Path: bloom-picayune.mit.edu!snorkelwacker.mit.edu!americast.com!americast.com!americast-post Newsgroups: americast.forbes From: americast-post@AmeriCast.Com Organization: American Cybercasting Approved: americast-post@AmeriCast.com Subject: Subway robbery Date: Fri, 6 Nov 92 11:08:08 EST Message-ID: "Copyright 1992 Forbes, Inc. Any further reproduction or redistribution without the express written permission of Forbes and ACC is prohibited." Subway robbery If you really believe that increased government spending solves problems, read this story. By Jerry Flint TIME: morning rush hour. Scene: the underground platform of the West 103rd Street station of the New York subway system's Broadway local. It's gritty and hot, but the riders are accustomed to that. What has them in a foul mood today is that no train has appeared in the past 20 minutes. Their already taut nerves pushed to the anger point, a good part of the mob marches upstairs and shouts at the token seller, demanding passes so they can walk seven blocks down to the express station at 96th Street. Either because she is terminally stu- pid or because she has total contempt for her customers, the token seller sits calmly in her bulletproof Plexiglas booth, seeing nothing, refusing to act. Finally, a subway cop takes the passes and hands them out. But the ill will lingers. It's not the delays, New York's beleaguered subway users ex- pect delays, it's the clerk's deliberate not-my-responsibility attitude. Is it any wonder that the voters become skeptical these days when politicians promise them heaven if only they will pay a bit more in taxes? New York City's taxpayers are already taxed to the ears to subsidize their filthy subways--with upstate New Yorkers and even the federal taxpayer also kicking in. And fat little they get out of it. New York City's transit agency manages the subway and bus transit systems and runs an operating budget of $2.7 billion a year, excluding capi- tal spending. Of that, about 20% goes for power, maintenance materials, li- ability and things like that. The other 80%, or $2.2 billion, is wages, salaries and fringes. Total employment is around 44,000 (that excludes 5,000 subway police), handling 1.5 billion passenger trips a year in what should be a highly automated business. Twenty-five years ago fewer workers, just 40,000, handled more riders, 2.1 billion passenger trips. The system's operating income, mostly from fares, at $1.25 a ride currently, is about $1.7 billion, or $1 billion short of the operating costs. New York State and local subsidies fund about 90% of that shortfall. Fed- eral subsidies make up the rest. Are taxpayers, from the school- teacher in Montana to a farmer out- side Syracuse, subsidizing the New York City subway rider? Not really. If it were run like a real business, the subway system could get by with may- be two-thirds of those 44,000 em- ployees. So the taxpayers aren't really subsidizing the subway. They are pay- ing the salaries and generous fringe benefits for that snotty West 103rd Street transit clerk and thousands like her, who owe their livelihood not to the fact that they are needed but to the fact that they belong to a powerful union that holds the world's greatest city to ransom. Let's look at the numbers. A train operator makes $50,000 a year. A conductor, who is the second guy on the train, the one who leans out to see if the doors are clear, makes $40,000. A token seller makes $33,000, a mop-and-broom guy or gal makes $31,000. Additional labor costs--Social Security, pension costs, medical insurance--run $7,000 to $10,000 per worker. These are the figures given by the system, by the way; actual costs are probably some- what higher. That token clerk? She gets $33,000 for breaking a $20 bill. This isn't rocket scientist work. A bank teller handles much more complicated transactions and gets $18,000 a year with little job security. Yet these $18,000-a-year tellers and others like them must ride the subways to work; so they are taxed to pay people who earn nearly double what they do and do not work as hard. There are 3,837 of these token sellers, pulling down an average $40,690 a head (pay, plus those other costs), for a total of $156 million. Any modern, automatic system selling tickets or electronic debit fare cards out of a machine--and they've been available for years in subway systems from San Francisco to Washington to Paris to Tokyo--would reduce the number of people needed, probably by half. You could easily cut $100 million off the wage bill by moderniz- ing the token selling system. Why doesn't New York's Transit Authority management offer large volumes of tokens at a discount to local merchants, who would retail them to riders along with newspapers and lottery tickets and thus cut the frustrating wait in line to buy tokens? Because until very recently, the union would not allow it. Over 35 years, from 1954 to 1989, New York's transit workers' pay went up 123%, after adjusting for inflation. In real terms, therefore, the average wage more than doubled. Mean- while, the average American worker's paycheck went up 14%, adjusted for inflation. Productivity? Measured in revenue miles per employee, the transit system workers' productivity went up 5%. That's not 5% a year, but 5% in toto over 35 years. Guess what happened? The system sank deep into the red, reaching ever deeper into the pockets of taxpayers in Arizona and Georgia as well as in New York City. Over those 35 years the subsidies grew from very little to $1 billion. A clear transfer of income from every American to a relative handful of workers. Says Dick? Netzer, professor of economics and public administration at New York Universi- ty and a student of the New York transit system: ''Most of the subsidies [from 1954 to 1989] went to wages.'' Well, why shouldn't subway work- ers make good money? It's not terri- bly pleasant work, and it costs plenty to exist in New York City. Wages aren't the only problem in the swollen labor costs. Productivity is also a problem. McKinsey & Co., the man- agement consulting firm, made a study two years ago and concluded that in comparison with other cities' transit systems, New York's big cost bloat was not in wages per se but in work rules and fringes. What are these fringes and work rules that caught the attention of McKinsey's researchers? Here are some of the more obvious ones: Swing pay. In transit you have a morning rush hour and an evening rush hour and much less demand in between. A practical way to handle peak loads would be a small core of full-time operating people and lots of part-timers. Other urban transit sys- tems have 10% to 15% part-timers, which holds down the pension, vaca- tion and other fringe costs, too. But New York's transport workers' unions have successfully fought the use of part-time workers; the New York transit system uses very few or none. Instead, a New York bus driver for example, is on call for 11 hours a day but actually works only 7 hours. But he or she is paid for 9 hours. Nine hours' pay for 7 hours' work. Most other transit systems don't pay for swing time. Vacation. After three years on the job, every city transportation worker gets four weeks' paid vacation. At a typical New York City bank, hardly a model of labor exploitation, a clerical worker must work 15 years to get four weeks off. Other cities give their tran- sit workers only two weeks off after four years. Sick pay. In New York, 12 paid sick days. If they get swing time, they are paid for nine hours--extra pay for a day they don't work. Night pay. In the other cities that McKinsey looked at, night pay ran between 4 cents and 10 cents an hour above the standard day rate. In New York City the shift premium came to $1.27 an hour more. Manning. All New York subway trains have two-member crews at all times; sometimes you may need two--at peak hours, or with curved stations. But some experts argue that single-manning is possible a good part of the time. The Washington, D.C. and San Francisco subway sys- tems already use such one-man crews. Some of the New York system's costs are tied to the 24-hour-a-day service, meaning it takes enormous costs--in labor and equipment--to move a few riders. McKinsey's re- searchers figured that the real cost of carrying a late-night rider in from the outer boroughs was $29.12. Is bad management partly to blame? One of the people who worked on that McKinsey study says this: ''Some of the best managers I ever met are in the [New York] sub- way system. The crap they have to put up with is enormous. The riders are always belligerent and think the worst. The press is always talking about overpaid managers, when in private business they could have earned more. And labor is always recalcitrant.'' But you can't blame labor, either. We all try to maximize our income by whatever means are at our disposal. The difference is that in transit sys- tems--and educational systems and other public services--wages and pol- icies aren't set by the market. They are set by politicians. The bottom line for politicians is not efficiency. It is votes. The board that runs the system, the Metropolitan Transportation Au- thority, is made up of 17 political appointees handpicked by local politi- cians and the governor. Try to close a station, and local community groups will raise hell. So will the union lead- ers, who (correctly) equate station closings with less demand for their workers. Try to increase revenues and make things easier for frequent riders by selling people tokens at discount (like 20 tokens for $20 rather than $1.25 each), to cut the lines, and liberals will object that this would only benefit the rich, because who else but the rich would have $20 in their pocket? And you wouldn't want to have zoned fares--whereby fares are proportional to distance traveled--because that would be hurting the ''geographically disadvantaged.'' David Gunn has run Washington, D.C.'s subway system since 1991. Before that, from 1984 to 1990, Gunn ran New York's Transit Au- thority. He did a remarkable job of rebuilding a transit system that was literally falling apart, ridding the sys- tem of graffiti and raising $8 billion for new cars, track and other sorely needed capital equipment to replace assets that had been run down over the years, as revenues were diverted into workers' generous paychecks and pension plans. FORBES asked Gunn: When airlines have troubles, they lower fares and work to improve themselves to get more money coming in; why can't the subways do that? Gunn replied: ''Air- lines can go bankrupt. That cleansing process doesn't occur here [in the subways]. Once you declare some- thing an 'essential service,' that op- tion [of bankruptcy] is gone.'' It's easy to become churlish about such situations, but fairness compels us to pay tribute to the New York subway system's harassed managers. They do what they can to improve things at the margin. A few good things are happening. More subway cops are in the stations and seem to be doing a better job. Subway maps are being installed on the platforms, where riders need them. There are plans to upgrade the system's public address systems, which now blast to- tally incomprehensible messages. An automatic fare system is being tested, and installation is to begin in 1993. In an attempt to be more respon- sive to its customers, the transit au- thority has recently appointed station managers and put their pictures and phone numbers on the walls of the stations. A FORBES reporter called his station manager to complain about the unresponsive clerk that morning at 103rd Street. The reporter ended up leaving his number with someone. A miracle happened. The station manager, Brian Kaufman, actually called back. He apologized, agreed the token seller was wrong, said he'd make sure instructions were clearer so it wouldn't happen again. The fact, however, is that there is little he can do to discipline the of- fender. She owes her job not to the customers or to the management but to her union and the politicians who bow and scrape to it. This is a story about New York, but it's also about most goods and ser- vices provided by the government, any government: They tend to be grossly overpriced and grossly ineffi- cient. Pumping money into educa- tion gave us better-paid teachers, not necessarily better education. Pump- ing money into the war on crime gave us better-paid cops, not safer streets. And pumping nearly $1 billion a year in subsidies into New York City's mass transit system has given New Yorkers better-paid transit workers, but not better transit. It's what happens when citizens look to the government to solve their problems instead of dealing with them through the marketplace.  "This information is the property of Forbes, Inc., ACC takes no responsibility for its content, or the actions of any individual or institution, predicated on the information herin. 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