Where’s the cheapest place to use public transport if you only get paid the minimum wage?

Former Australian Treasurer, Joe Hockey, had to apologise when he commented that “poorest people either don’t have cars or actually don’t drive very far” in defence of his government’s proposed increase in fuel excise. But whether the poor drive or not, it is clear that they do spend a sizeable proportion of their income on transportation in Australia. The Australian Bureau of Statistics 2009–10 Household Expenditure Survey, for example, indicated that those in the lowest income quintile spend 12.3% of their gross household income on transport.

Now some of that 12.3% will certainly be devoted to purchase and upkeep of cars and the costs associated with driving. But some will be associated with the use of public transport.

In many places, the cost of using public transport is the source of much commentary and complaint which is often accompanied by the statement that (insert name of city) has the most expensive fares in the world. Certainly that is the case in Brisbane where I live, but it is also the case in London and Oslo (and no doubt others).

What is going on here? Well clearly, it all depends on how and what you are measuring. Not only is it necessary to take into account different currencies and exchange rates, it is also necessary to compare different fare structures, concession pricing and products that are available in each of the cities and regions.

At NineSquared, the transport economics consulting firm that I work at, we decided to see if we could shed some light on the matter of who actually had the most expensive fares in the world (or at least amongst the 24 cities that we looked at). To do so, we decided to normalise the price of fares in each city by comparing it to the minimum wage in each of the countries in the study. Using the minimum wage provides a means of estimating the cost of fares in each country in relation to an income measure in each country. We understand that this does not address many customers’ actual incomes. For example, students and pensioners may be on a substantially lower income than someone on the minimum wage who works full time. The minimum wage in each country is also set by administrative or political means rather than the market and it is not necessarily the case that those who are employed at the minimum wage rate are able to enjoy the same standard of living across each of the cities and regions in the study. In this way, however, minimum wage rates are similar to public transport fares which, largely, are also set through administrative and/or political mechanisms.

To address the number of different products, concessions and discounts available, not to mention the disparity in distances that can be travelled across the systems studied, we reviewed publicly available information on public transport fares and pricing from 24 cities in Australia, Europe, Asia and North America to create a database of fares, fare products and the discounts that are available to customers in each of the cities. We then compared the number of minutes that would need to be worked, at the minimum wage, to purchase travel across as number of pricing scenarios including lowest and highest priced products and a scenario that reflects the average distance travelled in South East Queensland.

You can download the full report here by clicking on the link below

What we found

We looked at fares and the minimum wage in 24 cities across the world. Some of those cities charged different fares for different modes of transport and, as a result, we included 29 transport systems in our benchmarking — including each Australian capital city.

The initial benchmarking was based on the lowest fare available on each system. At shorter distances, Australian capital cities appear to represent reasonable value for money compared to the cost of using public transport in other cities, ranking between 13th and 26th most expensive (out of 29 remember). London was the most expensive city requiring more than 42 minutes of labour at the minimum wage rate to make 1 zone return journey. At the other extreme, Beijing requires its workers to spend just 7.1 minutes to be able to afford a single zone journey.

But most people don’t take the shortest trip. So we also estimated the impact the longest trip and the average length trip you could make on each system (where that information was available).

In this regard, the concept of an average trip is specific to location. In London, the average trip on bus is around 3.5km. In Sydney, the average bus trip in 2011–12 was reported as 6.7km while the average train trip was higher at 17.1 km. For the purposes of the benchmarking, we used the average distance travelled on public transport In Brisbane, a distance of 15.4 km which turns out to be about a three zone trip in the capital of Queensland in Australia.

And the results … London remains the most expensive of the cities surveyed. And the best (or at least the cheapest) place to live if you use public transport and you get paid the minimum wage…

… is Beijing.

Download a copy of the full report from ninesquared.com.au or click on the link below.