Wednesday, October 14, 2009

Back-of-the-envelope economics

It's almost like being back home. In the 80s. Auckland is in the eighth day of a paralysing bus strike.

Well, "paralysing" might be overstating things a tad. Most people drive themselves anyway. I, swelling with ecological smugness, walk to work. Only an unlucky minority, such as Susan, are really affected.

It's also not a strike. What happened was that 875 drivers and cleaners, wanting better pay, notified their employer that they would work to rule; and their employer, NZ Bus, responded by locking them out.

To me that makes the whole issue cut and dried. Working to rule is about the mildest form of industrial action it's possible to take; if I had my way, it should be the norm for everyone everywhere. Any company that feels threatened by a work-to-rule - is exploiting its employees. To retaliate with a full lockout, completely shutting down your services for over a week - that's a huge escalation.

And most people seem to agree. The (Auckland-based) New Zealand Herald has been squarely behind the drivers. Even Auckland's city government, such as it is, has mostly aligned itself the same way, threatening to cut off $58 million in subsidies to NZ Bus unless it gets back to delivering the services it's supposed to.

Now, we're told NZ Bus normally carries approximately 80,000 passengers per day. Since Susan is one of them, I happen to know that a standard, full-price season ticket costs around $110 a month. Allowing for concessions, let's say the average passenger pays about half that much. That's a monthly income of $4.4 million from fares. Add $58 million in subsidies from the city, and we're talking about an annual income (not counting advertising) in the ballpark of $110 million.

There are 875 drivers and cleaners - let's guess that there are 400 actual buses, each costing (let's say) $25,000 per year in tax, maintenance and depreciation - that's $10 million. Fuel - maybe as much again. That leaves $90 million to pay for advertising (minimal - mostly done by the city anyway), premises, wages, parking and other running costs and overheads. Let's say 40% of that should be going to the people who actually do the work - $36 million between 875 people comes to just over $40,000 per year, or (assuming a 40-hour week) about $20 per hour.

But NZ Bus pays its drivers $14-16 per hour. Susan tells me that other bus companies are significantly more generous. (Although how she knows this, I don't know. All I know is that they're not having these problems, at least not at the moment.) Which suggests my calculations aren't too far out.

It's enough to make me want to start my own bus company. If only I knew where I could lay my hands on 400 buses and a bunch of spare subsidies...

1 comment:

Anonymous said...

I read somewhere the NZ Bus company/Infratil aims for a return of 20% to its shareholders. I haven't found the info on their site though.