Economics

Why Amtrak loses money

Image Credit: Bruce Fingerhood (Flickr) (CC BY 2.0)

Image Credit: Bruce Fingerhood (Flickr) (CC BY 2.0)

How do you lose $85 million per year selling $9.50 cheeseburgers, as Amtrak reportedly has?

One way is to pay Amtrak employees 19% more in salaries and benefits than comparable private sector workers.

James W. Gillula, the managing director of the economic analysis and forecasting firm Global Insight, authored a 2007 pay analysis comparing compensation for Amtrak workers to that of similar private sector employees. Gillula found that Amtrak salaries were on average 4% lower than private sector levels. However, benefits were 81% higher than private sector levels, including 19% more paid leave, 181% more generous health coverage, and 51% more generous retirement benefits. This helps explain why, over a 7-year period, Amtrak quit rates averaged 2-3% per year while private sector quit rates were 26-27%. No one wants to give up a job with so many perks.

7 thoughts on “Why Amtrak loses money

  1. I got to admit, I love Amtrak. I love riding the rails. You get to see the country in ways you can’t from a plane or car. It’s quiet, relaxing, and much more fun than flying.

    I just don’t see why it needs government subsidies.

    Here are my thoughts:

    If Amtrak is successful, then it should be able to stand on its own two feet without government support. After all, why spend tax payer money on something that is making money?

    If Amtrak is losing money, that means they are either doing too much, or consumers do not view it as valuable. Either way, it should be scaled back. After all, why spend tax payer money on something the tax payers do not want?

    If Amtrak were to go extinct, I would be sad. But I see no reason why tax payers should subsidize my fantasies of being a rich railroad baron.

  2. well, question for you: do you think cars are not subsidized? A train runs on tracks as cars run on streets- I am not aware that the car companies are paying for the streets which are needed for cars to function.
    Streets are built and maintained by the gov – yet subsidized.

    • YOWEE, Cars pay for roadway through gas taxes…also pay for much of the urban transit costs…The actual work on roads is usually done by private firms…gov,t merely acts as conduit using users money to pay for services users get.
      Train riders do not pay for any of this…plus Amtrack runs on track paid for and maintained by freight , so yet another huge subsidy we are not counting.

      • Revenues from the gasoline and tire taxes come nowhere near covering all the costs of road building and maintenance. Your local highway commissioner can confirm this.

        The freight railroads are in a position to hold up Amtrak for track maintenance expenses or for obtaining passenger-friendly time slots. The cost accounting is tricky; it is likely, though, that Amtrak payments are a subsidy to the freight carriers, not the other way around.

        Interestingly, the photograph above shows the south end of Chicago’s Union Station, probably in the late 1970s. There have been a few changes to the station, and to the trains, in the past thirty years, that despite Amtrak’s parlous status, and the same kind of wrangling between Chicago’s Metra and the freight carriers.

  3. I just feel compelled to make a note here: In 2010, the best numbers I can find are that the gas tax covered about 42% of highway spending. Granted, this figure was off somewhat because of stimulus spending, but even in better years the ratio never seems to be higher than somewhere in the mid-60s. What’s more, it’s been trending downwards as fuel efficiency improves and inflation marches on while the ad valorem gas tax remains unchanged. It also dips whenever fuel prices spike as people choose not to drive as much, but those effects do come and go.

    Mind you, that is all on the federal side of things. State figures are going to be all over the place because state policies differ…the ratio is going to be higher in states with higher fuel taxes (or higher state sales taxes which apply to fuel), for example.

    What does this have to do with Amtrak? Well, it is rather a double standard to have Amtrak expected to turn a profit when interstates running parallel to Amtrak’s corridors are not expected to even break even. Alfred E. Perlman did a presentation to this effect discussing why the New York Central was getting out of the passenger business: The government was deeply subsidizing a very direct competitor (the Interstate Highway System; most interstates parallel a preexisting railroad line…and let’s not even get started on government support for airports and airlines) while taxing the Central to pay for those improvements. Amtrak has to operate in the aftermath of this environment, and it needs subsidies because of direct or indirect subsidies to virtually all other forms of travel in the US.

    I’ll make one other point: If you’re in favor of private sector solutions, ask yourself one question: Why, when there’s a crowded interstate and a parallel railroad line, the government doesn’t suggest to freight shippers that they use the almost totally privately-funded railroad lines rather than adding lanes to the interstate? Why should Norfolk Southern, CSX, Union Pacific, BNSF, and the other freight railroads not get the extra traffic instead, since they’ll pay for the vast majority of the construction, maintenance, etc. of their lines out of revenue rather than passing the bill on to taxpayers? Why should they instead watch as the government pumps money (some of which they pay in corporate taxes, I would note) into expanding a low-cost competitor? Just some food for thought.

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