Last week, we wrote about how a bus company in the Philippines had to discontinue its short-lived honesty payment system after over 30% of passengers had failed to pay fares during the trial period. Green Frog, already a progressive bus company with its hybrid buses and smart card fare collection, determined that an honesty system for fare collection was a bit too progressive for them to handle—and pulled its plug. Some critics were quick to point out that this was a sure signal that we Filipinos were—to be frank—too morally bankrupt for this kind of system to ever succeed in this country, and that we should continue praying for a god of discipline to magically transform our nation. It also led to a lot of unfair judgment passed on public-transit riders, who are often deemed here and abroad to be of lower moral character than people who drive their own cars.
However, this news got me thinking: How should we approach honesty systems for fares? So I did some research on how other cities deal with the issue.
In New York City, new data put out by the city’s Metropolitan Transportation Authority show that the rate of fare evasion by bus passengers is about one in five passengers. This is obviously lower than—but not that much far off from—the figure observed by Green Frog. Another famous example is Berlin, which is one of the world’s major cities where transit fare payment is not automatically validated upon boarding. You buy a ticket anywhere, board either the bus or the train without showing the driver your ticket or scanning it through a turnstile.
It is important to note that Berlin’s system is not an honesty system per se. There is spot-check enforcement by roving officers. If an officer asks you to produce a ticket and you cannot, you are fined €60 on the spot—which may be reduced to €7 if you can prove you own a ticket and just don’t have it at the time. At the fine level of €60, fare-dodging is only worth it if you can ride transit around 20 times before being caught, but still around 18% of Berliners admit to fare-dodging “from time to time,” which is close to New York’s figure and which looks like almost a rule of thumb for these “validation-light” systems.
So, if fare evasion is such a problem around the world, why do some of the biggest cities seemingly allow it to happen? If you claim to lose one-fifth to one-third of your revenue, what advantages are there to make a public transit system validation-free or validation-light? At the end of the day, it’s really all about math.
The most important thing to understand is that ticket validation comes at a cost. It costs money to place ticket gates at stations or on vehicles: It costs money to buy ticket turnstiles, it costs money to buy the land that they occupy, and it costs money to operate and maintain them. It also costs time to validate fare payments. There’s time passengers have to spend in line behind ticket gates while other people are swiping or scanning their tickets. It also costs time when a bus has to wait longer for everyone to validate their tickets before getting onboard. This validation step can add more than 30 seconds every time the bus has to stop—which adds up over the course of the day. You can avoid this by having onboard conductors on every vehicle as we do in the Philippines, but that costs money, too.
Think of the basic cost-benefit analysis as something like this: You have to weigh the anticipated losses from fare evasion—let’s say around 20% or 30% of fare revenue—against the costs of heavier validation and enforcement, both in money and economic costs like time. I would not be surprised if this had led some cities to conclude that lighter validation could save money even in the face of some fare evasion, especially in cities that face higher costs.
It seems almost too morally flippant to say that a certain level of fare evasion can be tolerated, as if there were an acceptable level of dishonesty in transit systems. But moral formation is the job of families and schools. Transit agencies should be concerned with designing systems that work well and deliver good value for public money. If looser validation procedures mean that everyone will get a better system, why not think about that?
The cash-based system in the Philippines’ public-utility vehicle industry means that it’s easy for operators to evade taxes
Another difference in cities like NYC and Berlin is that their transit systems are run by monopolies that are big enough to absorb losses from fare evasion, so they survive to enjoy the efficiency gains of light validation. Operators in the Philippines are too small and fragmented to absorb losses at those high rates. But ask anyone in any cash-based industry (especially public-utility vehicles) about “leakage” (employee pilferage of cash collections). These losses are normal and almost tolerated, but why? One reason is that the cash-based system in the PUV industry means that it’s easy for operators to evade taxes. This secret is quite open, and is one reason so many operators resist installing electronic fare collection systems. The losses from cash pilferage don’t exceed what they “save” from tax evasion. How about we get an honesty system for that?
Of course, we like it when people are honest and when they behave well. And in my opinion, the principles of an honesty or validation-light system have potential and should be studied. But before we get to talking about that, we should be talking about more basic ways to improve the system. How about conclusively ending the quota and boundary systems? Or transitioning our transport planning away from car-dependent projects like unnecessary bridges? Or eliminating hidden subsidies for cars, such as parking? Just because an honesty system stumbles doesn’t mean we should give up on it. But it does mean that we have quite a bit of work to do.