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

Abstract

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. 1 This working paper from the Brookings Institution has not been through a formal review process and should be considered a draft. Please contact the authors for permission if you are interested in citing this paper or any portion of it. This paper is distributed in the expectation that it may elicit useful comments and is subject to subsequent revision. The views expressed in this piece are those of the authors and should not be attributed to the staff, officers or trustees of the Brookings Institution.

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