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Why Great Transit Is Worth Loads of Money to Local Businesses

Reliable buses cut down on employee turnover—dramatically.

connel /

Jobs are moving back into city centers, but there's still an awful lot of them in the urban fringes and the suburbs—places typically hard for public transportation to serve. That's not a problem if you own a car, but it can be a huge one if you don't, or even just if your car breaks down that day. Most of us don't have the fortitude to walk 21 miles to work.

Your boss might say tough luck to these problems, but the truth is it's in the company's best interest to offer great car-free access to work—not just morally but financially. For one thing, the more potential employees can reach an office site, the more selective a business can be about its workforce, resulting in better matches between job and worker. An accessible location also helps retain staff: firing someone who's frequently late to work on account of poor transit creates substantial new costs in terms of finding, hiring, and training a replacement.

This matter of employee turnover is at the heart of some new research that attempts to quantify just how much a good public bus system is worth to a business, and thus to a community. Economics scholars Dagney Faulk and Michael Hicks of Ball State University analyzed employee turnover rates among manufacturers and retailers in Rust Belt counties with and without bus operations between 1998 and 2010. In a new paper in Urban Studies, they report, quite simply, that "counties with transit systems have lower turnover rates"—a win for workers, businesses, and the broader economy alike.

These results suggest that access to fixed-route bus transit should be a component of the economic development strategy for low-income communities not only for the access to jobs that it provides low-income workers but also for the benefit provided to businesses that hire these workers.

Faulk and Hicks compiled data on transit bus service (as measured by operating expenditures) in 40 counties with small metros (between 50,000 and 125,000 people) across Illinois, Indiana, Michigan, Ohio, Pennsylvania and Wisconsin. They focused on buses, not rail service, because that's far easier for such cities to implement or alter. The researchers then identified nearby counties without any fixed-route bus service to create a reasonable point of comparison.

Faulk and Hicks (2015), Urban Studies

Using data from the Census and the Bureau of Economic Analysis, Faulk and Hicks discovered that counties offering bus transit experienced a "modest but not immaterial" drop in employee turnover rates among manufacturers and retailers. That relationship could emerge from a number of factors: better access might have led companies to find workers who had fewer problems getting to the office, or workers who simply found their jobs more enjoyable. In one sample, for every $10 per capita a county spent on its bus operations, employee turnover fell .3 percent, Faulk and Hicks report.

The researchers dove a bit deeper to calculate just what that means to the bottom line. Based on prior research, they assumed a per-worker turnover cost of 16 percent of a salary—expenses related to recruiting and training. Using that figure, as well as the total workers in the counties with transit, Faulk and Hicks estimated that bus service saved the manufacturing sector upwards of $6.1 million a year in turnover costs. The retailing sector saved upwards of $1.9 million.

Those might not seem like earth-shattering numbers spread across an entire industry. But keep in mind these are small metros, and the researchers estimate that the turnover reductions amount to 4 or 5 percent of a bus system's 2010 operating expenses in these areas, no trivial share. The researchers paint their findings as most relevant to low-income areas, largely because manufacturing and retailing offer modest wages, but the economic benefits of transit on larger and wealthier metros are enormous, too.

That's something for business leaders in all communities to keep in mind the next time local officials make the case for more transit funding: the money doesn't just help potential workers find jobs, it helps the jobs keep the workers they find.

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