I’ve recently been taking a look at Statistics NZ’s Census data on car ownership in Auckland. One interesting observation is that low-income households are considerably more likely to not own a car. One implication is that minimum parking requirements, which require everyone to have carparks (or pay for their provision every time they go to the shops), are a quite regressive policy. (More on this in a future post!) And, of course, providing frequent, reliable public transport services and safe walking and cycling options throughout the city will benefit low-income households the most. (In other words, separated bike lanes are not just about hipster urbanism!)
Another interpretation of the data on car ownership is that it shows that a car is what economists call a “normal good“. In plain English, this means that when people’s incomes increase, they tend to have more of them. This seems to be true in Auckland: high-income households are less likely to own no cars and more likely to own three or more cars.
However, people commonly assume (or assert) that public transport is an “inferior good“, or something that people consume less of as their incomes increase. This assumption is deeply embedded in transport policymaking and transport modelling. It’s part of the reason that policymakers have been so eager to disinvest and underfund our public transport networks over the past half-century: “In the future, we’ll all be richer and drive more.”
But is this actually true? Let’s take a look at the data.
First, I took a look at the Household Economic Survey data, which Statistics NZ has very helpfully broken down by decile of household income. Here’s a chart showing the percent of household spending that goes to transport (including cars, petrol, public transport, etc) and passenger transport alone:
In short, higher-income households do seem to spend more money on passenger transport, both in absolute term (i.e. dollars per week) and as a share of their incomes. This may suggest that public transport isn’t an inferior good. Unfortunately, though, it’s not possible to draw any definitive conclusions from this data for two reasons. First, the Stats NZ data doesn’t allow us to split out urban areas (where average incomes tend to be higher and PT is available) from rural areas (which tend to be poorer and lacking in PT). Second, Stats NZ has grouped air travel into the passenger transport category… which means we might just be picking up the fact that richer people fly more.
So let’s take a look at a second set of data: 2013 Census data on household incomes and main commute mode. To avoid issues with comparing between rural and urban areas, I focused on data for Auckland alone. The following scatter-plot shows the correlation between PT mode share for commute journeys and median personal income for Auckland area units. (I’ve excluded area units with population densities less than 1 person per hectare, as they’re likely to be rural areas where PT isn’t available.)
There isn’t much of a pattern in this data. There are some higher-income areas with high PT mode share, and some with low PT mode share. But the trendline does seem to be moderately positive. In other words, the Census data doesn’t seem to indicate that PT is an inferior good – people in higher-income areas are slightly more likely to use PT.
Finally, it’s worth taking a look at changes over time. In other words: Are Aucklanders using PT more or less as average incomes increase? In order to examine this question, I looked at Statistics NZ’s data on household incomes by region as well as the public transport boardings data that Matt has diligently compiled. The Stats NZ data only reaches back to 1998, so we’re limited to looking at recent changes.
Matt’s data on patronage shows that total PT boardings in Auckland rose from 37.6 million in 1998 to 72.4 million in 2014 – significantly outpacing population growth. Incomes also rose over the same period. Here’s a chart comparing changes in (nominal) median household incomes with changes in PT boardings per capita for the Auckland region:
In recent years, Aucklanders haven’t reduced their use of public transport as incomes increased. In fact, we’ve seen the exact opposite – PT trips per capita have risen in line with median incomes. (Or even slightly faster, as I didn’t account for the effect of inflation on incomes.)
Is this conclusive evidence that PT is a “normal good” that people will demand more of when they get richer? Probably not – I don’t have the time, budget, or micro-data to analyse the behaviour of individual transport users. But it provides no empirical support whatsoever for the assumption that PT is an “inferior good” that people will want less of in the future.
In short, we should probably stop simply assuming that PT use will wither away with rising incomes. That might be true, but it’s not obviously apparent in the data. A better course of action would be to start planning to provide public transport that will be useful to people of all incomes.