Most Queens College students use the E train in order to get to Manhattan.
As a college student in Queens, New York, I ride the subway a minimum of twice a week. Last semester, there were times that I rode it four times in one day just to reach different parts of Manhattan! You can imagine my ire when I heard that the MTA was raising its prices. After months of deliberations and multiple votes, fare hikes were officially implemented this Sunday.
I have never been on the LIRR, but I have heard horror stories from those who commute to Queens from West Hempstead.
Across the board, the cost of taking a subway ride will become more expensive. Single rides increase to $2.75 from $2.50; unlimited monthly cards rise to $116.50 from $112; weekly unlimited cards go up a dollar to $31. And to residents of Staten Island and Long Island who always gripe about not being recognized as New Yorkers, fret not: rates for the Long Island Railroad and the Staten Island Railroad increase, too.
Hurricane Sandy wreaked havoc on many subway stations. Insurance companies were not going to cover the expenses. Naturally, the cost was imposed on us.
Doesn’t it seem like prices just went up? Indeed, the last fare hike took place two years ago, shortly after Hurricane Sandy. The combined impact of subways not running, increased repairs, and decreased ridership caused the MTA’s fourth quarter earnings to take a major hit. In order to mitigate the mounting debt at the time, single rides went up to $2.50 from $2.25.
The MTA argues that fare hikes are a means of keeping up with inflation. The public transportation in other urban cities has also been on the rise, at about the same clip.
In accounting, such an unusual loss in earnings is written off in the income statement as an Extraordinary Loss. While a super storm that cripples a metropolitan city is rare, the notion of a fare hike is not. Historically, this will be the fourth time since 2009 that the MTA has approved an increase. The additional quarter may seem insignificant, but over time it adds up; since 2013, the cost of a round trip subway ride will be a full dollar more!
LIght may travel faster than the speed of sound. But sometimes, the screeching of the subway is so unbearable that I question this basic tenant of physics.
Why does the MTA keep raising its fares? As an institution, the MTA has two main expenses. Its capital budget covers maintenance and improvements. The train and its tracks are antediluvian. Without having an engineering degree, I can confirm this solely based on the screeching I hear and the rocking I experience. They are in constant need of repairs and improvements. Ever hear the intercom announcement of “we apologize for the delay due to construction on train tracks ahead of us?” Exactly. Ultimately, this contributes to major societal inefficiencies, with people having to wait and be late. Of course, upgrading the obsolete infrastructure would be ideal, but nearly impossible because it would be so expensive and time consuming.
Unions exist in various fields, from teaching to healthcare. A social trend has been the dismantling of unions due to pressure from large firms.
The MTA must also contend with the operating budget, which includes day-to-day costs such as workers’ wages. The 34,000 MTA employees are part of a union called the Transport Workers Union Local 100. A union is an organization that negotiates with a firm on behalf of its members to ensure job security and other benefits, such as pensions and healthcare. It effectively functions by virtue of power in numbers; united, the workers have greater bargaining power than if they were to rally individually for better conditions. From an economic point of view, unions are inefficient because they make laborers more expensive. As a result, there are fewer jobs.
Because of the powerful union for the MTA workers, it is difficult to cut costs for this part of the budget. It remains stubbornly high, and keeps rising. Indeed, one of the latest concessions was that members would receive a 2% increase in salary next year. The MTA now puts this extra cost on us, in the form of a fare hike.
Complaints about the price hike are valid, among other reasons, because once prices go up, they will never go down. However, you should recognize that for one flat sum, you are able to go from one area of New York all the way to the other side. Other countries base the cost on the number of districts one travels, which is more expensive.
Despite the rising costs of riding the subway, we should recognize that the MTA is not a complete rip-off. In Australia, the cost of public transportation was my largest expense (after airfare). The reason why New York City’s public transportation is low, relative to that of other urban cities, is because it is subsidized. The debts that the MTA incurs are partly covered by our fares, and partly by the government. The taxes subsidize the cost by 40%. The cost of riding the subway would be substantially more if we bore the entire onus upon swiping our card.
Besides for the tax aspects, the government also serves to regulate the MTA. The public transit company is a monopoly since competition is virtually impossible. (Imagine another company trying to build another underground network!) To prevent the MTA from exploiting its ability to charge any price it wishes given this advantage, the governor and mayor both choose people to run the board of the MTA. This method of checks and balances serves the best interest of the subway rider, ensuring that prices stay low.
The graph shows a perfectly inelastic curve, as depicted by the vertical line. This means that no matter the price, quantity demanded remains the same. Often, the inelastic curve is applied to demand for medication; people will buy it at any cost in order to get healthy. And my pre-med friends say they don’t need to know anything about economics when they are doctors!
Will the fare hike ultimately affect ridership? Of course, there are some who will stop using the subway, as determined by the Law of Demand. For the most part, though, subway riders have an inelastic demand-they are not sensitive to the price change. They will continue to ride the subway. Many are dependent on the subway as being the most efficient way, or sometimes the only way, of reaching their destination. Since there is no appropriate substitute for the subway, they have no other option but to pay the increased fare. From daily commuters to tourists, riders will be mostly undeterred by the increase of 25 cents. With the same number of people, but increased prices, the MTA ultimately makes a greater profit.
As a city characterized by people always on the move, it is unsurprising that the subway is one of the mainstays of New York City. It is also unsurprising that, in a city known for its high cost of living, the price of public transportation is increasing once again. There are rumors that fare hikes will occur again in 2017. For now we may grumble at $2.75, but do not be surprised when the fare breaks the dreaded $3 mark.
