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Honored Citizen and youth fares: Are they fair?

A discussion of honored citizen and youth fares, and potential alternatives.
I was going to post this a few days ago until all of this week’s news. But while the discussion after the announcement of TriMet’s budget cutting has focused on service changes, the other component of what’s going on–fares–is still worth considering. The recent announcement, and the tradeoffs between equity and ridership/revenue, leads to an interesting discussion. To what extent should reduced fares for “Honored Citizens”, as TriMet calls them, be provided? A similar question should be asked about youth fares as well. Do these serve a socially beneficial purpose? Are they little more than age discrimination? Assuming there is a useful purpose served, would it be served better by some other, more direct policy?

The nitty-gritty on fare categories

Before we get into the idealized discussion of the whys and wherefores of age-based fares, one important detail must be mentioned up front. The Federal Transit Administration requires that federally-funded transit systems, such as TriMet, charge senior citizens no more than 50% of the full fare during off-peak hours. (I’m not sure if the FTA defines these hours, or gives agencies some leeway to tailor the definition to their local circumstances). During peak hours, the requirement is not in effect. TriMet, however, does not levy peak-hour fares–the same fare is charged all day, for all riders. Also, the discount given to seniors is greater than 50%–an all-zone ticket for adults is $2.40, but for seniors is $1, a discount of 58%. The discount on passes is even greater–a monthly pass would cost me $92 but my mother could have one for $26, less than 30% of the price. Honored citizens living downtown can get a limited bus pass for $10/month. (TriMet’s fare schedule is here).

Seniors, along with the disabled, are grouped into a category TriMet calls Honored Citizens. This category includes the following:

  • Senior citizens 65 and older, who require proof of age when riding.
  • Medicare recipients, who are required to carry a Medicare ID. If one is receiving Medicare prior to 65, it generally means either that the individual is near 65 and has opted for early retirement, or is disabled.
  • Other disabled persons who meet specific requirements, and who are required to carry a TriMet-issued ID stating such.

This article is only concerned with regular transit service; LIFT paratransit is another issue altogether.

TriMet also provides youth fares, for passengers 7-17, and persons 18 or older pursuing a high school diploma or GED. College students are not covered by this program (some colleges provide passes for their student body; however this is a separate program and not discussed here). Children 6 and under ride free with a fare-paying adult. Youth fares are also a substantial discount over adult fares, though not as much (presently $1.50 for a all-zone single-ride ticket, and $27 for a monthly all-zone pass).

TriMet’s stated rationale for the discounts it provides may be found here and here.

Rationale for age-based categories

The senior discount is a longstanding fixture of American business and political culture. Many businesses provide discounts to senior citizens–restaurants, movie theaters, hotels, and transportation companies both public and private. And as noted above, public transit agencies in the US are required to provide them to passengers. In the context of transit, several rationales are frequently offered for this:

  • Seniors live on a fixed income, generally from Social Security or private retirement plans, which may (SS) or may not (most pensions) be indexed to inflation. Most are not in the workforce (and many of those who are still working are doing so due to poverty). Senior citizens also frequently have higher medical expenses associated with geriatric and end-of-life care, though Medicare benefits offset this.
  • Senior citizens are also more likely to have mobility issues than are younger age cohorts, simply due to the biological pathologies of old age.
  • Senior citizens are more likely to be transit-dependent, particularly when driving is no longer an option due to medical issues.
  • Senior citizens, by virtue of being less likely to be in the workforce, are more likely to use transit during off-peak hours, and thus are desirable customers to have.
  • Many in US culture associate advancing age with virtue, and believe that mere survivorship past the working years ought to merit reward. Certain generations are venerated for the hardships their members collectively endured during their youth, and some consider making it to old age to be evidence of wisdom and/or a cleaner lifestyle, assuming that those who engage in chronic pathological behavior are more likely to perish before reaching retirement. Senior discounts are widely viewed as an entitlement–even by wealthy seniors in good health–and the designation of “Honored Citizen” does nothing to counteract that meme. (Could you imagine TriMet–or any government agency–referring to a benefits program targeted towards the poor in such glowing terms? I can’t either; poverty is routinely stigmatized in our political culture, but advancing age is praised).

Similar arguments apply to youth fares as well. I covered youth fares (and other issues related to families on transit in this Human Transit guest post).

  • Youth traveling alone are likely to not have much money, and be dependent on parents for funds.
  • Those who travel with children are more than likely to be carless–having kids along often tips the balance from bus/train to car for many trips–if nothing else, bringing along kids in the minivan makes you (legally) a carpool. Also, in many cases the only reason children are brought along on errands is that nobody may be available to watch them at home.
  • Families with small children (particularly those still using strollers) also frequently have mobility issues.
  • Families with children also are often engaged in off-peak travel. (Students using transit to get to and from school generally are peak riders on the way in, and off-peak riders on the way home, unless activities delays their departure from school)

Price discrimination, generally

Age-based fares (for identical trips on transit) are examples of price discrimination, which occurs when the same supplier sells identical goods and services to different customers at different prices. Some sorts of price discrimination are commonplace and generally considered unobjectionable, such as volume discounts (TriMet’s passes can be considered an example of this). Other types may be viewed with skepticism, or may be outright illegal–certainly if you’re the buyer being asked to pay the higher price, you might want to know why. Price discrimination doesn’t include practices like distance-based pricing (different prices are charged for different trips) or off-peak discounts (trips made at different times are generally not substitutable), though sometimes these practices may have a discriminatory effect, and sometimes this is intentional. (Airlines’ common practice of offering lower prices for round-trips involving a Saturday stay are intended to distinguish between tourists and business travelers, and charge a higher price to the latter).

One reason that price discrimination occurs is to permit suppliers to capture as much of the surplus value as possible. When a supplier charges a flat high price for something, volume is lower, as those market participants who are unwilling or unable to pay the high price don’t buy. When a supplier charges a flat low price, then he/she wins the business of those who won’t pay the higher price–but loses money from those customers who were willing to pay the higher price, but instead get a better deal. If the supplier can figure out which customers would be willing to pay a high price and charge those the high price, but make the same product/service available to the more price-sensitive customers at a lower price, the supplier can get more revenue than s/he would from a single set price.

Another reason for price discrimination is equity concerns. The reasons for age discrimination given above are equity-based–TriMet doesn’t give seniors and children lower prices because it thinks it will lose their business otherwise; it does so for perceived social reasons. (And because of the FTA mandate).

One problem, however, is this: Maximizing revenue and maximizing equity frequently call for opposite pricing strategies. A transit agency’s customers are often divided into “choice” and “captive” riders. (The latter term is problematic for many reasons, some of which are revealed by this discussion, but it suffices to illustrate the point). The latter group has a low elasticity of demand (they are stuck with transit, more or less) while the former has a high elasticity of demand (they can easily switch should transit no longer provide sufficient value). The choice riders are generally wealthier than the captive ones are. Were a transit agency to try and maximize social equity by assisting the poor, it would find a way to charge the poor less. On the other hand, were they to try and maximize revenue, the ideal strategy would be to charge the poor more–they’re the dependent riders, after all, and will have less ability to contest the fare increase by switching to another mode.

(This is different than the strategy employed by many retailers, who try to find ways to charge the wealthy more for the same or similar products and services. Gasoline, for example, is generally more expensive in wealthy neighborhoods than in poor ones, despite being the same in both locations).

This is an important point to keep in mind, both for this discussion, and in the broader context of TriMet’s budget woes. When an agency is strapped for cash, it becomes increasingly difficult to maintain a pro-equity pricing and service strategy, and soaking the poor becomes a tempting option.

Should we focus on age?

For the purpose of this section, we’ll focus on senior fares. A similar analysis can be applied to youth fares, but that is left as an exercise for the reader. (Feel free to discuss in the comments!)

Consider the five justifications for senior discounts given above. Only one of them–the desire to venerate senior citizens as a matter of social custom–is directly dependent on the age of the passenger. The other reasons–poverty, disability/mobility issues, off-peak travel, and lack of availability of cars, correlate with age, often strongly, but are not dependent on it. There are plenty of young people who are poor, disabled, have no access to an automobile, or more likely to travel off-peak. So the question is obvious: Why not replace the age-based discounts with discounts based on these other criteria?

Disability and mobility issues are, in fact, covered by TriMet. As mentioned above, Honored Citizen fares extend to the disabled, in two broad categories. TriMet also provides services to the mobility-impaired via LIFT (at far greater financial cost to the agency). TriMet assists mobility-impaired passengers in other ways besides the farebox as well. The agency’s operations are (as required by law) compliant with the Americans with Disabilities Act. All vehicles are designed to accommodate wheelchairs and other mobility devices. And many routes feature short spacing between stops, in part because the mobility-impaired are adversely affected by longer walks to a transit stop.

TriMet’s does not presently provide benefits to the poor at the farebox–there is no means-testing of fares. Poverty advocates such as OPAL are upset at the loss of return privileges on a single-ride ticket, on the grounds that it will impact the poor adversely. On the other hand, many of TriMet’s routes are social-service routes–routes with consistently low ridership that are expensive to operate, and which are arguably inessential for a comprehensive regional network–operated to provide lifeline service to low-income riders and communities along the line, and with no expectation of good financial performance. (These lines are often the most likely to be cut during a budget crisis). There are, however, a few roadblocks to reduced fares for the poor: For one thing, the poor often don’t have terribly effective advocacy in the corridors of power. Groups like OPAL do a fine job, but other constituencies often bring far more political muscle to the table, muscle that the poor can’t afford to purchase. For another, being perceived as a welfare agency can be damaging to a transit authority’s standing with the broader public–the poor aren’t popular in many quarters, and agencies which carry out a primarily social service mission risk losing popular support and funding.

The third criteria is transit dependence. Defining transit-dependence, and coming up with ways it could be proven to a TriMet ticket agent or fare inspector, is potentially problematic. Some examples might include discounts for those who can prove that they are not licensed to drive and/or do not own an automobile; Giving explicit discounts for this might be difficult, as proving transit dependence isn’t easy. One might be able to supply a DMV ID card or suspension/revocation order to prove one isn’t able to drive easily, but other situations (such as low-car households) may be more difficult to document. I’m not aware of any agency that offers discounts of this sort; and a quick Google search doesn’t reveal anything.

The final alternative–peak-hour surchages (or alternately, off-peak discounts) are something which has been talked about recently. Currently, TriMet has no plans to implement such a thing, but the recent white paper on electronic fare collection mentioned this as a possibility. In addition to having a load-balancing impact, charging a lower fare for off-peak travel also can promote economic equity, as it gives cash-strapped riders an option for journeys which are flexible in time, such as shopping trips or other errands. An alternative to different fares might be different expiration times. For example, TriMet could limit tickets to two hours of one-way travel during rush hour (opening to 9, and 4-7, say), whereas tickets purchased outside the window might be good for longer and/or include round-trip privileges.

One other thing

One other thing to consider: Senior citizens have long enjoyed quite a bit of political power, compared to other age cohorts; this is especially true with the boomers entering into retirement, due to simple demographics. Senior citizens are generally regarded as more reliable voters than are younger groups; there are age-specific lobbies (such as the AARP) which both provide advice to seniors on issues, and lobby the government on their behalf. There’s a good reason that many of the current plans to “reform” Social Security which are being bandied around Washington DC tend to delay the effects of austerity until the next generation (us Xers) reach retirement age: doing otherwise would be political suicide. Any attempt to substantially reform the current pricing structure would probably produce some uncomfortable pushback, even if the net effect for most people is nil.

Thus, a few questions to consider:

  • Do age-based fares (whether for the old or for the young) serve a legitimate and useful purpose?
  • Would other pricing or service strategies be better?
  • What balance between equity (whether based on economic factors, or other parameters) and financial performance (maximizing farebox return) should be struck?