The triumph of American industry has come from increasing productivity, particularly worker productivity. Since local governments took over private transit companies, however, worker productivity in the transit industry has collapsed.
As the figure above shows, transit companies in the 1950s carried about 60,000 transit riders per worker each year. As of 1960, just 12 of the nation’s hundred largest cities had taken over their transit systems. But after passage of the Urban Mass Transportation Act of 1964, cities quickly municipalized transit. By 1980, only New Orleans and Greensboro, NC, still had private transit and the number of riders carried per transit worker had fallen 25 percent. It continued to fall until stabilizing at around 27,000 trips per worker in the late 1990s.
“It wasn’t supposed to turn out like this,” exclaimed UC Irvine economist Charles Lave. But municipalization provided increasing subsidies to transit, and those “subsidies sent the wrong signals to management and labor. Management interpreted the message to mean: efficiency was no longer primary,” Lave continued. “Labor interpreted the message to mean: management now has a Sugar Daddy who can pay for improvements in wages and working conditions.”
Transit productivity declined in other ways as well. In 1960, fares covered virtually 100 percent of transit operating costs. Today it is less than 35 percent. In 1988, the earliest year for which capital expenditures are available, every inflation-adjusted dollar spent on capital improvements produced 1.25 transit rides. By 2015, it was less than 0.55 transit rides.
The underlying problem is that subsidies have led to mission creep as interest groups other than transit riders play the biggest role in lobbying for transit funding. Transit was originally about providing transportation for those who needed it. Now it is about providing jobs for construction workers and transit operating employees, building glitzy but little-used rail lines, and giving politicians an excuse to subsidize economic development.