Raising the Bus Fair

By Todd Trewern

Capitalism prides itself on achieving the most efficient results through the power of the free market. Given every person’s spending is driven by their wants and needs, capitalism allocates goods and services to those who want them most as measured through their willingness to spend more than others. This pushes the prices upwards – think TradeMe bidding war. Thankfully, capitalism also gives us competition between sellers. All buyers are going to want the cheapest thing that meets their desires, which helps to push prices down – think Pizza Hut offering a $5 range to undercut Dominos.

Competition is great! If everyone is vying for your dollar, they’ll try to minimise their costs and drop their prices. Where services are provided by the government, capitalists argue, there is no competition to ensure efficiency and lower prices. This was the reasoning provided for the introduction of the updated Public Transport Operating Model (PTOM) system in 2013.

Public transport is overseen by regional councils (Greater Wellington, not Wellington City, say). The framework for all council activity is set by central government – what they can and can’t do, and how they must do it. PTOM are the guidelines councils must follow in running their public transport schemes.

Since 2013, this has meant councils must segment their networks into bundles of routes and call for bids from the private sector to meet them. Companies then make their offers, and the council then chooses the best offer. This is the market in action! Competition between bus companies ensures that regional councils are paying the cheapest amount to get the services provided to their residents. Those companies have trimmed all the fat, made the best possible offers that they can, so we all stand to benefit from their efficiencies, right? The contracts, which specify the levels and quality of services must be followed, ensure efficient public transport to the standards residents want, need, and expect, right?

Let’s imagine we run a bus company, looking to be selected to provide a bundle of routes in Wellington. To make sure we can win the tender, we need to cut our costs. Unfortunately, we don’t set the price of buses, so we can’t save meaningful amounts on this front. The price of diesel is also something that we can’t change. In fact, the only major business cost we are in control of is how much we pay our drivers. And it works! Now we have our bundle of routes, our business can operate them and still make a profit (our shareholders will be happy!).

Even if we only cut wages by 20c, over the course of our contract (which could be as long as 5 years) we will save large sums of money. Because we have no way of knowing how our competitors will act, we should cut our costs (wages) by as much as possible – maybe even all the way to minimum wage.

What will happen if we cut our drivers wages? People quit – and you can hardly blame them. In February this year, RNZ reports, there were an average of 1085 cancellations per day in Auckland, and 448 in Wellington. This isn’t a new phenomenon, and the government has tried several things to resolve this issue: topping up PTOM contracts to ensure Wellington driver wages of $27, then $30 per hour, and easing immigration constraints for bus drivers. These have led to minor improvements in reliability.

What’s really needed, though, is a new PTOM – one that allows councils to consider factors like wages in their decision-making. One that allows non-corporate organisations, even councils themselves, to bid for and provide public transport.

The Government has started work on one with a new name (Sustainable Public Transport Framework), a new acronym (SPTF), and a new key goal, alongside reliability, affordability, accessibility, and safety, of ensuring “employment and engagement of the public transport workforce is fair and equitable.” One that stops ‘the race to the bottom’…

This work is expected to be completed by next year, but in the meantime, we are stuck with the consequences of a strictly commercial public transport network. At a time when sitting in traffic costs the country billions in productivity annually, when air pollution from vehicles is making us sick and leading to premature deaths, in the midst of a climate crisis that requires urgent action, the ‘efficiency’ provided by the current PTOM is ensuring that choice in transport doesn’t exist for most.