Making cost-benefit analysis more relevant when reducing social exclusion matters

A higher priority for reducing exclusion

The last decade has seen a striking change in the land use transport (LUT) policy priorities being pursued by many jurisdictions. From a situation where economic outcomes long reigned supreme, much greater emphasis is now being placed on

• cutting greenhouse gas emissions to levels more in line with keeping global temperature rise below 2°C and
• ensuring that all residents have more equitable access to the benefits of living in their city/region.

The language of ‘reducing social exclusion’, or ‘increasing social inclusion’, is often used to describe the second direction.

London, Malmö, Manchester, Melbourne, Singapore and Vancouver, for example, prioritise reducing social exclusion, as does Scotland, and increasing social inclusion is a focus of United Nations Sustainable Development Goals 8, 10, 11 and 16 (UNDESA, 2023) and is central to the European Social Model (Eurofound, 2023).

Burchardt et al. (2002, p. 30) developed a widely used definition of social exclusion: ‘An individual is socially excluded if he or she does not participate in key activities of the society in which he or she lives”. This essentially sees social exclusion as ‘… the end result of a set of processes that prevent people from participating in different forms of economic, social and political activity’ (Saunders, 2011, p.12).

The social goal evaluation gap

A major challenge for those seeking ways that LUT policy and planning can reduce social exclusion, informed by cost benefit analysis (CBA) of alternative options, is the lack of a means of monetising the societal benefits from reduced social exclusion. Thus, while transport CBAs have long valued travel time savings for car drivers in dollar terms, they do not have comparable values for the societal benefits from reducing social exclusion. This evaluation gap can only serve to entrench exclusion.

Closing the gap

ITLS researchers, and colleagues from The University of Melbourne, have been working for some time on closing the CBA evaluation gap confronting initiatives intended to reduce social exclusion (Stanley et al., 2011, 2021, 2022a, b). Drawing inspiration from studies that used trade-off settings to value travel time savings, the team has identified trade-off settings from which monetised values of several LUT policy-relevant factors thought likely to influence social exclusion can be inferred.

Those policy-relevant variables are trips (as a measure of mobility), bridging and bonding social capital, sense of community, three conceptions of wellbeing and area socio-economic disadvantage. A range of personal characteristics were also identified as likely to influence someone’s risk of exclusion, such as age, household income, abilities, household circumstances (e.g., presence of children), personality, etc.

The research shows that an additional trip is worth around A$22.75 (2019 prices), based on the contribution of this trip to reducing social exclusion. Similar trip values were found in separate modelling for both Melbourne and regional Victoria. Monetary values have also been developed for changes in bridging and bonding social capital, sense of community, three conceptions of wellbeing and area socio-economic disadvantage.

The trip value of A$22.75 is several times higher than the value that results from applying the economists’ traditional ‘rule-of-a-half’ to estimate these benefits from additional trips. The higher value is because the ITLS estimated trip value includes an inferred value for BOTH

• the ‘rule-of-a-half’ benefits to the trip-maker PLUS
• an inferred estimate of the value of the reductions in the wider societal costs of exclusion, that follow from increased trip making by at-risk people (e.g., lower costs of crime, lower health system costs, improved productivity).

Ignoring these wider societal benefits, as current LUT CBA does, imposes a serious bias against initiatives that increase trip making as a way of reducing exclusion.

Former ITLS student, Dr Leong Wai Yan, Chief Transport Economist at Singapore Land Transport Authority, and his team have seen the potential value in the ITLS work and replicated the analysis of trip values for Singapore. They found similarly ‘high’ values. This is significant independent corroboration of the ITLS/University of Melbourne research. The LTA is using its trip values to evaluate its future plans for Singapore’s land transport system, including its Friendly Streets initiative.

ITLS case studies have shown that using these trip values can substantially improve the absolute and relative business/investment case for major improvements to public transport services in areas of higher exclusion risk. For example, for improvements in Sydney’s relatively disadvantaged west, Parramatta Light Rail benefits more than doubled and benefits from doubling local bus services increased by half when inclusion benefits were added, dramatically improving the case for these initiatives to proceed (Stanley et al. 2022b).

Further support for the credibility of the ITLS monetisation research comes from benchmarking its values for changes in subjective wellbeing against UK values. The UK value for a one-unit increase in someone’s subjective wellbeing score for one-year averages two values, one based on association between income and life satisfaction (HMT & SITF, 2021). The relevant UK value represented 45% of 2019 UK mean household income. The midpoint of the ITLS/University of Melbourne subjective wellbeing values was 49% of sample mean household income, strikingly close to the UK percentage and a little below what Biddle et al. (2020) found in a recent Australian income/life satisfaction analysis.

These comparisons support use of the ITLS monetised values in Australian LUT evaluations, particularly evaluations of initiatives intended to reduce social exclusion. To assist such application, the values should be embedded in Australian transport planning/evaluation guidelines. Those at risk of social exclusion deserve this respect.

References

Biddle, N., Edwards, B., Gray, M. & Sollis, K. (2020). Hardship, Distress, and Resilience: the Initial Impacts of COVID-19 in Australia. ANU Centre for Social Research and Methods. The initial impacts of COVID-19 in Australia

Burchardt, T., LeGrand, J. & Piachaud, D. (2002). Degrees of exclusion: developing a dynamic, multidimensional measure. In: Hills, J., Le Grand, J., Piachaud, D. (Eds.), Understanding Social Exclusion (pp. 30-43). Oxford University Press.

Eurofound (European Foundation for the Improvement of Living and Working Conditions) (2023). Social inclusion. Retrieved 19 December, 2023, from Social inclusion | European Foundation for the Improvement of Living and Working Conditions (europa.eu)

HMT & SITF (HM Treasury & Social Impacts Task Force (SITF) (2021). Wellbeing Guidance for Appraisal: Supplementary Green Book Guidance.

Stanley, J., Hensher D., Stanley, J. &Vella-Brodrick, D. (2011). Mobility, social exclusion and well-being: Exploring the links. Transportation Research, 45,8, 789-801.

Stanley, J., Hensher, D., Stanley, J. & Vella-Brodrick, D. (2021). Valuing changes in wellbeing and its relevance for transport policy. Transport Policy, 110, 16-27.

Stanley, J., Hensher, D. & Stanley, J. (2022a). Place-based disadvantage, social exclusion and the value of mobility. Transportation Research Part A, 160, 101-113.

Stanley, J., Hensher, D., Wei, E. & Liu, W. (2022b). Major urban transport expenditure initiatives: Where are the returns likely to be strongest and how significant is social exclusion in making the case. Research in Transportation & Business Management, 43, 10071.

Saunders, P. (2011). Down and out: Poverty and exclusion in Australia. The Policy Press.

UNDESA (United Nations Department of Economic and Social Affairs) (2023). Sustainable Development: The 17 Goals. Retrieved November, 24, 2023, from https://sdgs.un.org/goals