University

American spending on transportation drops by 11.3% since 1989

Posted on October 23, 2017

Photo: University of Michigan
Photo: University of Michigan
Although the average cost of a new vehicle today is well over $30,000 and the price of gasoline has more than doubled in the past 30 years, Americans spend less on transportation today than they did back when the first George Bush was president.

In 1989, American households averaged 18.9% of all expenditures on transportation (vehicle purchases, gasoline, other related expenses). But last year, transportation expenses had fallen to 15.8% of all personal expenditures, say researchers at the University of Michigan.

Photo: University of Michigan
Photo: University of Michigan

Using data from the Bureau of Labor Statistics' Consumer Expenditures Survey, Michael Sivak and Brandon Schoettle of the U-M Transportation Research Institute examined transportation expenditures for 1989 and 2016 and for three groups of consumers (all income levels and the lowest and highest quintiles of income).

They found that the absolute expenditures for transportation, adjusted for inflation, dropped by 11.3% — from $5,268 in 1989 to $4,675 in 2016.

Specifically, vehicle purchases accounted for 6.3% of all expenditures last year, while gasoline and motor oil represented an additional 3.3% — down from 8.4% and 3.5%, respectively, in 1989.

While transportation costs accounted for the second-largest household budget category behind housing expenses in both 1989 and 2016, transportation expenditures relative to housing costs declined from 61.6% in 1989 to 47.9% last year.

Perhaps not surprisingly, the researchers found that total transportation expenditures in 2016 for the lowest quintile of income were proportionally higher than for the highest quintile (15% vs. 14.4%).

In addition, transportation expenditures for households in the lowest quintile of income were lower than food costs for both 1989 and 2016. In contrast, those in the highest quintile of income spent more on transportation than food in both years.

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