Train disruptions and their impacts on the economy

Train disruptions and their impacts on the economy

by: Wong Wen Hao

2017 has not been a good year for SMRT. Besides multiple disruptions, engineers had to deal with flooding and a track signaling fault which resulted in a train collision.

More than three million trips are made on the MRT daily, and this figure is expected to rise, complementing Singapore’s population growth. Analysts foresee greater frequency of train disruptions in the near future as MRT’s system continues to deteriorate.

The importance of the MRT

Singapore’s MRT serves a bigger purpose – it does more than transport people from one place to another. Operations began in 1987 with the intention of attracting economic activities. In campaigning for the construction of the MRT in 1980s, the late Ong Teng Cheong, 5th President of Singapore, mentioned the MRT plays an important role in shaping the development of a city (1980).

He pointed out that MRT stations would act as magnets for commercial activities, thus freeing up land elsewhere for other purposes, such as recreation.

Additionally, the MRT also solves the problem of road congestion. In an interview with TODAY, Dr Theseira, transport economist at the Singapore University of Social Sciences highlighted that hundreds of cars would be required to cater for every passenger in a single train. [1] Research suggests road congestion has been linked to losses in production due to punctuality of workers and goods being affected. Furthermore, a report by transport analytics company INRIX found that congestions incur an estimated cost of US$1700 per household in lost time and fuel annually in the USA, and this figure is expected to rise to US$2300 in 2030. [2]

Assessing the impact of MRT disruptions on the economy

The increase in recent disruptions stresses the importance of examining the possible impacts that they may have on Singapore’s economy.

Statistics collected from multiple reports have identified being late or absent for work as the main cause of loss in productivity. The monetary loss incurred by a company can be expressed as salary paid out for undone work because an employee is not present. The other costs associated with being late are less quantifiable, such as lower quality of work.

According to the Straits Times, a report by public transport app Moovit has suggested that around 54% of commuters had been affected by at least one train disruption in the month of April 2017. [3] Assuming this figure is consistent monthly, then this would mean that more than half of the one million train users are affected at least once every month.

The country’s estimated median salary of $4000 in 2016 implies a median hourly salary of $25. If we were to interpret these figures from an economic viewpoint, each hourly delay would cause the economy approximately $12.5 million in salaries for undone work.

Besides amounts that can be quantified, there is also intangible damage done to the economy that would be difficult to calculate.

For instance, there would be a loss in revenue for companies due to lower employee engagement resulting from the increased travel time to work. Employee engagement has also been linked to shareholder return and customer satisfaction, according to a report by Aon Hewitt. [4] Disengaged employees often display undesirable workplace behaviour, such as the lack of initiative and enthusiasm. [5] In addition, disengaged employees have higher rate of absenteeism, and are less likely to remain in the company that they are unsatisfied with. This could prove to be a major issue for developed economies, as evidenced by a survey conducted by Gallup, which found that disengaged employees cost Germany between €214 billion to €287 billion a year. [6]

Factors influencing the impact of MRT disruptions

However, perhaps it would be unfair to evaluate such a gargantuan issue using simplistic calculations, without considering other factors.

One factor to consider is the composition of the economy. In an interview with the Business Times, Dr Park Byung Joon, senior lecturer at SIM University’s School of Business, mentioned that the overall impact on the Singapore economy would not be substantial since Singapore’s workforce has a larger proportion of white-collar workers as compared to blue-collar workers. The impact on manufacturing and exporting industries has been thought to be heavier as compared to non-manufacturing industries, such as finance. According to a 2017 report by German financial services provider Allianz SE, business interruption has been identified as the top global business risk for the fifth consecutive year. [7] This includes supply chain disruption, which may be caused by supplier failure. In 2016, although manufacturing contributed to the majority of Singapore’s GDP, it only consisted 20% of the aggregate amount. [8]

Moreover, the impact of a disruption varies with the time at which it occurs, as this indirectly determines the number of people affected. Train disruptions during peak hours would affect the majority who depend on public transport to travel to their destinations. Although disruptions that occur on weekdays may affect productivity, disruptions on weekends may be equally damaging. This is because consumers are more likely to spend money on weekends, as shown in a Gallup survey. [9] A major disruption may hence affect Singapore’s overall GDP, due to a weaker multiplier effect as consumer spending is reduced.

So what can we do?

There is no straightforward method to calculate how much a public transport disruption costs to an economy. Much of the costs to be considered cannot be quantified and only estimates can be used. There are also many other factors that affect the cost of a disruption and therefore, not all disruptions are equal.

Rather than attempting to quantify the impact of MRT disruptions to the economy, hopefully the outcries of dissatisfaction from the public would implore respective authorities to undertake greater effort to mitigate the impact of future disruptions.

References

1. Tang, L. (2017). How to ease the crowds during major MRT disruptions? Options are limited, experts say. TODAY. [online] Available at: http://www.todayonline.com/singapore/how-move-crowds-during-next-major-mrt-disruption-options-are-limited-experts-say [Accessed 4 Dec. 2017].

2. INRIX (2014). AMERICANS WILL WASTE $2.8 TRILLION ON TRAFFIC BY 2030 IF GRIDLOCK PERSISTS. [online] Available at: http://inrix.com/press-releases/americans-will-waste-2-8-trillion-on-traffic-by-2030-if-gridlock-persists/ [Accessed 4 Dec. 2017].

3. Tan, C. (2017). Half of train commuters hit by delays in the past month: Poll. The Straits Times. [online] Available at: http://www.straitstimes.com/singapore/transport/half-of-train-commuters-hit-by-delays-in-the-past-month-poll?login=true [Accessed 4 Dec. 2017].

4. Aon Hewitt (2016). 2016 Trends in Global Employee Engagement. [online] Aon Hewitt, p.3. Available at: http://images.respond.aonhewitt.com/Web/AonHewitt/%7Bb4acca8e-712d-4fd7-969e-08ce67e5d14a%7D_2016-trends-in-global-employee-engagement.pdf?utm_source=eloqua&utm_medium=email_21803&utm_campaign= [Accessed 4 Dec. 2017].

5. Taylor, K. (2014). 13 Signs of a Disengaged Employee (Infographic). [online] Entrepreneur. Available at: https://www.entrepreneur.com/article/234436 [Accessed 5 Dec. 2017].

6. Nink, M. (2017). The Negative Impact of Disengaged Employees on Germany. [online] Gallup.com. Available at: http://news.gallup.com/businessjournal/190445/negative-impact-disengaged-employees-germany.aspx [Accessed 5 Dec. 2017].

7. Allianz SE (2017). Allianz Risk Barometer Top Business Risks 2017. [online] Allianz Global Corporate & Specialty SE, pp.2,7. Available at: http://www.agcs.allianz.com/assets/PDFs/Reports/Allianz_Risk_Barometer_2017_EN.pdf [Accessed 5 Dec. 2017].

8. Singstat.gov.sg. (2017). Statistics Singapore – Share of GDP by Industry. [online] Available at: http://www.singstat.gov.sg/statistics/visualising-data/charts/share-of-gdp-by-industry [Accessed 4 Dec. 2017].

9. Jacobe, D. and Jones, J. (2009). Consumers Spend More on Weekends, Payday Weeks. [online] Gallup.com. Available at: http://news.gallup.com/poll/123839/consumers-spend-more-weekends-payday-weeks.aspx [Accessed 4 Dec. 2017].