Economic Impact of Increased Congestion for Freight-Dependent Businesses in Washington State

Congestion in the transportation system causes freight dependant businesses to alter their business model to satisfy consumer demands under uncertain operational conditions. Wasted fuel, lost productivity, and reduced mobility on the urban road network cost the nation’s network users billions every year. Despite the magnitude of this cost, it is not in itself useful to inform public policy at the state level. Instead, transportation agencies need additional knowledge to understand how industries are impacted by congestion, what their likely response will be to increasing congestion, and the net impact of these industry responses to the economy. Data from a survey of freight dependant businesses and seven IMPLAN models were used to calculate the costs of congestion and estimate the annual economic impact of increased congestion for freight dependant businesses in the State of Washington. Responses from freight dependant businesses indicate that consumers would likely pay 60 to 80 percent of the increased cost of congestion. Ultimately, this means that consumers will pay higher prices for freight dependant goods and freight dependant businesses will spend more to provide those goods. The primary areas of increased cost for freight dependant businesses were identified as additional trucking costs and inventory costs. It is estimated that the consumer cost for a 20 percent congestion increase, 60 percent cost realization, in Washington State is $8.7 billion. The economic impact of this redistribution of wealth and inefficiency is a loss of $3.3 billion dollars in total output and over 27,000 jobs.