PDF: 

Chapter 5: Transportation Economics

Transportation Economics

The Nation’s transportation system makes possible the efficient movement of both people and goods throughout the country and internationally. As discussed in chapter ¹, transportation assets, totaling $7.7 trillion in 2013, are a major underpinning of the Nation’s wealth and prosperity. Besides facilitating activity in all segments of the economy, the for-hire transportation sector (services for which one pays a fee or buys a ticket) directly employed over 4.6 million people in 2014, generating revenues from taxes and user fees through payments for fuel, and invested in infrastructure and equipment needed to move people and goods. Beyond its contribution to the U.S. gross domestic product (GDP), transportation is also an important element in both household and government budgets. The average household spends about $9,000 per year on transportation, while the government spends about $1,000 per capita on transportation expenditures.

Transportation’s Role and Contribution to the Economy

The demand for transportation included $1,422 billion in personal consumption (e.g., vehicle and motor fuel purchases), private domestic investment in transportation structures and equipment, government purchases, and exports related to transportation goods and services in 2014 (as measured in chained 2009 dollars). Transportation, as a share of the Nation’s total demand for goods and services, accounted for 8.9 percent of U.S. GDP in 2014 (table 5-1). GDP is an economic measure of all goods and services produced and consumed in the country.

The contribution of transportation to the economy can also be found by looking at transportation’s role in production. The transportation services used to move wheat from farms to mills, flour from mills to bakers, and bread from bakers to grocery stores, exemplifies how transportation enables the production and sale of nearly everything made and consumed in the United States. The U.S. Input-Output (I-O) accounts show the industries using transportation services provided by transportation firms on a fee basis, called for-hire transportation, and the contribution of for-hire transportation firms to the economy. In 2014 for-hire transportation contributed $506.2 billion (2.9 percent) to U.S. GDP (current dollars). While for-hire transportation contributes less to the economy than other industries, for-hire transportation delivers the raw materials other industries need to produce finished products and delivers finished products to consumers (figure 5-1). The Transportation Satellite Accounts (TSAs), produced by the Bureau of Transportation Statistics, expand on the I-O accounts to show the full role of transportation in production (see box 5-A). The TSAs use the same structure as the I-O accounts and quantify transportation’s role and impact from four perspectives.

1. the value of transportation services each transportation industry makes,
2. the amount of transportation used by each industry and sector in the economy and the contribution of each industry and sector to the economy,
3. the amount of transportation required to produce one dollar of each product, and
4. the inputs required to produce one dollar of transportation.

The TSAs provide data for the years 2002 through 2012. In the 2012 TSAs, for-hire transportation contributed 2.9 percent to the U.S. GDP of $16.5 trillion. Transportation services (air, rail, truck, and water) provided by nontransportation industries for their own use, called in-house transportation, contributed an additional 1.2 percent ($203.2 billion) to U.S. GDP. The contribution of in-house truck transportation to GDP ($172.1 billion) exceeded the contribution of for-hire truck transportation ($123.0 billion) due to the extensive operation of trucks by nontransportation industries for their own purposes (figure 5-2).

Similarly, one can consider households as producers of transportation. Households produce transportation services by purchasing goods and services, such as cars and motor vehicle fuel, so they can travel by their own motor vehicle. The household production of transportation services contributed $295.6 billion (1.8 percent) to U.S. GDP in 2012 (figure 5-2).

Transportation indirectly contributes to the economy by enabling the production of goods and services. Some industries depend on transportation more than others. In 2012 the wholesale and retail trade industry depended the most on transportation, requiring 10.9 cents of transportation per dollar of output (figure 5-3).

Transportation and Economic Cycles

Total spending on transportation fell in 2008 after the onset of the 2007–2009 economic recession and only as of 2014, returned to the pre-recession level. While total spending on transportation in 2014 exceeds the 2007 level, data on transportation-related demand show that personal consumption of transportation ($978.3 billion in 2014) has not reached the pre-recession level ($1,005 billion in 2007) (table 5-1).

Data for 2014 freight traffic and passenger travel show the transportation related economic recovery. The Transportation Services Index (TSI), created by the Bureau of Transportation Statistics, combines available data on freight traffic and passenger travel to measure the movement of freight and passengers (see box 5-B). All freight traffic and passenger travel declined during the economic recession but have since rebounded, and the freight and passenger TSI reflects this recovery. The freight TSI reached a consistent monthly level above the January 2008 peak in the first quarter of 2013. The passenger TSI lagged the freight TSI recovery, reaching a consistent monthly level above the May 2007 peak in the second quarter of 2014 [USDOT BTS TSI 2014 2015]. The freight TSI and the passenger TSI peaked in different months because the two indices relate to different economic sectors. BTS has shown the freight TSI to be a leading economic indicator, turning about 4 months prior to accelerations and decelerations (growth cycles) in the economy (figure 5-4). The passenger TSI also moves in anticipation of changes in the economy; however, it tends to lead periods of expansion or recession (business cycles) in the economy (figure 5-5) [USDOT BTS 2014a].

Transportation-Related Employment and Productivity

The transportation sector (transportation service providers and warehousing) is a significant employer in the United States. In 2014 about 4.6 million people worked in transportation services and warehousing, with trucking accounting for 30.5 percent of that total. The transportation and warehousing labor force declined during the 2007 to 2009 recession and continued to fall through 2010 before rising above the 2007 level in 2014 (table 5-2).

Employment in transportation is not limited to transportation service providers and warehousing. Many work in businesses with transportation-related functions, such as motor vehicle parts dealers and vehicle and equipment manufacturing. Including these workers brings the total employed in transportation to 12.3 million, or 8.8 percent of the U.S. labor force in 2014 (table 5-2).

Some workers are employed in nontransportation-related industries but hold transportation-related occupations. Truck drivers, for instance, may be employed by grocery chains that operate their own truck fleets. In 2014 there were 2.4 million people employed as truck drivers in the United States. More persons were employed as truck drivers than in any other transportation-related occupation (table 5-3).

The range of annual wage levels for different transportation and transportation-related occupations is wide. For example, in 2014 air traffic controllers, airline pilots, and aerospace engineers had an annual median wage of more than $100,000; while the largest transportation- related occupation, heavy and tractor-trailer truck drivers, had an annual median wage of $39,520. The highest wage occupations employ relatively few workers while the lower wage occupations employ millions of workers (figure 5-6).

The size of the transportation workforce depends on the demand for transportation and on firms’ utilization of the workforce. Technological improvements, more efficient utilization of employed persons, and other factors enable firms to produce transportation services with fewer employees.

Labor productivity measures the production of goods and services per hour of labor. From 2000 to 2014, air transportation’s labor productivity rose the most among those transportation modes that collect labor productivity data, increasing by 93 percent. Labor productivity for rail increased by about 32 percent during the same period. Smaller increases occurred in freight trucking (20 percent) and the U.S. Postal Service (2 percent) [USDOL BLS Industry Productivity 2015] (figure 5-7). Increases in labor productivity are the result of multiple factors, including a more efficient mix of labor and capital through technology growth, reductions in the workforce or wages following a recession, and changes in regulations among other potential market forces impacting the alignment between labor and output.

The impact of productivity on transportation companies can be seen through changes in revenue per ton-mile, which is the output of freight transportation modes, and revenue per passenger-mile, which is the output of passenger transportation modes, over time. The increase in labor productivity from 2000 to 2013 corresponds with an increase in revenue per unit of output from 2000 to 2013, exceeding the rate of inflation across air (passenger and freight) and rail (passenger and freight)— the modes for which revenue per unit of output data are available. The only mode not showing an increase in revenue per unit of output between 2000 and 2013 is domestic passenger air travel, which fell after the 9/11 terrorists attacks and has not yet fully recovered, and general freight truck transportation, which grew marginally less than the rate of inflation between 2000 and 2007 (the latest year for which data are available) (figure 5-8).

Transportation Expenditures

Personal Consumption and Household Expenditures

Personal consumption expenditure data and household expenditure survey data provide two ways of looking at spending on transportation. Personal consumption expenditures measure transportation consumption – what households spend, in aggregate, on transportation (e.g., expenditures on vehicles, fuel, etc.) and what federal, state, and local governments and other organizations spend on transportation on behalf of households (e.g., transportation subsidies that benefit households). Household expenditure data, on the other hand, capture only the purchases that households make themselves and show the average amount spent by a household.

Personal consumption data provide a picture of all goods and services purchased in the economy by households and by organizations on behalf of households (e.g., employer paid parking and transportation subsidies and health insurance and medical care financed by government programs) [USDOC BEA 2014]. In 2014 expenditures on transportation by U.S. residents were roughly $1,231 billion. This translates to almost 10.4 percent of all personal consumption expenditures (figure 5-9).

Household expenditure survey data show that households spent an average of $9,073 per year on transportation in 2014—roughly 17.0 percent of all expenditures. Average household expenditure is dollars directly paid by households and shows transportation as a larger percent compared to the personal consumption expenditure measure. Personal consumption expenditure account’s inclusion of health care payments—a payment largely made on behalf of households—results in health care becoming a significantly larger expenditure compared to transportation (figure 5-10).

The majority of household expenditures on transportation went to the purchase and upkeep of vehicles, including the cost of gasoline, according to both personal consumption expenditure data and household expenditure survey data.

Spending on transportation changes as income rises. Households in the highest income quintile spend on average 4.7 times as much on transportation annually ($16,788) as households in the lowest income quintile ($3,555). The difference in transportation spending results, in part, from a difference in the number of vehicles and earners per household. The average number of household vehicles rises with income (table 5-4).

Household expenditures on transportation rise by income quintile, but households across income quintiles spend a nearly equal percent of their budget on transportation (table 5-4).

Public and Private Sector Revenue and Expenditures

Expenditures

Federal, state, and local governments spent approximately 5.1 percent ($319.8 billion) of their expenditures on transportation in 20121 [USDOT BTS 2014b]. Federal, state, and local governments spent $5.4 billion more in 2012 than 2011 but spent the same percent of their expenditures on transportation in both years. On a per capita basis, government spending on transportation averaged about $1,000 per year [USDOT BTS 2014b]. The expenditures covered, among other things, the monies needed to build, operate, and maintain publically owned transportation facilities and implement public policy in areas such as safety and security.

In 2012 state and local governments spent 88 percent of the $319.8 billion (including Federal grant monies) in government transportation spending (table 5-5). Government transportation expenditures increased (without adjusting for inflation) by 71.6 percent between 2000 and 2012. Nearly two-thirds of government expenditures went to highways, followed by transit (17.2 percent), air (13.1 percent), and water (4.1 percent) [USDOT BTS 2014b].

The public sector is the major funding source for transportation infrastructure construction, especially for streets and highways. In 2014 the value of government-funded (public) construction underway was about $113.7 billion and accounted for 90 percent of spending on transportation infrastructure construction [USDOC CENSUS 2014]. Approximately three-quarters of government- funded investment was for highways; the remainder supported the construction of transportation facilities and infrastructure such as airport terminals and runways, transit facilities, water transportation facilities, and pedestrian and bicycling infrastructure (figure 5-11). Investment has been growing since 2012. These increases follow a decline in 2011 as the investment associated with the American Recovery and Reinvestment Act (Pub. L. 111–5) came to an end.

Private sector spending also has grown since declining in 2011. In 2014 the value put in place by private construction of transportation facilities and infrastructure was $11.9 billion [USDOC CENSUS 2014]. Together, government-funded (public) and private investment in transportation construction totaled $125.7 billion in 2014 (figure 5-11).

Revenue

Government transportation revenue comes from user taxes and fees, such as gasoline taxes and tolls, air ticket taxes and fees, and general revenues. In 2012² government transportation revenues from all sources totaled $180.2 billion (current dollars) (table 5-6). State and local governments collected 69.2 percent of all transportation-related revenue, while the Federal Government collected the remaining 30.8 percent. The highway sector generated the greatest revenues (mainly from gas taxes), accounting for $125.0 billion (69.4 percent) of all revenue, followed by air with $31.1 billion (17.3 percent) mainly from air ticket taxes and fees (table 5-6).

Total transportation revenues fell short of government transportation expenditures in 2012. In 2012 transportation revenues covered 56.3 percent of expenditures. The gap between transportation expenditures and revenues has declined since 2009, when revenues covered 51.0 percent of expenditures [USDOT BTS 2014b]. When revenues do not cover expenditures, general tax receipts (e.g., from sales and property taxes), trust fund balances, and borrowing are needed to cover the shortages.

Costs of Transportation

The movement of goods and people requires the use of resources—labor, equipment, fuel, and infrastructure. The use of these resources is the cost of transportation. Producers and users of transportation services pay for the resources. Users of transportation services include both businesses and households. Businesses pay for transportation to acquire inputs for the goods they make and to deliver final products to consumers. Households purchase resources, such as motor vehicles and motor vehicle fuel, for travel by automobile.

Costs Faced by Producers of Transportation Services

The major inputs to produce transportation goods and services include transportation equipment, fuel, labor, and other materials and supplies, as well as the depreciation of items like airplanes, trucks, railroad locomotives and freight cars, trucking terminals, railroad track, and other infrastructure. The price of these inputs impacts the price of freight and passenger transportation.

The price of transportation equipment has steadily increased since 2004, according to the Bureau of Labor Statistics’ Producer Price Index (PPI). Transportation equipment PPI is an index that represents the average change in the price producers’ receive for the goods and services they sell. The PPI reflects changes in transportation equipment prices faced by transportation service providers³. The average change in prices transportation service providers face when purchasing railroad rolling stock, aircraft, and ship and boat manufacturing, has grown more quickly than for all transportation equipment manufacturing (figure 5-12). Price increases may impact the profitability and decision making of the rail, air, and water transportation sector, lead to greater transportation costs for consumers using one of these modes, and influence prices in other sectors that rely on rail, air, and water transportation, such as wholesale, retail, and warehousing and storage. Similar impacts may be seen among transportation modes and sectors using automobiles. The prices faced by transportation service providers in purchasing automobiles rose in 2012, having remained steady for several years (figure 5-12).

Transportation fuel prices also impact the price of freight and passenger transportation and the demand for transportation. An increase in fuel prices, for instance, may reduce the demand for transportation modes reliant on that fuel and shift demand to transportation modes that use less costly fuels. Average annual fuel prices for all classes of transportation fuels peaked in 2012 and have since declined (figure 5-13). In 2012 the average annual fuel price for gasoline was $3.70, while the average annual fuel price for diesel fuel was $3.20. In September 2015 the average fuel price for gasoline (all types) was $2.75, while the average fuel price for diesel was $2.02 [USDOE EIA 2015].

Costs Faced by Businesses

The prices that transportation companies charge for transportation impact the freight shippers’ and travelers’ transportation decisions (see box 2-A). The relative level and changes to transportation prices faced by businesses is captured in the PPI for transportation services.

The rail transportation PPI grew more rapidly (64.5 percent) than the PPI for any other transportation mode between 2004 and 2014. The relative prices for air and water transportation services also increased during this time period, with prices for trucking services growing at a slightly slower rate (30.8 percent) than air (42.0 percent) and water (36.7 percent) (figure 5-14). Across all modes, transportation prices faced by businesses halted their increasing trend in 2008, at the end of a period of economic growth and rising fuel prices. The cost of transportation services declined during the 2008–2009 economic recession but has since climbed steadily (figure 5-14).

Costs Faced by Households

The costs households face for transportation services (e.g., air travel) and transportation inputs (e.g., motor vehicle fuel) impact household spending decisions. Most passenger travel in the United States is by personal motor vehicle. The cost of owning and operating personal motor vehicles impacts household travel behavior—what mode households choose, how often they travel, and how far.

The cost of owning and operating a personal motor vehicle includes insurance, license, registration, taxes, depreciation, and finance charges (ownership costs) as well as gas, tires, and maintenance (operating costs). Fuel accounts for less than a quarter of the total annual cost of owning and operating a personal motor vehicle on a cents-per-mile basis. In 1990 fuel accounted for 16.4 percent of the total cost of owning and operating a personal motor vehicle; in 2013 fuel accounted for 22 percent of these costs (figure 5-15).

Household transportation costs grew by 62.6 percent from 2000 to 2014, according to the Consumer Price Index for Urban Consumers (CPI-U). Transportation costs fell in 2009 and marginally in 2014. [USDOL BLS CPI-U 2015].

International Trade: An Economic Impact of Transportation

Transportation and Trade

Transportation enables the export of American goods and services and connects U.S. businesses to sources of raw materials. An efficient and reliable domestic transportation system with good connection to the international transportation system supports the United States in the global market place.

In the global marketplace, the transportation industry moves goods and provides services. Looking at only goods, the value of goods traded (including exports and imports) was $3.5 trillion in 2014 (current dollars). After accounting for inflation, the real value of goods traded grew from 2000 to 2014, despite a slight decline during the 2008–2009 recession. Exports in goods drove growth in 2011 through 2014, but annual imports in goods continue to exceed exports. In 2014 the goods deficit (exports minus imports) was $771 billion in current dollars [USDOC BEA NIPA 2015].

Of the goods traded in 2014, 16.7 percent were related directly to transportation.⁴ Petroleum products, including fuel oil, comprised an additional 12.8 percent of all goods traded in 2014 [USDOC BEA ITA 2015].

The transportation industry also provides transportation services, such as sea and air transport, in the global marketplace. The value of transportation services traded (exports and imports) was $184.3 million in 2014 (in current dollars). The U.S. imports more transportation services (e.g., revenue from inbound cargo of U.S. ocean carriers) than it exports (e.g., revenue from outbound cargo of U.S. ocean carriers). However, since 2007 exports have comprised an increased share of all transportation services traded. In 2014 the value of transportation services exported ($90.0 billion) was 95.6 percent of the value of transportation services imported ($94.2 billion) [USDOC BEA International Services 2015].

References

National Bureau of Economic Research (NBER). U.S. Business Cycle Expansions and Contractions. Available at http://www.nber.org/ as of April 2015.

U.S. Department of Commerce (USDOC), Bureau of Economic Analysis (BEA).

—2015. International Services. Table 3.1 U.S. Trade in Services by Type of Service. Interactive, Annual. Available at http://www.bea.gov/itable/ as of April 2015.

—2015. International Transactions (ITA). Table 2.1 U.S. International Trade in Goods. Interactive, Annual. Available at http://www.bea.gov/itable/ as of April 2015.

—2015. National Income and Product Accounts (NIPA). Table 1.1.5 Gross Domestic Product; Table 1.1.6 Real Gross Domestic Product, Chained Dollars. Interactive, Annual. Available at http://www.bea.gov/itable/ as of April 2015.

—NIPA Handbook: Concepts and Methods of the U.S. National Income and Product Accounts, Chapter 5: Personal Consumption Expenditures, November 2014. Available at http://www.bea.gov/methodologies/ as of April 2015.

U.S. Department of Commerce (USDOC), Census Bureau (CENSUS). Value of Construction Put in Place, Not Seasonally Adjusted (2002-2014), available at http://www.census.gov/ as of April 2015.

U.S. Department of Energy (USDOE), Energy Information Administration (EIA). Monthly Energy Review (March 2015). Table 9.4 Retail Motor Gasoline and On-Highway Diesel Fuel Prices; Table 9.7 Refiner Prices of Petroleum Products to End Users. Interactive, Annual. Available at http://www.eia.gov/ as of April 2015.

U.S. Department of Labor (USDOL), Bureau of Labor Statistics (BLS):

—Consumer Price Index (CPI-U). All urban consumers, U.S. city average, current series (series ID CUUS0000SAT). CPI Databases. 2015. Available at http://www.bls.gov/cpi/ as of April 2015.

—Industry Productivity. Labor Productivity and Costs Databases. 2015. Available at http://www.bls.gov/lpc/ as of November 2015.

—Producer Price Index (PPI). PPI Databases.

2015. Available at http://www.bls.gov/ppi/ as of April 2015.

U.S. Department of Transportation (USDOT), Bureau of Transportation Statistics (BTS):

—2014b. Government Transportation Financial Statistics 2014. Available at http://www.bts.gov as of April 2015.

—National Transportation Statistics (NTS). Available at http://www.bts.gov/ as of April 2015

—2015. Transportation Services Index. Available at http://www.bts.gov as of April 2015.

—2014a. Transportation Services Index and the Economy Revisited, December 2014. Available at http://www.bts.gov as of April 2015.

—2015. Transportation Satellite Accounts (TSA). Available at http://www.bts.gov as of April 2015.

 

¹ 2012 is the latest year for which comprehensive data have been published.

² 2012 is the latest year for which data are available.

³ The actual prices transportation service providers pay may differ from the prices sellers receive for the transportation equipment they sell because of government subsidies, sales and excise taxes, and distribution costs.

⁴ Includes automotive vehicles, parts, and engines; civilian aircraft, engines, and parts; and other transportation equipment.