THE REAL COST OF COM­MUT­ING

Long com­mutes aren’t just a waste of time. There’s also a mas­sive fi­nan­cial cost.

Finweek English Edition - - FRONT PAGE - By Jo­han Fourie ed­i­to­rial@fin­week.co.za Jo­han Fourie is as­so­ciate pro­fes­sor in Eco­nomics at Stel­len­bosch Univer­sity.

my friends who com­mute be­tween Stel­len­bosch and Cape Town ev­ery morn­ing tell me that they have to be on the road at 05:15 or they’ll be stuck in traf­fic. That is much worse than a decade ago, when they could eas­ily be at the of­fice at 07:00 af­ter leav­ing home at 06:00.

The stats back up their story. A new study by An­drew Kerr of UCT’s re­search unit Data First, ti­tled Tax(i)ing the poor? Com­mut­ing costs in South Africa, shows that in 2003, white South Africans spent 54 min­utes/day com­mut­ing by car, longer than the av­er­age for the US and all 23 EU coun­tries at the time. By 2013, this num­ber had in­creased to 67 min­utes.

But those with cars are the lucky ones. Black South Africans, who pre­dom­i­nantly use pub­lic trans­port, spent an ex­or­bi­tant 87 min­utes com­mut­ing per day in 2003. Ten years later, that num­ber had in­creased to 101 min­utes/day.

Th­ese shock­ing sta­tis­tics are not only ex­pen­sive in terms of fam­ily time lost, but also as a pro­por­tion of the bud­get. Kerr shows just how ex­pen­sive this is. Take a full-time worker with a monthly in­come of R3 000 (close to the me­dian in­come in SA). R3 000 a month amounts to ap­prox­i­mately R17/hour. Deduct the monthly trans­port costs and the two hours spent in traf­fic, and the R17/hour falls to R12.50, a 26% de­cline in wages com­pared to some­one who worked from home. Kerr cal­cu­lated what amounts to trans­port ‘taxes’ for dif­fer­ent modes of trans­port: 26% for minibuses, 31% for bus users and 39% for those us­ing mul­ti­ple modes.

And not only is trans­port re­quired to ac­cess jobs, but good schools are of­ten far from town­ships.

My point: South Africa may have high wage lev­els com­pared to other de­vel­op­ing coun­tries, but the high com­mut­ing costs re­duce the pur­chas­ing power of th­ese wages sig­nif­i­cantly. Both firms and trade unions should take note. Even if the cost of trans­port as a per­cent­age of wage in­come can be lim­ited to 10% (R15.30 hourly wage in­stead of R12.50), the im­pact on work­ers’ earn­ings would be mas­sive: it would en­tail an in­crease of 11% in spend­ing power. That’s how you ne­go­ti­ate a higher salary with­out any­one pay­ing for it.

How do we re­duce th­ese costs?

Can sub­si­dies help al­le­vi­ate some of this bur­den, es­pe­cially for the poor­est of the poor? Not really, Kerr finds. Cur­rent sub­si­dies are tar­geted at buses and trains, and it seems that th­ese ben­e­fits do not suf­fi­ciently trickle down to con­sumers. Only 7.3% of the poor­est 20% in­come earn­ers ac­tu­ally use th­ese modes of trans­port, in com­par­i­son to 19.6% who use minibuses. (In the to­tal pop­u­la­tion, 22% of com­muters use taxis com­pared to only 6.1% who use buses and only 2.8% who use trains.) Sub­si­dis­ing pub­lic trans­port can only play a lim­ited role in re­duc­ing the cost bur­den of com­mut­ing.

What are the al­ter­na­tives?

One op­tion is to tax the use of per­sonal ve­hi­cles more heav­ily. In the­ory this is what the e-toll sys­tem had hoped to achieve, but due to poor man­age­ment it failed to win pub­lic sup­port. An­other is to ex­pand the road net­work, but econ­o­mists know that making per­sonal trans­port cheaper will only en­cour­age more of it, which will re­sult in even more traf­fic and con­ges­tion. A larger road net­work is a very ex­pen­sive way of not fix­ing the prob­lem.

The only al­ter­na­tive is to bring peo­ple closer to where they want to work and play. For those at the top, the op­po­site is also true: bring­ing work and play closer to where peo­ple live. But that is not really an op­tion for the poor. In fact, as re­search by Ed­ward Kerby shows in a 2014 study ti­tled African man­u­fac­tur­ing wages, the apartheid gov­ern­ment tried ex­actly that with the Re­gional In­dus­trial De­cen­tral­i­sa­tion Pro­gramme, and failed.

To re­duce the com­mute would re­quire build­ing denser neigh­bour­hoods of af­ford­able hous­ing closer to cities. It would re­quire build­ing more and, es­pe­cially, bet­ter pub­lic-trans­port-in­te­grated net­works. It would re­quire cre­at­ing a one-tick­et­ing sys­tem with low or even zero fees for the poor­est, no­tably chil­dren and the old-aged. Gov­ern­ment ac­tion is key, but firms and trade unions can help by de­mand­ing change. Com­mut­ing fees must fall for wages to rise.

South Africa may have high wage lev­els com­pared to other de­vel­op­ing coun­tries, but the high com­mut­ing costs re­duce the pur­chas­ing power of th­ese wages sig­nif­i­cantly.

An­drew Kerr Se­nior re­search of­fi­cer at Data

First, UCT

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