Friday, December 26, 2014

Biggest cost from SEPTA strike is time lost

Calculating the economic impact from the mass-transit strike is debatable, but the cost can be measured in time lost.

Biggest cost from SEPTA strike is time lost

Few phrases make me cringe more than “economic impact.”

Calculating the economic impact of anything, whether it’s hosting World Series games or the presence of a certain business sector, is fraught with fudging.

Sure, you can count the number of New York Yankees players, coaches and staff who worked and paid wage taxes in Philadelphia for the three games here. Those are direct benefits, while paying for police overtime for crowd control would be direct costs.

But it’s the indirect costs and benefits where economic impact gets murky.

And Drexel University economics professor Roger McCain reminded me of that when I asked about figuring out what the two-day-old SEPTA strike is costing the region.

The biggest direct cost we all experience is time lost. McCain, who said it took him 25 minutes to drive from 30th to 34th Streets on Market Wednesday morning, said time is the ultimate scarce resource. Scarcity is what economics is all about.

I’ve been reading Thomas Sowell’s Basic Economics, which begins with the classic definition of the dismal science: Economics is the study of the use of scarce resources that have alternative uses.

When our commute doubles because we can’t catch the Market-Frankford El and must drive instead, we have traded time at work or at home for time spent in transit. Employers, many of whom are trying to be flexible under the circumstances, still expect a full day’s work, so we are all really paying for longer commutes with less personal time.

The bugaboo comes in trying to put that loss of time in terms of money. Tempted as we might be to multiply our hourly wage rate by our extra commuting time, it would overstate the cost, McCain said. Studies have asked what people would pay to reduce their commute and it tends to be less than their wage rate.

Indirect costs related to the SEPTA strike might come from fewer people traveling into Center City to shop or eat out. But if they stay in the suburbs and wind up shopping or eating out there, what’s the result? Consumer spending still occurred in the region.

While dining at a suburban Applebee’s rather than Table 31 represents a trade-off, is it really fair to take the difference between average checks at each restaurant and count it as a negative impact on Philadelphia?

Even if you just zoom in on the direct impact on SEPTA, there’s some guesswork involved. The City and Frontier Divisions handle 928,000 trips each weekday. Most people ride round-trip, so that’s why the agency says this strike is affecting hundreds of thousands of people.

But you can’t multiply the 928,000 trips by the cost of a token ($1.45) and say that SEPTA’s losing $1.35 million in revenue a day. Why? Because many passengers have migrated to the Regional Rail lines that are still running and are more expensive.

SEPTA spokesman Andrew Busch said while the agency is losing ridership revenue, its costs are lower because it isn’t paying the 5,100 striking members of the Transport Workers Union. “As of now, it’s about a wash,” he said.

But the longer a strike lasts, the more negative the impact will be on SEPTA’s finances. Lost revenue would begin to outstrip the benefit of lower labor costs. Inconvenience could chase customers away.

Once the strike ends, it may take a long time for ridership to return to pre-strike levels.

The bottom line is that economic impact numbers are not very reliable, McCain said.

But there’s another way to measure the strike: by the level of annoyance that builds as we sit in traffic in our vehicles, squeeze onto packed railcars, and walk extra blocks to work or school.

Again, we can’t quantify that psychic cost. We only know that we feel more annoyed, and there’s no benefit in that.

Mike Armstrong Inquirer Columnist
About this blog
Mike Armstrong blogs about Philadelphia corporations and business-related topics. Contact him at 215-854-2980. Reach Mike at marmstrong@phillynews.com.

Mike Armstrong Inquirer Columnist
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