Getting the Poor to Work
by Robert Poole, Jr., Director of Transportation Studies, Reason Foundation
It’s not a new debate, but I’ve recently read several more contributions to it, so I thought I’d share some thoughts with you. The question is this: If we want to improve the job prospects of low-income people, by enabling them to reach more potential jobs, is it more effective to spend resources on expanded transit service or on helping them obtain a used car?
Several years ago I came across papers by UCLA researchers, one by Paul Ong and another by Evy Blumenberg (both in 2002), that looked at how employment prospects of welfare recipients could be improved via programs to help them obtain cars. I’d overlooked, until recently, a slightly earlier paper by Steven Raphael of UC Berkeley and Michael Stoll of UCLA that I just read and found fascinating. Using 1990 census data, they found “strong evidence that having access to a car is particularly important for black and Latino workers,” because low-income members of those groups tend to live in segregated areas that are not exactly full of job opportunities. There is good evidence that “car owners search greater geographic areas and ultimately travel greater distances to work than do searchers using public transit or alternative means of transportation.” One striking finding from their data analysis is that “raising minority car-ownership rates to the white car ownership rate would eliminate 45 percent of the black-white employment rate differential.” The paper is titled “Can Boosting Minority Car-Ownership Rates Narrow Inter-Racial Employment Gaps?” (I could not find it online, but it was published in the Brookings-Wharton Papers on Urban Affairs, 2001.)
Welfare rules are a problem for low-income people acquiring a car, since some programs will cut off assistance if the recipient owns a car worth more than $4,650. But for the working poor, that is usually not a problem. They make up the clientele of an impressive private-sector program called Ways to Work (www.waystowork.com). For more than 20 years it has been helping low-income people get affordable auto loans, in partnership with local banks. Ways to Work, now headquartered in Milwaukee, was launched in Minneapolis in 1984 with backing from the McKnight Foundation. Ways to Work guarantees the loans and helps participating banks work out programs like the one profiled by a Washington Post article (Jan. 11, 2007) run by Virginia Commerce Bank. It makes auto loans of up to $4,000, with interest rates of no more than 8%, to enable people to buy used cars. Ways to Work cites a study by the OMG Center for Collaborative Learning in Philadelphia, which found that participants in the program increased their take-home pay by an average of 41%
Finally, a recent issue of Transportation Research Record (Issue No. 1986) included a study by Chang Yi of the University of Texas at Austin, “Impact of Public Transit on Employment Status.” It was limited to Houston where, the author admits, “It is difficult to obtain enough samples with no access to vehicles.” While the author finds both auto ownership and transit to be important for employment-related mobility, he also states that “household car ownership and the possession of a driver’s license may be more effective to help unemployed individuals find meaningful job opportunities than the provision of convenient access to public transit at the neighborhood level.”