Labor Costs, Not Peak Oil, Will Halt Suburban Growth

One of the favorite lines of the urban planning whiners is that peak oil will doom suburbia. As if once the oil dries up, it will take American innovation with it, and no one will come up with a way to sustain the economy with electricity or any other energy form. While this reasoning is based on false hope, not actual data, the idea behind it - that suburbs will hit a wall - actually has something going for it.

Suburbs in most regions are stretching out to their limits now, and the factor constraining them is not oil, energy, or liberal academics who think every road should have a bike lane, but the cost of the labor to construct to new roads and rails. Ever notice how any public works project, whether a highway or light rail line, always seems to go up in cost the longer it's debated? The main reason for this is labor costs continue to go up faster than inflation, even in a recession.

Ten years ago, the Dulles Rail project had a price tag of $2 billion. Now that the line's finally under construction, the cost has soared past $5 billion, and required that it be built in two separate phases. This does not include the cost of new railcars, and the price of steel and bulldozing equipment hasn't gone up that dramatically. But the price of skilled engineering labor to design and supervise construction has. For a list of contractors working on the project, most of whom are subcontracted to Bechtel, check out Dulles Transit Partners .

All these engineering costs hit a highway project just as harshly as a transit build, and are limiting the amount of new transport capacity that can be built, which is in turn limiting how far out of the city masses of four-home-per-acre subdivisions can be built.

In addition to labor costs going up, there's no mass production in railcars like there is with passenger automobiles. For all the environmentalists concerned about "sustainability", there is nothing sustainable about an operation that has a capital budget equal to its annual revenue. Yet this is exactly the situation DC's Metro faces, and as a result will always need some kind of subsidy from government agencies - state, Fed, and local - to remain solvent. By comparison, telecom companies that spent just a third of their revenue on capital projects ten years ago are mostly bankrupt. So Metro is basically three times past what any private business could sustain.

In addition to railcars, much of Metro's capital budget goes to maintenance, which is largely skilled labor needed to repair tracks, the system's massive electrical network, and building maintenance within the stations. While there all kinds of grand plans to take the thing to far flung reaches of the DC area, the financial burden to do so would be enormous, and I will bet anyone the Dulles extension will be the final major build for the system.

With the same labor costs impacting roads and rails equally, it's getting harder and harder to provide major transport capacity to outer suburbs. As a result, many metro areas are going to start hitting growth limits dictated not by energy, terrain, or water, but simple economics. Liberal academics can moan all they want about lack of new transit, their conservative counterparts can argue as loudly as they'd like for new roads. But in the end neither will get their way.