Why working from home could be a disaster for public transit — and the economy

ANALYSIS: The TTC helps Toronto’s economy more than you might think. And remote work could undo those benefits
By John Michael McGrath - Published on Apr 15, 2021
A new CD Howe Institute paper estimates the value of the TTC to Toronto at $2.7 billion annually. (Rachel Verbin/CP)

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Ben Dachis was doing a thought experiment to try to calculate the economic value of the Toronto Transit Commission and its network of subways, buses, and streetcars: If the TTC simply stopped existing, what would that cost the Canadian economy? And how could you go about working that out?

Then COVID-19 arrived in Ontario, and suddenly he had what every policy wonk most fervently desires: actual real-world data.

“We got started on this before the pandemic — very shortly before the pandemic,” says Dachis, who is currently a director of public affairs at the CD Howe Institute and previously worked in the office of Premier Doug Ford. “We didn’t get a total shutdown in February [2020] but it was pretty darn close.”

In a paper released Thursday morning, Dachis and co-author Rhys Godin estimate the value of the TTC to Toronto at $2.7 billion annually, though they concede that number falls to $1.75 billion if you take commuting alternatives into account. (If the TTC were to disappear, some workers would still make it to their office by foot, bike, or car.) That’s not money that shows up in the city’s (or province’s) treasury; rather, it’s increased economic activity that comes from the fact that the city’s transit network supports a dense core of jobs and businesses.

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“This is an application of fundamental economic theory,” Dachis says. “Urban agglomeration has always been there in the background, something we’ve always understood intuitively when it’s explained to us. But it’s also invisible — that’s the nature of it. It’s a public good.”

“Urban-agglomeration benefits” is an unwieldly term, but it describes something that isn’t fundamentally difficult to understand: when lots of businesses are close together in the same area — as in the downtown core of a major city — they have lots of workers to choose from (and their workers have lots of employers to choose from), and they support numerous peripheral businesses. Think of the bars and restaurants that exist to cater to lunch and after-work crowds. The overall level of economic activity and productivity is higher than it would be if those same businesses and their workers were all spread evenly around the city or province.

But Toronto’s business district is possible only because a huge number of workers can be shuttled in every morning (and out every evening) on the TTC and GO Transit. Take those away, and the costs to the economy would be large.

So what if commuting technologies were to change? What if people end up opting for remote working long after the pandemic is over?

Then, says Dachis, the math works backwards, and addition becomes subtraction: Toronto and the region would face substantial economic harms if workers stopped commuting into the downtown core. It’s kind of like the case of traffic congestion, he notes, in that it’s fundamentally difficult to estimate the costs of trips that people don’t make, whether because of clogged freeways, long subway delays, or having the option of commuting to work via fibre optic cable.

“You might be that last customer that makes a restaurant downtown possible, where if it weren’t for you, that restaurant will be shutting down,” Dachis explains. So if you don’t walk in the door, it’s not just you that’s harmed — it’s everyone else who was going to eat at that restaurant. And the workers. And the owners.

The more subtle costs come from less productive workers. With remote work, the sharing of knowledge within workplaces breaks down — more seasoned workers spend less time face-to-face with their juniors, and new workers don’t learn as much through the informal channels that are vital in any work environment.

Employers might find a balance between working from home and the productivity of the office —a way to maximize employee happiness while also retaining the advantages of in-person work. Dachis’s research suggests a range of 20 to 40 per cent of hours worked remotely — but that could leave transit operators like the TTC struggling to cover the gap created by lost revenue. We already saw this problem play out in 2020; the federal government eventually came to the rescue with a transit bailout for numerous cities, including Toronto. In the longer term, cities (or, just as likely, provinces and the federal government) are going to need to find a way to fund transit systems. They’ll still be key to economic prosperity in the country’s largest cities, even if we’re only using them three days a week instead of five.

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