Technology is Disrupting the Transportation Industry

The increasing pace of change is a defining feature of our times.  This is one of the most discussed topics among consenting adults, right there with the ongoing debate about what exactly constitutes a recession. Far more than those who lived during the Renaissance or the Industrial Revolution, people are self-consciously aware of the transcendent characteristic of this period in history.

Americans truly live in an age of innovation. Even the most conscientious technophobes find it difficult to ignore the waves of technological change that are rolling through the global economy.

One challenge to implementing technological advances is outdated regulatory structures.  The pace of change far outstrips government’s ability to serve the public interest by managing and regulating these new developments. Government at all levels needs to rethink the application of old-style bureaucratic tools to today’s fast changing high tech industries, especially when it comes to transportation.

A healthy transportation system is the lifeblood of American commerce and industry and is central to America’s ability to compete with its economic competitors, particularly China. Indeed, there is a robust link between the level of transportation investment and the nation’s ability to increase its productivity.

Technological innovation is transforming the transportation system.  In addition to the number one trend – the move to electric cars – there is autonomous driving – not just for cars but for low-cost micro-mobility – ride-sharing; in-vehicle connectivity; 5G wireless technology;  companies like Uber and Lyft adding to the concept of on-demand mobility; robotics, such as robo-taxis that are currently operating in Phoenix and San Francisco; and mobility technology, to name just a few salient trends.

Consider mobility as a service the holy grail. Ideally it would offer customers the ability to plan, book, and pay for transportation services by digitally connecting to a variety of public and private transportation options across all transportation modes.

The future of transportation is being shaped by a convergence of these trends – a huge set of disruptive forces to reckon with. While it is extremely difficult to predict when these new technologies will be ready for prime time and their rate of proliferation and adoption, it is important to understand and consider the impact they will have on mobility and the transportation system.

Such improvements could help reduce the costs of traffic congestion, which some experts believe cost the economy over $120 billion per year; road accidents, which killed nearly 43,000 Americans in 2021; air pollution, which contributes to health problems like respiratory ailments; improving mobility for seniors and individuals with disabilities; and other societal benefits.

Underscoring the discussion about the rate of technological change is the major implications advances in mobility will have for urban centers as they determine how to tailor new mobility approaches within each city context.

Just as the Federal Communications Commission manages the airwaves for the public good, so, for example, must cities manage their streets and public transit.  Their challenge is to become mobility managers, leveraging all the new technology to provide better and safer service to their riders.

There are opportunities and threats that cities have never encountered before, presenting a daunting challenge to the current crop of public sector managers. They might not be willing to buck the status quo and reimagine the future of mobility, especially in their quixotic quest to improve mobility, particularly in cities where transportation assets are reaching the end of their expected life span after suffering from decades of benign neglect.

The challenge for providers of transportation services is to leverage current assets while wisely exploring the development and deployment of new technological innovations that indeed may cannibalize existing core assets.  Just how many public sector managers and leaders are capable of being ambidextrous is problematic when operating in a political environment.

But to paraphrase Bob Dylan, when the times, they are a-changing, you must too.



The Shrinking Labor Force

The country is in a fragile state – burnt out from three years of pandemic; social upheaval; the war in Europe; and an economy that is cooling under the weight of high inflation, rising interest rates and the scarcity of labor.  The U.S. may have reached the point where its past is more appealing than its present.

So when good news comes along, you might as well seize it. This could apply to a recent announcement by the Bureau of Labor Statistics that the economy added a seasonally adjusted 372,000 jobs in June, well above the 250,000 economists expected.

But this sliver of good news must be set against the continuing cost of living crisis, or “Bidenflation,” as some call it, which is impoverishing working Americans.  The consumer price index rose 9.1 percent in June on a year over year basis, the worst inflation since December 1981.  It is unclear how the Federal Reserve will put the inflation genie back in the bottle without a creating a whole lot of pain.

Education and health services led job creation, followed by professional and business services, and leisure and hospitality. Meanwhile, the unemployment rate remained at 3.6 percent, a touch above the 50-year low reached before the pandemic hit in early 2020. Job growth continues, although fewer people are looking for work.

The Covid-19 pandemic turned the labor market upside down, and it is currently drum tight.  There were more than 11 million job openings at the end of June – up substantially from 9.3 million open jobs in April 2021 and seven million prior to the pandemic.

The pandemic led many people to reevaluate what they want from a job and from life, and it prompted a wave of early retirements.  Others left to start their own businesses.  Still others left to care for children, elders or themselves.  Some people simply threw in the towel and decided to stay at home, courtesy of the taxpayers.

The demand for workers far exceeds the number of unemployed people looking for work.  The labor participation rate – the share of adults working or looking for a job – was 62.2 percent in June, down from 63.4 percent before Covid.

Workers are taking advantage of the tight labor market by switching jobs for better pay, which represents a new source of inflation for many American companies.

Average hourly earning rose 5.1 percent over the last year.  Rising wages could make it harder for the Federal Reserve to tame inflation.  Nearly 79 percent of American workers are in the service sector, where higher labor costs are a large burden.

In addition to a shrinking labor force driving up wages, a steady decline in birth rates is expected in the U.S. and many advanced economies, which will sharply reduce the growth of the labor force.

For example, life expectancy in the U.S. has increased from 1980-2019 and improvements in morbidity and mortality rates will lead to a rapid increase in the number of people who are over 65 and retired.  As a result, dependency ratios – the ratio of the number of dependents to the total working age population – are set to rise sharply.

Put simply, deteriorating U.S. dependency ratios in the U.S. and globally means dependents who consume but do not produce will outweigh those who are working.  In effect, too few people carrying the load.

This translates to lower productivity per capita, an ever-intensifying war for talent and skills, and upward pressure on inflation.

As the supply of labor contracts, their bargaining power will increase and wages will continue to rise.  The growing leverage of labor may have beneficial effects on inequality, but it may manifest an increasing risk of structural inflation.