In the comment threads at HA and elsewhere, some critics have shrugged off the looming Metro bus service cuts in suburban and exurban King County by asserting that most folks out there already have cars. Eliminate the less efficient feeder routes, they argue, and just focus on providing more park and ride spots. Which I suppose would be a welcome solution for Mercer Islanders accustomed to fighting for spots at its overcrowded park and ride.
But for the suburban poor, not so much.
The problem is, not everybody owns a car and not everybody who does own a car can really afford one. According to AAA’s annual Your Driving Costs report (pdf), released just this week, the average cost of car ownership is $8,876 a year. By comparison, a full-time worker earning the Washington State minimum wage of $9.32 only takes home $19,385 in pre-tax income.
Of course, you can drive for less. But not as much less as you might imagine. AAA estimates average depreciation and finance charges at $3,510 and $847 respectively. So if you inherited a 15-year-old car from your grandmother, you can subtract that. But older cars generally have lower average fuel economy and higher annual maintenance costs (AAA estimates about 5 cents a mile for normal routine maintenance and wear and tear just over the first five years of the car, plus another penny a mile for tires), so you gotta figure those costs would be substantially higher on your typical beater. As for insurance, sure you can save bucks by declining collision and comprehensive on grannie’s clunker, but the poor generally have lower credit ratings and thus higher insurance rates, and the young (or their parents), well, they’re just generally screwed when it comes to auto insurance.
So when every penny is counted, I’d be surprised if there are many folks who can drive a car for much less than $4,000 a year. By comparison, a two-zone Metro bus pass costs $108 a month.
One of the side effects of Seattle’s booming economy and relatively strong real estate market is that we have been relentlessly driving our middle class families, let alone the working poor, out of the city and into cheaper suburban housing. It’s a tradeoff: longer commutes in exchange for lower rent. But for many households who rented an apartment or purchased a house based on proximity to a bus route that is no longer there, adding a car to their monthly budget just doesn’t pencil out.
Short term, there’s not much Seattle voters can do for suburban bus commuters. But we shouldn’t just shrug off their plight.
Are you factoring in what will happen when the minimum wage increases?
Here
http://horsesass.org/seattle-i.....nt-1259948
I commented:
Chicago Fed in 2011 published this (abstract):
Following a minimum wage hike, household income rises on average by about $250
per quarter and spending by roughly $700 per quarter for households with minimum
wage workers. Most of the spending response is caused by a small number of households
who purchase vehicles. Furthermore, we find that the high spending levels are financed
through increases in collateralized debt. Our results are consistent with a model where
households can borrow against durables and face costs of adjusting their durables stock.
(linked here
http://www.ritholtz.com/blog/2.....increases/
)
I don’t know how many vehicles that is, but if we’re going to talk about minimum wage changes, Chicago Fed says that translates into those affected buying more vehicles.
If Metro makes cuts and people with more money no longer have the same ability to get to work using Metro, wouldn’t they be putting their bus fare PLUS their higher take-home pay into vehicles, thus boosting vehicle purchases even further?
A leased LEAF costs $400/mo. averaged over the two-year lease period, including insurance. Oh, and including fuel expense. That’s $5k per year. Someone seeing a boost from $10/hr to $15/hr could cover that, especially if they aren’t dropping a hundred bucks or so per month into Metro.
@ 1
Of course, there may or may not be parking expense.
Since there is so much spare capacity on our road system, all these extra cars will be no problem. Right?
Are you factoring in what will happen if the minimum wage doesn’t increase? If it costs bottom-scale workers more to work than they can earn by working? It means employers won’t be able to hire, work won’t get done, and many will go out of business because few can function without labor. Just ask the eastern Washington growers what happened when they couldn’t hire pickers. Fruit rotted on the trees.
@1 ” … wouldn’t they be putting their bus fare PLUS their higher take-home pay into vehicles, thus boosting vehicle purchases even further?”
How much car can you buy for $108 a month? (Assuming you have free parking and can spend it on car payments? I suspect for most folks, the $108 a month they save on bus fare would pay for one week of downtown parking, if they can find parking.)
So the cheap labor conservative’s argument is that there should not be a $15 min wage because the poor could afford cars, instead of taking the bus service that has been cut? That makes no sense.
Cheap labor conservative is against bus service and he’s against paying a living wage. At least he’s consistent.
@ 6
That makes no sense.
That should have been your first clue that you totally misread what I wrote.
For many years, city and county policies have been designed to concentrate office space downtown, drive cars out of the city core, and make transit routes converge at the city center. In other words, Seattle has been designed to depend on mass transportation for worker mobility. What happens if mass transportation isn’t provided? Can a stool stand on two legs? That’s your answer. But why do we think we can continually load more taxes on drivers and homeowners? Shouldn’t business be paying for the transportation system that gets workers to their businesses? Bus service is for their benefit, and business has more money than anyone else, so why don’t they chip in?
Goldy writes:
So when every penny is counted, I’d be surprised if there are many folks who can drive a car for much less than $4,000 a year. By comparison, a two-zone Metro bus pass costs $108 a month.
A better comparison would be the *yearly* cost of a two-zone Metro bus pass, i.e. $1,296 (12*108). Just sayin’
@9 Most HA readers can do that math in their heads.
Pish posh. As a sovereign citizen, you can save $25 by not applying for license and you don’t need to pay for insurance. And if you use your grandmother’s handicap parking placard, you don’t need to pay for parking, either.
@10 I don’t doubt you for a minute. But it just one of those pet peeves, like some people need to straighten crooked paintings that are hanging on a wall.
@1
You keep bringing up that report, but it doesn’t say what you think it does. The report shows that average increase in income following a $1/hour minimum wage increase is $250/quarter and spending increases by $700/quarter. So you have a problem with low income workers leveraging their money like big capitalists do? Who cares if they buy a car? That is a durable good and an investment, just like the middle class buys a house. But screw those poor people, why are they buying frivolous things like cars with their money, right?
From the last paragraph:
“For these reasons we should be somewhat suspicious of claims that the minimum wage will significantly boost the economy. Nevertheless, our results, as well as the results of other many other papers (a small recent list includes Parker et al 2010, Adams et al 2009, Browning and Crossley 2009, Krueger and Perri 2008), provides compelling evidence that putting money into the hands of consumers, especially low-income consumers, leads to predictable increases in spending.”
The economy is overflowing with capital. What we’re lacking is consumer demand. Businesses won’t invest and hire until people start spending again. Nothing boosts consumer spending more or faster than raising the incomes of the working poor, because they’ll spend it immediately and spend it all. A higher minimum wage is the single most stimulative thing we can do for the economy right now.
@14 Paying Pimple Popping Pete 15 bucks an hour so he can buy a few more Slim Jim’s and Red Bulls isn’t going to stimulate anything…especially when Pete is replaced with an automated burger flipper.
@ 13
Hi Don:
I read the same thing you did. I’m concerned that vehicles purchased by people who might least be able to afford the payments seems to be much of what happens with the (apparently limited) additional money flowing into the economy after a minimum wage increase. And realize that this happens (or did in the data Chicago Fed studied) with increases in minimum wage substantially less than what are being proposed in Seattle. There was just a piece this week that stated that under-40 grads with student debt have median net worth of only $8700. So do we want those folks taking their wage increase and going out and buying a car, or do we want them saving some of it so their net worth might improve? That’s my main concern – accumulation of more debt by those supposedly benefiting from the increase in minimum wage.
However, they’ll do what they’ll do, won’t they? So my point was that it might be a substantial amount of additional vehicles being purchased if:
1. Metro is less useful to them because of the cuts
2. They find themselves with significantly more money due to the proposed minimum wage increase, which could be fairly substantial in a relatively short period of time.
Just think: Some of that minimum wage money could go to buying vehicles that then are used by Uber or Lyft drivers to give rides to people who can’t use Metro.
Heh.
@8
“Shouldn’t business be paying for the transportation system that gets workers to their businesses?”
Sure, but B&O taxes share the same popularity as hangnails and VD – in Wa they are calculated on gross proceeds with no deduction for any cost of business activities.
A State income tax makes more sense to me, as we have examples of working systems to develop our own unique (better than theirs!) system. I’m not sure how we would go about generating the revenue through business taxes: all businesses equally? Profitable businesses only?
@14
“The economy is overflowing with capital. What we’re lacking is consumer demand. ”
I disagree. Wealth concentration. Wal-Mart. The capitol is there, it is simply in the hands of those who have enough of it to invest in a protectionist manner. The demand is there, and they expect to be able to buy products manufactured overseas at a fraction of US fabrication cost.
What we’re lacking is the foresight to legislate against globalization in meaningful ways. Stimulation of our largely destroyed manufacturing base through the time tested methods of import intervention and tariffs perhaps.
Most low-wage employees don’t have fulltime jobs. Let’s say they work 30 hrs/wk. If they were paid $15/hr, they’d be making a munificent $21,600/yr. That’s not going to stimulate the economy, and they won’t be buying a new car, but at least they’d be better able to afford rent plus food. That’s what the $15/hr movement is about. If they can’t get a bus to work, then they’ll lose that job.
@16 “I read the same thing you did. I’m concerned that vehicles purchased by people who might least be able to afford the payments seems to be much of what happens with the (apparently limited) additional money flowing into the economy after a minimum wage increase.”
Ahem …
http://www.youtube.com/watch?v=IwY25smUB8U
@17 “A State income tax makes more sense to me”
To me, too. The Gates Commission (officially, “Tax Alternatives for Washington State: A Report to the Legislature November 2002,” see link below) discussed several alternatives to the existing tax structure, the most publicized of which would have replaced the 6.5% state sales tax and the B & O tax with a state income tax. This option would give tax relief to small businesses as well as low-income and average-income households, but Washington voters have repeatedly made it clear over the last 40 years that they won’t approve a state income tax.
“The demand is there”
You’re wrong about this. Lack of aggregate demand is THE BIG PROBLEM with the U.S. economy right now. Conservatives deny this, because acknowledging it would drive policy in a direction they don’t want policy to go, i.e. toward more stimulus. I don’t know whether you’re saying this for ideological reasons or because you don’t know better, but it’s very clear in the economic data what’s going on.
http://dor.wa.gov/content/abou.....report.htm
Personally I would vote for a state income tax IF and only IF it got rid of the sales tax.