NewGeography.com blogs

As noted by Wendell Cox, commuting and congestion have a large economic cost. Time spent behind the wheel, slowed by traffic, is time that could otherwise be put to more productive economic pursuits. Commuting and congestion also have social costs. Every minute lost trapped in snarled traffic is time that might have been spent with family, friends, relaxing, or getting involved in community building activities. Commuting can also lead to elevated stress levels, with studies showing finding that “greater exposure to congestion is related to elevated psycho-physiological stress among automobile commuters.”

One proposed solution to the challenges presented by commuting and congestion is an enhanced embrace of telecommuting. Proponents argue that businesses looking to increase productivity, burnish their “green” credibility and reduce fuel use, and allow workers to strike a better balance between life and work should offer employees the option to work from home. Whatever the motivation, it does appear that there has been a rise in the adoption of telecommuting. According to varying estimates, somewhere between 20 and 35 million individuals telecommute occasionally. Numbers appear to be on the rise, with projections showing up to 63 million workers will be making use of some form of telecommuting by 2016.

As businesses increase their adoption of telecommuting, they may also want to provide workers with increased schedule flexibility. A recent study conducted by BYU finds that workers given the option to make use of telecommuting and flex-scheduling had a much higher “breaking point” at which family life and work begin to interfere with one another. According to the study, “for office workers on a regular schedule, the breaking point was 38 hours per week. Given a flexible schedule and the option to telecommute, employees were able to clock 57 hours per week before experiencing such conflict.” As the study points out, this added flexibility allows workers to potentially make use of the equivalent of an “Extra Day or Two” in each work week, adding to productivity. According to the lead researcher, E. Jeffery Hill, the use of flexible scheduling can also contribute to greater worker satisfaction and morale. In challenging economic times the promise of increased worker productivity, improved worker happiness, and potential cost savings realized through reduced office space and facilities should be an attractive spur to increased corporate adoption of telecommuting.

It has been a horrendous week in Dhaka, the capital of Bangladesh and the world's most dense urban area (104,000 population per square mile/40,000 per square kilometer). On Tuesday, a five story residential building collapsed, killing 23 people in the building and in other structures in the path of the collapse. Then, on Thursday evening, a fire started on the lower floors of an 8-story residential building in the old town section of Dhaka. By the time it was controlled, 117 people had died and 8 buildings had been destroyed (link to Daily Star photo).

Disastrous fires are an unfortunate fact of life in the hyper-dense informal settlements (shantytowns) that pervade large urban areas in developing countries. In April, 7,000 people were left homeless in a Manila shantytown fire (photo), while the homes of 4,000 families were destroyed in another Manila fire just three weeks later.

While Dhaka has no shortage of shantytowns, this was not a shantytown fire. The bigger risk is the sprawl of high rise buildings (5 stories to 20 or more), which are home to most of the people who do not live in shantytowns. The Daily Star now reports in an article entitled, "Filled-up, Full of Risk" that much of the land is "reclaimed" and "marshy" in Dhaka and not suitable for multi-story buildings. Recent heavy rains have made the situation worse, and at least three additional buildings have begun to tilt since Tuesday's collapse.

Dhaka is built on one of the most challenging sites for an urban area. It sits on one of the world's largest river deltas (the Ganges-Brahmaputra). The combined river course (called the Padma) is only miles to the west. Only 200 years ago, the Brahmaputra itself ran to the east of Dhaka and then changed course. This illustrates the instability of the riverine system, which completely surrounds the urban area with tributaries and river channels.

A map produced in the Daily Star, illustrates the problem. The red areas are considered safe for building multi-story buildings. Virtually all of these areas are now developed. However, large sections of high rise buildings have been developed outside the red areas (see photo), especially between Mirpur and Gulshan. Virtually all of the areas that can be developed are unsuitable for high rises. With a population expected to rise from the current 10 million to 16 million by 2025, Dhaka needs room to grow. It will not be easy.

Photo: Multi-story buildings between Mirpur and Gulshan

Much has been written in recent years about the costs of congestion, with ground breaking research by academics such as Prud'homme & Chang-Wong and Hartgen & Fields showing that the more jobs that can be accessed in a particular period of time, the greater the economic output of a metropolitan area. Greater access to jobs not only improves economic growth, but it also opens greater opportunities for people and households to fulfill their aspirations for a better quality of living.

Congestion costs are principally the cost of wasted time, which the most recent Texas Transportation Institute (TTI) Annual Mobility Report places at $15.47 per hour. It is important to understand that much of this cost is not because the car is not moving. It is rather because time that could be used more productively is being consumed.

Steve Polzin of the University of South Florida has raised a related issue that has been virtually absent from urban planning discussions in a Planetizen blog entitled "The Cost of Slow Travel." Noting that transit travel time is considerably slower than auto travel times, Polzin broadly estimates that slower travel on transit costs the nation $44 billion, which is two-thirds the $66 billion. Polzin does not suggest that this is a final, "take to the bank" lost productivity number, but does suggest attention to the issue.

Such thinking is long overdue. Wasted time is wasted time. Most wasted time occurs with respect to travel during peak periods, when most people are commuting to or from work. The $66 billion in wasted time by automobile translates into $550 per commuter per year in the United States (Based upon 2007 commuting data from the American Community Survey). The cost of wasted time for transit is 12 times as high, at $6,500 per commuter, using Polzin's estimate. Of course, as Polzin is quick to point out, these are not final figures. However, they are a starting point for important (and perhaps "inconvenient") economic research that has been largely kept off the agenda up until now.

It is extremely difficult to find reliable reporting on the intensity of the housing bubbles across China, but this article from the China Post of June 1, 2010 "Economist sees housing market bubble", appears to be realistic.

It states that in 2009 the average house price to average annual household income in China was 9.1 times earnings and that it rose to 11.15 during the first two months of 2010. Beijing and Shanghai are reported to have exceeded 20 times average household earnings during early 2010. These figures are from Yao Shujie, head of the School of Contemporary Chinese Studies at the University of Nottingham.

The article noted that last week, Chinese real estate services company E House China released figures suggesting that house prices to incomes nationwide in 2009 were 8.03 times incomes, but those in Beijing, Shanghai, Hangzhou and Shenzhen were over 14 times household incomes.

Recently, Wendell Cox of Demographia, working with the South China Post, estimated that the Median Multiple (median house price divided by median household income) for Hong Kong was 10.4 – as reported in this New Geography article Unaffordable Housing in Hong Kong. Because sufficiently reliable data is now available from Hong Kong, it will be included within the Annual Demographia International Housing Affordability Surveys going forward.

As the Annual Demographia International Housing Affordability Surveys clearly illustrate, house prices do not exceed three times gross annual household incomes in normal markets.

Rather remarkably, in researching and reporting on the China Housing Bubble, there has been no discussion of the land ownership differences of China and western countries.

Freehold land is not available in China. The land is leased for a remarkably short term of 70 years. Instead of conventional ground leases in the west where ground rentals are paid, Chinese Local Governments demand an upfront payment of capitalized rental. On this basis, the land interest should be a wasting asset over the term of the lease.

Rather remarkably – this appears not to be the case in China, where the buying public have convinced themselves (no doubt with encouragement from real estate agents and developers) that at the end of the term of the ground lease, Local Government will simply “gift” the land to home owners!

On the sound income to house price measure, China’s housing bubble is clearly the worst in the world. When the unsatisfactory and uncertain land ownership issue is factored in as well, it is particularly concerning.

The Kauffman Index of Entrepreneurial Activity produced good news for the year 2009: Americans have created businesses at its fastest rate in 14 years. This past year, 558,000 businesses were created each month, marking a 4% increase from 2008. Though this comes in the midst of economic recession, president and CEO of the Kauffman foundation Carl Schramm seems to think the unsavory results of massive layoffs have fostered these higher rates of entrepreneurship, serving as “a motivational boost” for the newly unemployed to become their own boss. He sees the recent rates in business startups as a favorable sign for economic recovery.

Using the monthly Current Population Survey from the US Census Bureau and US Bureau of Labor Statistics, the Kauffman index has tracked the demographic makeup of business creators, as well as their location. Though African Americans lag behind other groups in terms of the number of entrepreneurs, they saw the largest increase from 2008 to 2009 from an index of .22 to an index of .27. Both the 35-44 and 55-64-year-old groups have increased to an index of .40 percent, also the greatest of their demographic category.

The index followed predictable trends in terms of location of entrepreneurial activity, showing that the largest rate increases occurred in the south and west in states like Oklahoma, Montana, Texas, and Arizona while Mississippi, Nebraska, and Pennsylvania floundered. However, business creation rates in the Midwest and South outdid those of the west, which actually declined from 0.42 to 0.38 percent from 2008 to 2009.

You can find interactive data on entrepreneurial activity for the period spanning 1996-2009 on the Kauffman Foundation’s website at www.kauffman.org/kiea.

Kirsten Moore is an undergraduate at Chapman University majoring in US history and screenwriting.