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

Margy Waller
Margy Waller Visiting Fellow, Economic Studies and Metropolitan Policy, The Brookings Institution

November 28, 2005

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.