassles, then you end up with a large segment of the population who are effectively held hostage to the whims of unionized transit workers and those transit workers know that. The union claims that they are merely worried about losing pensions and jobs, but as a practical matter they will get everything that they want because they are in a very strong position to make such demands precisely because the social decision has been made to rely on transit as a means of getting around. Those union workers have the power to make their problems a public problem and I am confident that those pensions will ultimately get backed up by the British taxpayer.
Social losses result from lost economic activity and from having a large workforce of transit workers who are commanding rents that result from wages which are above their levels of productivity. The $4.8 billion per year subsidy that the Tube is receiving works out to about $700 per person per year or $2,800 for a family of four. Throw in the fact that even a zone 1 and zone 2 Oyster Card monthly pass is 90 pounds and you have a real cost of about $2,800 per year for using a transit system which can only get you to a neighborhood in London that is within a 4-5 mile radius of the Strand. Tack on another $1,500 plus per year if you want to use the the Tube in its entirety. At costs like that, you are getting to the point where you might as well start thinking of buying a car, especially if you have a family.
A big question for many who live in London is what are the substitutes? As the Economist article mentioned, many stayed at home. A few were fortunate to be able to walk or bike their way around and they were fortunate this is still late summer. However such issues really beg one to ask whether British taxpayers are getting their monies worth when the people who are the recipients of their largesse won't even do their jobs without demanding even more tribute - and yes, tribute is the correct word to use here. Then there's the issue that this same union is - surprise - desperate to get the back the work that Metronet quit doing. So far TFL is the only bidder, which should not shock anyone and will end up giving the transportation union exactly what it wants. Several months ago, a portion of an old tunnel collapsed and as the City Journal article mentions, it would take an awful lot of guts for a private sector actor to take on the maintenance and upgrade of a 100 year old subway system with huge unknown defects and liabilities.
Sigh... I'm glad this is not my problem - yet.
Wizard
Posted by The Mighty Wizard at September 9, 2007 04:08 PM