31st Annual Automotive Insights Symposium | Auto Affordability as a Barrier to Employment: Some Fresh Approaches

RICK MATTOON: So good afternoon, everybody. Welcome back from lunch. Once again, if you haven't figured it out, I'm Rick Mattoon, the regional executive here at the Detroit branch of the Federal Reserve Bank of Chicago. I'm really excited about this next panel.

One of the things that's part of the Fed's mandate is obviously the notion of inclusive maximum employment for the economy, in addition to price stability. And this panel really plays to that. One of the things I've been very proud of in doing this are sort of our auto research here is we've tried to look at it very broadly.

It's not just the impacts on the industry we're interested in. We're interested in workers, we're interested in auto communities, and we're interested in how these various issues play out for different demographics within our society. So within that context, one of the things that we've been trying to do recently is look at things that are particularly barriers to employment.

And so last year, we did a major effort, in terms of looking at childcare as being a barrier to employment. And this panel looks at transportation as being another barrier to employment. There's obviously a loss to the economy if we don't have people-- have an opportunity to be employed as they would like to be.

And so that's why this topic is particularly important for us in our work at the Fed. So we're really, really excited to have this outstanding panel of three real superstars in this area to guide us through this conversation.

I'll also say, in motivating this panel, one of the things I did was I looked at a lot of the literature, and there is a fair amount of literature in this area. And one of the things you will find is there's overwhelmingly a sense that the preferred US Transportation mechanism is the automobile.

Americans like on-demand transportation and automobile ownership has shown to have a lot of effects, in terms of improving everything from health outcomes for families, to educational outcomes, to all sorts of things. But the real challenge that we're looking at right now is automobile affordability is becoming a real problem. And so if that's not available to people, are there other options other than automobiles?

Can we either make automobiles cheaper? Can we bring more people-- have other ways for people to be able to get to work? And that's a lot of what we're going to be looking at in this particular panel. So again, I'm really excited about having this conversation.

The other thing I'll say is, is there's also a-- in this literature, there's always been a tradition of work that was based originally in John Kain's work, which John Kain came up with the idea of what was called spatial mismatch hypothesis. And that's a fancy word for saying that often, where job centers are aren't where people are.

So the ability to get people closer to where they work or make it seamless for them to be able to get to work has always been an issue within the literature. And it's something, again, that I think we're going to dive into. So without further ado, I'd like to just briefly introduce our panelists.

Their complete bios are in your program. I also will make the comment that we will be taking questions throughout this through the portal for the program, and I'll be moderating them from the tablet that I have available to me. So our first speaker is Erin Keating. She's the executive analyst and senior director of Economic and Industry Insights at Cox Automotive.
 
So we've already had several Cox people talk to you during this program. Basically anything you want to know about cars, Cox pretty much can tell you. So we're very pleased to have her.

Her particular role in this is to talk about why car ownership has become less affordable, not just why the prices of cars have increased, but why the ownership characteristics, everything from insurance and other things also are influencing this. Our second speaker is a fellow Fed colleague of mine, Emily Garr Pacetti.

Emily is the Senior Principal and Interim Community Affairs Officer at the Federal Reserve Bank of Cleveland. Emily has done some very interesting work. She's done a lot of work looking at issues that impact low and moderate-income communities throughout her career.

And one piece that I happened to come across was some work they did that looked at Pittsburgh, an example they had in Pittsburgh, which looked at whether or not ride sharing, or Ubers, or those things could possibly be a solution, or not a solution necessary for getting people to work.

And last, but certainly not least, is Jayme Powell. Jayme is the executive director of the Detroit Regional Workforce Partnership. Her role in this panel is particularly interesting because they've been set up, in part, to work with firms within Detroit to figure out transportation solutions.

And I think that what's going to be very interesting to see how firms are responding to this? What kind of models- this is very on in terms of work, but where this might lead to. So I think, again, this is going to be a great opportunity for all of us.

So without further ado, we're going to start off with Erin, who's the only one who has slides on this panel, which is why we're all sitting up here. And she's going to give you a very thorough background on why auto ownership has been becoming less affordable. So thank you. Erin, please join us.

ERIN KEATING: Good afternoon, everyone, and I apologize that we are the first ones to have to wake you back up after the meal.

Thank you very much for the delicious meal.

As Rick said, I'm Erin Keating. I'm the executive analyst at Cox Automotive. I report directly into our chief economist, Jonathan Smoke, or DJ Smokey Smoke, as some of you may know him. I know that he normally does do these types of things.

So I will just caveat I am not an economist, nor do I try to play one on TV. So I will do my best to provide the industry insights that we're seeing from our amazing team that really does spend day in and day out in all of this data.

I did work for an OEM for quite some time, so my heart always sort of stays over in the OEM space for automakers and the automotive manufacturing business. But at Cox Automotive, of course, we have a real advantage to be able to see a lot of different data sources and pull some things together, especially around pricing, and availability, and inventory, and things like this.

So today, we are obviously focusing on affordability. And I'm just going to try to power through these slides, because as Rick said, I'm the only one that does have them. But I know people love these charts, so we're going to power through them, just to help set the scene of where are we, why is it so expensive, and what are some of the good points or good news, optimistic things, to be thinking about.
 
So first up, we've got the transaction prices. Oh, I've got to-- I'm like, someone else is going to advance that. Nope, that's me.

Transaction prices. So we know that we are nearing $50,000. There's only been five years-- or five times within the last five years that we've neared the $50,000 mark. Just a caveat, some of this data could be a week or two old. I'm sure you'll pardon that.

But we have seen that cars are peaking. And we are about 10% on average more than we were-- more expensive than we were before the COVID pandemic. I will go into a couple of the factors that are really influencing that, but for sure, you can see that good old economic supply and demand did hit the system in 2021.

And through 2022, we really did experience a shortage. And so that did drive up a lot of the prices as well. There are other factors that also did that, but that certainly did not help anything.

One thing we should note is that price changes have also gone up and it's been variable throughout all different manufacturers. So not any one manufacturer has really brought the average up or down. You can see we actually have a pretty decent middle there at 27% price increase since 2019.

But there are some manufacturers that A, were either lower than 2019, or all the way to the right, and we stopped publishing anyone that goes even further on the right. We see some manufacturers who have really priced themselves almost out of the market by increasing their pricing anywhere from 40% to 45% since 2019. And right there is a real challenge for automakers.

When you are not paying a ton of attention to exactly who your customer base is, regardless of how expensive it gets to make your vehicles, you will have a tougher time retaining owners and getting new ones. So there's some real reasons why some of those manufacturers are in trouble because they've raised those prices so much. But a lot of them have also raised their prices just due to extenuating circumstances.

Average auto loan rates. We know that these have been historically high, but they've also been historically low. We really did see-- I mean, I like to brag, and I shouldn't, but I was fortunate enough to buy a car in 2020 for 0% because they were giving them away at that time.

But that is not the case anymore. So I would also like to say, some of this is relative. I know certainly my husband and I have a decade between us, and so he was complaining that when he first bought his first house, he paid 13% on the house. And I know that wasn't even as high as my parents paid. And so wasn't I spoiled to think 3% to 4% on a mortgage was good?

So it does help to be a little bit-- remember what perspective is. So we did have historical lows here in these last five years, which really did get people trained on lower payments. And they are back up higher.

We are starting to normalize a little bit. But there are a lot of things that impact the auto loan rate. It's not just as simple as looking at the Federal Reserve Bank and what the Fed funds are doing. So we'll talk about that.

Next up, rates and pricing lost almost 10% of the buying pool. So this was an important thing to consider, is that as rates and pricing went up, we really priced out of the market the subprime market and lower income quintiles. Now we did make up that in most of the upper to middle class income quintiles.
 
So we did see that we actually saw the 10% nearly sort of drift over to the right, which is why we were able to sustain car sales at certain levels, or one of the reasons. But we have lost a significant portion of the buying pool for new vehicles due to the cost increases.

Used car pricing. My colleague, Mark Strand, pulled this together. And this is really important, I think, especially when we're talking about affordability. A lot of the individuals that are typically very focused on monthly payments and/or cost of ownership here would be people that are hourly workers and so forth.

And we've seen that while average hourly earnings have actually gone up, and we-- I don't how often we really talk about the fact that we have had seen some substantial wage growth-- they're not keeping pace with how fast the cars grew in costs, especially used car vehicles. So it's important to consider that they weren't growing necessarily in tandem with each other.

So what are some of the factors influencing affordability? Lord knows I have been on the phone nonstop, thanks to my colleague Mark Schirmer here, with plenty of media talking about why are cars so expensive. And there's a lot of things that really impact this.

There's interest rates, there's the transaction price to consider, and then there's the total cost of ownership. I'm going to go through a few slides after this to dig a little bit deeper into this. But just to highlight, for the auto interest rates, again, we had historically low interest rates during the pandemic.

So perspective-wise, you're thinking, these are crazy high. But they also came from very low rates. So that just is something to keep in mind as far as how consumers are thinking about it.

We've had rising inflation, which did cause the Fed to have to raise the Fed funds rate, which, of course, then also impacted the interest rates. Delinquencies and defaults, we had seen some of the highest levels in 20 plus years. And that is something that auto Lenders do take into consideration when they're looking at their portfolio of business and how to price their auto loans, as well as they look at used car values and depreciation.

And so we had really expensive used cars. So all of these factors, plus plenty more that I don't even know the secret quant analysis for, is what goes into the auto lender sphere when they're looking at how much to charge individuals on their credit, or on their auto loan. As well as we did see credit tightening for a lot of the market. So that was also a challenge.

The average transaction price. This is probably my favorite one to talk about because people are very, very confused as to how cars are built, how expensive they are. I am assuming most people in this room actually do understand the complexity. And if you don't buy now, after all that we've been learning over the last two days, come see me. We'll have a refresher. But it's a very complex thing to build a motor vehicle.

We have over 30,000 parts potentially in any one vehicle. And we did have a historic production loss over the pandemic. We have to remember we lost 10 million units and the automakers suffer because of that, because those are profitable units that they anticipated to sell over that time period, to be able to put money in investments, CapEx, and so forth for the things like the powertrain transition that we've had and the expected technology and innovation that people want in their cars.
 
You heard Pete DeLongchamps yesterday talk about how people wonder why cars are so expensive, but they want the 15 bells and whistles on the vehicle, and they'd like it to drive itself, and maybe sing to you, and massage you while you're driving, and those things cost a lot of money. I mean, my first car was a stick shift with roll-down windows and an actual key that started it, you know? And it ran just fine, I have to tell you.

But it really does drive up the cost. We have picky US consumers. And we have over 630 variants currently available in this market for what was last year, 15.8 million vehicles sold. So just think about the complexity of having to, at three years ago, in the product planning division of an OEM, they're having to sit down and think, what do we want to build?

How many variants, and models, and trim levels, and things that we want to put on this car in three years, because that's typically the production cycle? Where, then, do we want to put it into this massive country in very different geographies, given what people want to drive? Four-wheel drive versus two-wheel drive is a very basic consideration.

And then once they get it to the market here, they've got to figure out how to then allocate it to the specific dealerships. And we just take a big breath and hope to God we figured it right and that the cars are being sent to the right place at the right time and will get sold to the right people.

And when it doesn't, you see incentives come in, or you see costs having to be absorbed by the automakers to move those vehicles around. So it's a really costly thing to assuage the US consumer. And I think it bears some responsibility for consumers to think through that a little bit.

And as I'll show in a couple of slides, we'll see that people have started to accommodate their choices and options to meet certain budget goals that they have. Globalization, as we've been talking about the last two days, this is certainly something else that has increased costs for everyone. And of course, the supply chain snarls that really pushed demand way beyond supply. And I thought that Austin did a great job of really talking through the supply side yesterday.

And then there's, of course, the total cost of ownership. What I should say about this is that we know that a majority of people who are looking at the affordability crisis as very real and imminent in their lives, they are likely not looking at the total cost of ownership of a vehicle. What they are looking at is their monthly nugget, what they've got to actually shell out of the wallet every month.

And that has gotten more expensive. Insurance costs have gone through the roof. Repairs and maintenance costs are very high. And then, again, alternative powertrain accommodations.

So if a vehicle is less expensive, say, an EV, some of the leases are some of the best deals you can get out there right now. But you have to have a charger and/or you have to have a charger accessible so that you can actually make sure. And these things cost money.

So it's not apples to apples to just say, oh, get an EV and you'll save all this money on gas. You've still got to power the thing, right? So these all have continued to really drive up the price of owning the vehicle.
 
So let's just zip through these really quickly because these are just data points to show you what I'm talking about. So delinquency rates did decline in November before rising again in December. They did end the year slightly up year over year in aggregate, but they did move down year over year for subprime. So we started to see auto lenders loosen a little bit towards the end of the year and the rates get a little bit lower.

As well, defaults declined in November and December in aggregate and for subprime. And then what I was talking about here, used vehicles. So 2024 saw more normal depreciation trends versus previous years and we do expect that this is going to continue. And again, when an auto lender is looking at their portfolio of risk, something they-- oops. I haven't pushed this.

It's hard to do two screens here. When an auto lender is looking at their portfolio of risk, they are taking into consideration how reliable, how dependable, and stable are those used car prices and depreciation. And then, again, what we talked about was the loss of production.

But the loss of production in those years is now really coming to call these years, because now we're missing a bunch of young, used vehicles coming back into the market. And the used sales trends tend to be a function of supply. And we are going to hit a period of time now where we are going to be missing a lot of vehicles to the tune of 10 million, 2.5 million per year of different tranches of years. So 0 to 1 years-- or zero to three years and so on and so forth.

And then finally, as I spoke about the total cost of ownership, insurance has gone up 18.6% year over year. Last year when we looked at this, it was closer to 30%. Vehicle maintenance and repair CPI has gone up 32.5% versus 2020.

And we're getting back to normalization in how many miles we're driving. So it was one thing to be during the pandemic, and considering all this, you weren't maybe driving as much. So all of this wasn't front of mind. But everyone's getting back to using their personal transportation and that's really showing us that these things are quite expensive and people are starting to come up on these repair and maintenance costs as well.

So that's all of the evidence of why we have, really, affordability issues, and not all the reasons. There's plenty. Again, it's a very complex business. But there are some good signs, positive signs that are in the market.

Vehicle sales are anticipated to hit over 16 million this year. We're proposing that it's 16.3 million. And it will be since the first time in the pandemic.

So the market demand is out there. And we saw, towards the end of last year, that it did start to veer towards luxury vehicles. We always see luxury vehicle sales pick up at the end of the year. But we saw a pretty substantial increase this year. And so we like to say there was the Trump bump that really pushed them over.

Incentives are finally creeping back up to prepandemic levels. Again, a thing to remember, prepandemic incentives were regularly around 10%, 11% of average transaction price. We're just now back to 7.5%. So we've got some room to grow here. So there is some good signs that OEMs might be coming to the table with some incentives.
 
Real wage growth-- say that 10 times fast-- is happening. Inflation has improved. And most importantly, it's improved for our lower income quintiles. And then monthly payments are down very modestly. So those are some of the positive signs.

Now Rick asked me to throw a little something in here about what can we do. And honestly, I guess this is where I say my disclaimer is this is not the opinion of Cox Automotive, but what I came up with when I was thinking about it. And I don't have all the answers, but I'm excited to talk on this panel about some other answers.

But one thing, government and municipalities. We can't ignore the fact that the electric transition is coming. We have got to get better and faster with infrastructure because those that actually find the cars unaffordable are a lot of the times, the ones who do not have garages, or are not able to charge at home. So infrastructure is key in getting that democratized across the entire United States.

Better public transportation choices and reliability. I just came from DC where I grew up, and I was just so pleasantly reminded of how wonderful it is to have the metro take you everywhere, all the way out to the burbs and everything. And then I go home to Atlanta where it takes me 25 minutes to drive to the closest MARTA station and another 45 minutes to get to the airport. And by all that, I could have just driven and paid the price, right? So it's important that we continue to think innovatively around public transportation.

Buyers. I'm constantly talking with my KBB folks about this. Buyers just-- understand what your monthly budget is. Work with a dealer.

Here's the interesting thing about a dealer. They have a profit incentive, which means they want to sell you what their inventory is that is on the ground. And they often really do want to work with you.

We heard, again, Pete, yesterday with Group 1 Auto talking about how they didn't raise the prices in the pandemic because they want you as lifetime customers. Dealers can be helpful in working with someone to figure out what car is most in their budget. And then also be willing to consider multiple options. And again, we'll see a little bit of how that's happened.

But going in and being flexible. You may not need the three rows. You might want it. You might need it for one trip a year, but you might not need it. So how can you accommodate your demands with perhaps smaller vehicles or even cars?

And then for everyone, I just always like to say I spent a lot of my career in marketing communications. Speak to what is available. It's not all gloom and doom.

People pay attention to what we say, what the media says. That's where they get their vibes for the vibe economy, if you listen to Kyla Scanlon. It's where they figure out whether they're in real danger or not.

And to be honest with you, we're at one of the highest inventory situations we've been in a couple of years. There's lots of good options on the ground at dealers and we need to remind people that they do have options and they can look for solutions in this particular situation.

So just to quickly wrap up, I'm going to whip through a couple of things here to tell you where we stand and why I think those positive signs are here. So last year, we did 15.9 million vehicles sold. This year, we do expect 16.3 million.
 
So we are seeing a good and stable automotive market. Whether we ever get back to 17 million or more remains to be seen. But 16 million is nothing to shake a stick at. So I think it's important for us to remember that the automotive market is growing.

And then secondly, like I said, it's a good sign consumers are really starting to pay attention to what do I really need. And we saw what was gaining last year was the compact car, the compact SUV, the subcompact SUV. And the brands that had those vehicles are the ones that were doing well. The ones that were losing?

Midsize SUVs, midsize cars, full-size trucks. So customers were willing to downsize if they needed to fit within their budget and that's a good thing, because we do need people to be able to compromise on what they need in order to find a good balance here between what customers want and what automakers can deliver.

And again, brand incentives. I spoke about this already. 7.9% is the industry average right now. But you can see that light blue line is where we are now versus the darkest blue line in 2022. They've gone up substantially. They have room to grow. So we do believe incentives are going to come into the market.

And again, new vehicle inventory. We are back to pre-COVID levels, currently 400,000 more units than we had a year ago. And day supply is sitting around 75. Some manufacturers are lower, some are higher. But overall, we've got good variety on the ground.

Real earnings, as we said, are positive since May 2023. We are starting to close that gap. So we do have wage growth in conjunction with affordability challenges, costs of things going up. And that's something to be hopeful about and to be positive about.

And then inflation. This one is really-- this really hit home for me when I saw this, because that blue line, that's the really high mountain top there, that is the lowest income quintile. And so when we were talking about the inflation rates feeling-- in 3%, 2%, when we're talking about that, we're talking about relatively high income individuals.

The low income individuals are actually feeling it at some point here in 2022 at over 20% inflation. And it's just really important to remember in this large, large country of ours, there are a bulk of people who really experience these things very differently than probably most of us in this room and those that are maybe talking about affordability. It's a real crisis, and I'm sure my friends here are going to talk a little bit more about that in a minute.

And then let's see. The last one, average payments. They've come down modestly in 2024. We still have some work to do here.

But they are starting to come down just a bit. I think we went back up a little bit in January. But I think with the optimism, we can expect that things are going to continue to go down.

And of course, there are risks to the outlook. I don't know that I need to go through this entire slide, because I'm pretty sure we hammered that nail in the coffin over the last two days. There are plenty of things that could disrupt this, but at Cox Automotive, what we've tried to really stay the course on is the data tells us that we're looking at a decent year in automotive.
 
The data tells us that overall, incomes are rising, that inflation is going in the right direction, that with some modicum of evenness, even if it means that we're volatile day in and day out, but if we actually end up on the course, this year is not going to be that bad, at least for the automotive industry, as of right now.

Talk to me in a week, maybe. I don't know. Every day, we're changing. So upside risk is that we actually could really get population and labor force decline, which is less negative. We could have productivity gains.

And then we have strong income gains that could sustain stronger-than-expected consumer spending, which is always good for the economy. So that's where I'm going to leave it. I have one last slide here, just to leave up on the screen, is our forecast for 2025.

For sure, if you need any of this data updated, always feel free to check out the Cox Automotive Newsroom. We do update our figures. Mark here, my colleague, is very good about making sure all of our latest stuff is on the Newsroom, and we are consistently looking at this.

So that's always a good place to go to see what we're seeing in the automotive market. But I will now zip it and turn the floor over to my colleagues here, and we will-- and you all will do something with the screen and I will head back up to the stage. So thank you for your time.
 
RICK MATTOON: Thanks, Erin.

[APPLAUSE]

Thanks, Erin, and that was terrific. So I think we all understand now the dynamics that are going, in terms of affordability in the auto industry.

So now we're going to turn to Emily Garr Pacetti, my colleague from the Cleveland Fed. Emily, can you tell us something about what your research has shown in this area? Sort of like what solutions you've been thinking about and how you come at this issue?
 
EMILY GARR PACETTI: Absolutely. And thank you, Erin. That was a great presentation. Well, first, Rick, thank you for having me.

I joked with him yesterday that I asked him a few times whether or not he really felt that I would be helpful on this panel. I don't usually speak to a roomful of auto experts and industry leaders, so it's good to be here. So you can tell me after if I did OK.

I am honored to be part of the Fed family. I'm from the Cleveland Fed, and if for no other reason than we are really committed to bringing together people from different perspectives on various issues and learning from one another, and I have learned a ton over the last 24 hours. I really appreciated the presentations that many of you have participated in already. So I wanted to thank you for that too.

My name is Emily Garr Pacetti. As Rick said, I am a Senior Principal at the Federal Reserve Bank of Cleveland, the neighbor here. My comments are my own and of course, not those of the Cleveland Fed or the Federal Reserve System.
 
My role at the Cleveland Fed is focused on the research and outreach related to lower income workers, and more specifically, access to good jobs. I'm also on the Board of the Greater Cleveland Regional Transit Authority, and similarly, my views do not represent those of the authority.

So whether or not someone has physical access to jobs is a critical, and, I think, often overlooked element of employment stability. I think that matters to this group for two reasons. The first is how people get to work affects the auto industry's workforce.

We heard it yesterday from Pete, who you also mentioned. You can't keep up or compete if you don't have the workforce. And in this reference, it was to technicians.
And then workers, of course, are also consumers. You can't get a vehicle if you can't afford it. All of this matters. And I really appreciate the Chicago Fed bringing in this panel to provide a fuller picture of the economy and the workforce related to these challenges.

So I thought I'd offer-- before I go into some of the practice, I wanted to provide some historical context for the increase in the distance between people and jobs. And I'm very conscious of the fact that I'm in Detroit, which is, I think, the poster child of sprawl.

I'm going to focus on post-2000. So we found in past research that job access in major metro areas on average declined about 7% from 2000 to 2012. So access, or the distance between people and jobs, is still increasing post-2000. It leveled off a little bit in the teens. And there were, of course, some exceptions around the country, such as Columbus and Pittsburgh.

They had slight increases in the teens. But generally, we saw declines in job access around the country in major Metropolitan areas.

Places with the steepest declines in excess were also associated with suburban job growth. So these are from my colleagues, Elizabeth Kneebone, Kyle Fee, many others who have done a ton of work on job sprawl and job access. So shrinking cities in particular, or cities that are losing population, have seen a reduction in job access, especially for lower wage workers.

And this is really important when we think about places like Cleveland and Detroit, where long-term population trends are flat or declining. So who does this affect most? In Northeast Ohio, research found that jobs are least accessible for people with a high school degree, and this is the largest share of the regional workforce.

But even when you have proximity, of course, you don't always solve the issue just because a worker is close to a job. It Doesn't mean that the job they qualify for that job, and I will provide that caveat. But my remarks here are really focused on the distance between jobs and workers.

So of course, the pandemic came, and it shifted the ground under our feet. I think efforts to gauge what's happening is very real, and it changes week to week and month to month as we watch the numbers come in terms of transit riders, in terms of jobs and workforce coming back into downtown, what's happening with remote work. I really think this is an area ripe for research because it has huge implications for not only transportation, but jobs.
 
Traditionally, to improve job access for residents, one might consider two approaches. You create incentives for employers and workers to locate closer together, or you improve access to and affordability of transportation options. And that's what I think this conversation is focused on.

Of course, to increase access to transportation, one is the vehicle. Affordability of vehicles themselves is a real challenge we've heard yesterday and today. Insurance costs, maintenance costs, general upkeep all go along with the prices themselves to make vehicles hard to afford for a lot of families.

Anecdotes from employers and industry are really helpful in this regard and we heard that yesterday from Kristin and President Goolsbee, that we routinely hear from businesses, workforces, and workforce practitioners like yourself, and nonprofits, just what's going on in the community. And in this sense, I know in our research and outreach at the Cleveland Fed, transportation is constantly mentioned as a barrier for lower income people to get to work. That cuts both urban, rural, and suburban contexts.

So then there's also public transit. And it does have limitations. Only about 5% of the US population uses public transit to get to work. This is, of course, higher in urban areas, and it's less prevalent in rural areas.

Traditional public transit buses and trains aren't always an option for lower income families and the solution set really needs to include a variety of transit modes, including cars, especially in less densely populated places. So we're going to talk about what some of those look like in a bit. In short, no one sector can solve this. It really requires innovation and perhaps different responses and ways of thinking.

The way I like to think about it is both multinodal, so lots of different stops and places where one goes on a journey, and multimodal. There are many different ways to get around. And this is very different than breadwinner commuting of post-war Detroit, for example, where you'd have one worker and a job, and you go back and forth from that worker and job.

That doesn't include childcare. That doesn't include a second job. That doesn't include many other steps you would make along the way that are just the reality of today's workforce.

So as we think about access to jobs and innovation, we have to be sure we are skating to where the puck is headed. It is what, January-- it's February now in Detroit. So we can't just stay stuck in where we've been or where we are today.

And with that, I do want to turn to a little bit of the innovations, but I think we're going to get there in a little bit. So I will turn it to you, Jayme.
 
RICK MATTOON: Thank you. So thanks very much, Emily. Jayme, one thing I hope you'll do is share with us what the purpose, or the goals of the Detroit Regional Workforce Partnership. It's a unique organization. A lot of people aren't from Detroit, so they're not as familiar in how you perceive this particular issue.
 
JAYME POWELL: Absolutely. And first and foremost, I just wanted to say thank you, Rick, and thank you to the Federal Reserve for both having me. It's truly an honor to serve on the panel. So thank you.

Again, good afternoon. I'm Jayme Powell. I'm the Executive Director of the Detroit Regional Workforce Partnership. We were formed in late 2023 by the business community and we are an employer-led workforce intermediary housed at the Community Foundation of Southeast Michigan.
 
And our role, we exist to really simplify the way in which our business community collaborates with workforce development organizations from across the Southeast Michigan region in order to really build regional talent strategies that allow us to be really targeted around addressing some of our most pressing and urgent talent demands. And the strategies that we work on with, with our employer partners really vary because we organize our employers by sector, and we work to help them navigate through a discovery phase that allows them to really dig deep and truly understand some of the root causes to the pressing talent challenges that they've identified.

And we work to lift up local, regional, and national solutions that have proven some success. We work to pilot new innovative solutions where it's appropriate. And we work to bring those effective solutions to scale so we can really meet a regional demand.

Our employers really face a host of issues that really affect their ability to attract and retain talent. And I'm sure it's no surprise to everyone here, especially given the topic of our panel today, that one of the most persistent challenges that our region here faces is the reliability and affordability of transportation options for workers.

There's been a really direct linkage shown between transportation access and chronic tardiness and absenteeism at work. And while that's true for all employers, the social service sector is certainly really experiencing that challenge because it really results in lost wages and a surge in costs to backfill roles for shift workers. And I'd say overall, the result is a huge loss in productivity.

So overall, chronic absenteeism is a huge bottom line killer for employers. And it affects employers of all sizes. And really, what research is showing is that across the state of Michigan, about a quarter of adults have, at some point, experienced transportation insecurity in their career lifetime, and that there's a real connection between transportation access and the ability to retain a job over time, which, of course, has implications for lifelong earning potential.

And so this research, in combination with evidence provided by our employer partners, has really stimulated a body of work for the Detroit Regional Workforce Partnership around employee retention. But Southeast Michigan has really been plagued by both the rising costs of personal vehicle ownership, as well as poor public transit infrastructure.
And that's really important, because there's an overwhelming number of individuals across the Southeast Michigan region that are commuting to and from Detroit every single day. And over 2/3 of Detroit residents are commuting outside of city limits for work every single day. And I think what that reinforces is the need for real regional collaboration, for regional solutions that work for everybody.

I think what we probably all know here is that employers have an imperative to care. They do care. And they care because, as I mentioned earlier, it, of course, affects their bottom line. It affects their current and future employees' well-being over time. And it certainly has significant implications for the overall health and vitality of our economy at large.
 
And so the Detroit Regional Workforce Partnership is really honored to be both a partner to our employers, a partner of our regional workforce development organizations, and, of course, our state partners, to really lift up a body of work that allows us to both discover and identify the solutions that are working for employers. And I know early in our work, we've talked a lot about the kind of origin and destination mapping to look at where microtransit can potentially be a solution to gap fill where there's maybe a gap in fixed routes where there can be expanded commuter benefits for part time and hourly wage workers. Where there's an opportunity to drive greater collaboration for carpool incentives, and leveraging the influence of the business voices to advocate for improvements in fixed routes, or the removal of opt-out communities.

And so there are solutions out there, and we're really working with our partners and our employers to both uncover them and build the right technical assistance tools to both guide the discovery and the implementation of those solutions. So we're really grateful to be a trusted partner of both our employers and regional and statewide partners.
 
RICK MATTOON: That's terrific. So you've opened up a whole host of questions, and there's questions already coming in pretty quickly on this. So you've clearly hit a nerve here.
So the first thing I guess is all of you touched a little bit on potential solutions, or ways in which we can do this. So I'm going to ask you the unfair question, and I ask each of you this. So if you had a magic wand and could pick a strategy that you think would be most effective, what would that look like? And also, who are the partners you need to have at the table to make that happen. So Erin, we'll go--
 
ERIN KEATING: Oh goodness. I knew you were going to come to me first. So I guess-- I'm assuming you want me to think of it from the automaker's perspective, or from the--
 
RICK MATTOON: Yeah. I mean, you can take it from whatever perspective you think. I mean, yeah. Well, how would the automakers--
 
ERIN KEATING: My opinions own there.

[LAUGHTER]

I mean, I think that a lot of the discussions we've been having over the last two days is how do we remove barriers to manufacturing, to the increasing costs of vehicles? A lot of this-- for sure, no one-- everyone agrees that the tariff situation right now is-- it's untenable.

It's not reasonable even to have it 30 days. I mean, it doesn't allow strategic companies to really build their strategy going forward. And these are massive manufacturers and employers across the country that really need stability in regulation, in policy, and so on and so forth. And I'd like to say that it doesn't really matter sometimes whether you like what the policy or regulation is. It matters more that there's stability with it.

And we saw that even with consumer sentiment, the Trump bump again after the election. We saw that it was a divided nation. But the fact that it was decisive and that it was a peaceful transfer of power, people felt better.
 
And so I think that for the automakers specifically, I would assume that's one of the big ways that we can really help bring costs down, is to get some stability in the requirements, some stability and standardization across the country, and things like standards on engine transmissions and things are going to be critical to be able to bring the cost down.
 
RICK MATTOON: OK. So Your magic wand is stability?
 
ERIN KEATING: Sure. Yeah. I know it's asking a lot right now, but--

RICK MATTOON: Right. Right. But no, that's good. I mean, as I said, since the theme of this conference has been so much about uncertainty, that's kind of the counterpoint to that. So, Emily, how about your magic wand?
 
EMILY GARR PACETTI: Oh, I think we should go to Jayme now.

[LAUGHTER]

ERIN KEATING: Come on. I had to go right away.
 
EMILY GARR PACETTI: You ready?
 
JAYME POWELL: I'm happy to.

EMILY GARR PACETTI: Are you ready?
 
JAYME POWELL: I'm happy to. I think my magic wand is a little bit more of stability and more of transformation. And I think that's maybe generated by the fact-- I'm a long-time Detroit region native. And so I've certainly-- I'm a one-car household.

And so this certainly hits home with me. But I'd say you asked about partners and then you asked about solutions. And so--
 
RICK MATTOON: Yeah. Who needs to be at the table?
 
JAYME POWELL:Do you know the short answer is everybody. Nobody is left out of the equation. But my angle, the world in which I'm coming from is that solutions are really both motivated by and driven by employers. And so for us, employers have to then partner and be willing to both share information and data with partners such as ourselves, the intermediary bodies that can kind of serve as organizers of the players at the table.

And that includes government entities. It includes consultants, and those who can help us both analyze the data. Because I think the things that we've really been working on in our early discovery is a lot of what I mentioned earlier about this kind of origin and destination mapping. We have to understand more of the commute patterns that our workers are taking.
 
And I think-- you mentioned this earlier as well, which is work isn't the only place that we go every day. We go to the grocery store, we go to drop our kids off at childcare, or our dog to doggy daycare.

But our commute patterns are really interesting to track, because we really have to understand the proximity in which somebody is commuting to and from work. And so part of those investments are surely in infrastructure. We certainly can't ignore the kind of public play on the need for infrastructure here in the Detroit region.

But employers have to play a really great role in both helping us understand those commute patterns, using cellular data, using some of their kind of employee-based information to help us do the kind of mapping work that also allows us to identify the gaps that allows us to improve fixed routes, or invest in greater microtransit solutions. So I know that we've certainly been having many conversations with our Regional Transit Authority, and SMART, and our other operating bodies to ensure that we can expand some of those microtransit solutions, at least for starters, to fill the gap where there may be an absence in some of the more expensive fixed route solutions.

So I think thinking about leveraging business voice for advocacy purposes, thinking about policy reform. And so as you can see, it's a bit of a multifaceted strategy that requires everybody to be at the table effectively contributing and participating, and really owning the solution. But of course, my vantage point is that employers are critical to playing that key role.
 
RICK MATTOON: Yeah. I really like the idea of starting with understanding this mapping of what the need is so you don't presume what the correct solution is going to be.
 
JAYME POWELL: Yeah. There's no blanket solution.

RICK MATTOON: Right, right. And so you actually tailor it based on what the needs are and the usage pattern is. So that's a really interesting approach. Emily?
 
EMILY GARR PACETTI: All right. Can you give me two magic wands?
 
RICK MATTOON: Yeah.
 
EMILY GARR PACETTI: OK. Then I think I can do this.
 
RICK MATTOON: OK.
 
EMILY GARR PACETTI: So one, I have to say this, is safe, affordable, and reliable public transportation. I mean, really, if I had a wand to do that, I would.

It's not going to solve all the transit issues that we're talking about today and transportation issues. And so then I go to Magic wand number two. And I think about when the transit system ends, and thinking about-- especially in these areas of declining populations where infrastructure is very costly, it's hard to expand the infrastructure with a declining population. It's hard to improve the infrastructure with a declining population.
 
And so you have to have other sectors come to the table. And the private sector is a huge part of that. And when we think about-- I know at the RTA, we are knocking on doors of employer is looking for microtransit pilots and really talking to employers about, hey-- and this is not me. This is the GM.

But what do you what do you guys need? How can we work together? So magic wand is not having to go to 50 different, or 100 different, or 1,000 different employers' doors.
I wish there was a way to understand more about a comprehensive landscape assessment of needs and where the solutions are. And I think that's the tricky part. When you look at like microtransit pilots, they're all over the country, and some are successful and many are not.

And it's like, I wish there was an easy way to custom build oh, this is the answer for your community. And it's so much more complex than that. So I guess yeah, I take my two magic wands, and one is to just-- safe, reliable, and affordable public transit. But then another is to just really have some mechanism for coordinating and understanding employer need to be able to pair the two together.
 
RICK MATTOON: Well, you definitely earned your second magic wand through your answers. So Erin, I've got a question for you, and I pretty well know where this is going to head. It came from our audience.

But obviously, one of the things that's been brought up throughout this conference is the cheapest car ownership option is largely Chinese electric vehicles. How should we think about that?
 
ERIN KEATING: So I think this was actually raised yesterday as well. I do want to always caution people when they're thinking about the price tags that are being thrown around with Chinese EVs. They are not homologated for the United States. And again, when we talk about regulation and policy, there are a ton of safety regulations that are required to homologate those cars for the United States.

So it is a misnomer that you're going to bring over one of those cars for $14,000, and that's how much you're going to sell it for. So I just want to make sure that is clear, because I don't know that we talk enough about the fact that the prices do not translate to our market, which is why our market is more expensive to manufacture in.
I mean, the latest safety regulation that we need now is to be able to break what is it, 90 miles an hour away? I mean, it's just an insane amount of innovation that needs to go into the lowest trim car, as well as the highest trim car.

Some of these, you would argue, are very, very good for safety. But some of them are very, very expensive. So we do need to put that caveat on that.

I think if you talk to the dealer base, the franchise base, I think they'd say that if there's a Chinese manufacturer that can make their way in here and the cars are appealing and affordable, they would likely be A, raise their hand to have a franchise.

Obviously, I think it needs to be considered because of the affordability crunch. I just think that the political environment right now is so spicy that I'm just not sure how that actually works itself out in any kind of short fashion. And perhaps by that point, I think every automaker has felt the pressure enough that there's a need to catch up, a need to get better.
 
Some will. I do think some are poised to get better at it. Some won't. Sometimes it's really hard-- old habits are hard to break.

And when you've seen a vehicle broken down to its very components and parts-- I know you guys went and visited Caresoft Global the other day. I've had a chance to walk through their factory when they had the Chinese EVs there alongside of the American counterparts, or other counterparts.

And it's astonishing just the way in which they've looked to trim corners, because every little milligram counts when you're thinking about aerodynamic efficiency for electric vehicles and things like this. So I think that it's not a bad thing that all other manufacturers are being put on notice to say, hey, what can we do differently here to produce a less expensive vehicle?

And it might get really uncomfortable for a bit, but that's what competition's supposed to do. It's supposed to push up the preparedness and the quality of everybody that wants to compete. But the political environment, I can't tell you.

I can't imagine that they're coming anytime soon. But I get why people think, why can't I just have that? Just I'm telling you, you're not getting it for 14 grand.

[LAUGHTER]
 
RICK MATTOON: Thanks, Erin. So Jayme, we have a question from the audience for you, which is somebody who obviously knows Detroit. So the question is, regional cooperation on transportation in Detroit has been stymied by political boundaries and fiefdoms for many years. Do you see any progress to greater integration on regional public transit?
 
JAYME POWELL: Someone knows Detroit well. I'd say the short answer is yes. It's really complicated. But I think that's why regional intermediary bodies like ourselves exist. It's to build trust, to build connection, to build shared understanding.

You're right. We do kind of exist in these little microcosms based on geography, because everyone kind of puts their head down and is like, that's my territory. That's all I have to worry about. I can't worry about anything beyond that.

But when you can bring together intermediary bodies that can help keep us organized, allow us to see the bigger picture, help compile and aggregate all of this information that gives us this broader context about what we're facing and why it matters to take that regional approach, and I think that's part of the employer vantage point, the louder those employer voices become.

Employers aren't recruiting talent based on city or county. They want the best talent that they can get their hands on that fills their immediate needs and their forecasted needs. And so when you think about that kind of cooperation, I'd say our role is critical because our imperative is to lift up the voices of our business community and get them a little bit more proactively engaged.
 
And I think if you think about-- I'd say our employer voices, our business leaders have a really unique value proposition, because they carry a lot of influence. If they have a lot of stake in the game and they understand the stake that they carry, and then they also duly understand the kind of return on investment by investing their time, their energy, their capital, their data in understanding the context of the challenge, and then even taking a step beyond that to have a stake in the solutions. That is where you get a little bit of a greater set of regional cooperation. And so I think that's why that work is really so important.

RICK MATTOON: So just to clarify, from your perspective, you're saying that you think particularly the firms are the ones that have the opportunity to create leverage for this regional cooperation?
 
JAYME POWELL: Absolutely.

RICK MATTOON: Because again, as you say, the governmental entities, often it's harder for them to cooperate just because they're so boundary-defined.
 
JAYME POWELL: Absolutely.

RICK MATTOON: OK. That's great. So Emily, now I've got a question for you, because you kind of hinted at this, and this came from the audience.

So one of the issues also is, again, is location of this spatial distance issue. So one of the things is for a time, a lot of the development was greenfield-oriented development. That's often completely disconnected from public transit.

Are there any sort of best-practice solutions that can address that, the footprint of where jobs are and where development occurs? And I mean, this is a big question so I almost apologize in advance for asking you.
 
EMILY GARR PACETTI: I'll try. I don't how satisfactory this will be. So I can answer it two ways, one just with examples of things that I know are happening in Northeast Ohio. So that's how I'll take this one. It's a big issue there.

When I say Northeast Ohio, just so you know, it's Canton, Akron, Cleveland. There's a lot of rural areas. It's a 16 to 18 county area around the city, if you will. So quite a bit of geography.

And when we think about development and where we are attracting new employers to-- so this is before-- we can talk about existing infrastructure. I'm talking about before we attract a company or try to attract a company, there was a regional intermediary of foundations called the Fund for Our Economic Future who worked with a national nonprofit to create a tool that helped employers. And they worked with the local economic development organization-- regional economic development organization, to create a tool to help employers identify where their labor pools would be coming from if they located in a certain area.

So they have this. And this is a real-- this is very helpful. And you can match, like, what is the skill set that you need, and what type of labor pool are you looking for in whatever place you're looking. So that's just one example of how they tried to address that issue head on before it gets to a problem of a large distance between workers and employers.

There's a lot of manufacturers in the Cleveland area who have done local hiring efforts. And so we visited a few who are really trying to hire more locally from the community. And then I'll give the example of Pittsburgh that you started off with, Rick. And thank you so much for dusting off old research.
 
RICK MATTOON: I was fascinated. That's why I called Emily. I read this paper. I was like, I love this paper.
 
EMILY GARR PACETTI: Yeah. It's lovely when somebody sees research that you conducted seven years ago and they ask you to talk about it. And I appreciated the opportunity. I will say that was just-- it seems like decades ago that we were talking about ride-hailing services, like Lyft and Uber, if you guys can think back 10 years.

I mean, can you think back 10 years ago? This was cutting-edge stuff, you know? So I will say we did this assessment and we found-- I think I have the numbers here somewhere. But we found that if you extend-- we looked at all these areas in Pittsburgh where there were job centers, or Allegheny County generally.

We looked at where the job centers were, and we looked at where the workers lived. And the public transit infrastructure just didn't get you everywhere. And so if you added ride-hailing, as I don't know. I think there's lots of creative ways to do it. But let's say subsidies for ride-hailing services that helped you get to a job site, you would add 70,000 additional jobs within a 90-minute commute zone. You would have access to 70,000 additional jobs.

And we looked at where those job centers were. The airport was one of them. And fast forward, they're undergoing major renovations at their airport. It falls outside of the public transit line.

And no, they didn't adopt our recommendations for ride hailing or whatnot. I don't even know if we had formal recommendations in there. But there is now the Workforce Development Organization, the airport, and there's one other partner in there that I'm forgetting. There's probably a couple partners.

But they're working together to have another bus line run directly from the endpoint. It's the last-mile service, the endpoint of the public transit system to the airport. And the airport needed that because the workers-- they're undergoing all these renovations and they need the workers to get to the job site.

So this was just one-- it's a very isolated case. It's just one example. But that's a great example of collaboration across sectors. And it's getting people out to a job site that already exists. They're not going to move the airport.

And so that's one where I just think there could be more examples like that out there, where the conversation just needs to happen. And it needs to be a cross-sector one.
 
RICK MATTOON: That's great. No, thanks for that answer. So this is for Erin. And it's also-- let's go back in time. So at one point, when I was working in Chicago, one of the answers was going to be fractional car ownership.
 
ERIN KEATING: Oh, geez. Yeah.

RICK MATTOON: And the Zipcar, right?
 
ERIN KEATING: I remember this. Yeah.
 
RICK MATTOON: So what happened to the Zipcar? Should we be thinking about bringing the Zipcar back, or fractional ownership as being a potential solution? And I'll ask-- any of the panelists are welcome to join in on this.
 
ERIN KEATING: I mean, at the time when I was at Audi, we had started Audi on Demand, and I don't believe that program runs anymore. There are some that are still-- right? Smartcar, and-- there's a couple that are still actually working.
 
And I would say that the urban folks that I've met that utilize these services think that they're fantastic. But for automakers specifically, I mean, it's quite expensive to maintain a fleet of vehicles an to hope and pray that people are actually going to buy in to fractional ownership.

And Zipcar is a little bit different because you're actually just paying legitimately to basically rent the car for a couple of hours, whereas a lot of the automotive manufacturers had gone into building fleets that were specifically for customers that would say, oh, hey, I want to-- I'm going to buy a-- I'm going to pay $1,000 a month and that means I can basically borrow any of the cars that are available in this particular fleet.

A lot of reasons that would not work. And typically, they were penciled for luxury vehicles because those who could afford to swap in and out. I will say, Volkswagen just put this program out, and it's at two dealerships in Georgia right now. And I have come close to considering it because my son's car died and we need to get another car. And I really don't know that I want to buy a new car at this moment.

I probably shouldn't say that, but they have-- basically, if you've ever worked at an OEM, typically you have employee leases and things like this where it's all inclusive. So the price includes the insurance, and tagging, and everything like that.

And so they're offering that to consumers, where you could basically buy in to be able to pick and choose, and have a Jetta for a month, or three months, or whatever it is. So it seems like a really interesting way to get folks into bridge cars. If their car breaks down and they need a personal transportation to get somewhere, and you can't make a quick decision on how you're going to do that, would that make sense, that some of these manufacturers come up with these programs, which are essentially extended rentals?

To me, it's really appealing because it doesn't hold me to the vehicle for a long time. The cost is actually relatively reasonable. And it's all of it. I don't have to now re-insure the car, or get this, that, and the other done.

So it truly seems-- I haven't done it yet-- like a hassle-free way to get that interim solution while you work through how do I get the next car, or what am I going to do about the next vehicle? But otherwise, it's an expensive endeavor and you have to have consumer demand for it. And I don't think we've seen the consumer demand for it and economics.
 
RICK MATTOON: So do either of the other two of you have any thoughts about fractional ownership? Have you ever thought about it as being possible?
 
JAYME POWELL:I haven't for myself.
 
RICK MATTOON: Oh, you-- wow.
 
JAYME POWELL: No, but I don't know. I think I agree with Erin. It can be a really expensive proposition, but it's also a more short- term solution. And I think that people are really interested in figuring out a sustainable and affordable solution for themselves. So when I think about low-income workers, for instance, it's not the most viable solution. Yeah, I guess--

ERIN KEATING: I would say they're like scooters and everything. I mean, I don't-- if any of you have been to any of the cities where they've really implemented the electric bikes and scooters. I mean, it terrifies me.
 
I saw some guy the other day with a helmet going, I swear, 30 miles an hour on a scooter. And I'm thinking, that looks just really dangerous. But man, he was getting from point A to point B the way he needed to.

And I do think that maybe vehicles are not necessarily the-- four wheels are not necessarily the right way to go, but two-wheel. It seems like that tends to pick up at least in urban markets. You see a ton of people in New York City on bikes all the time and so forth.

JAYME POWELL:I think that relies on that kind of density in those urban core areas.

ERIN KEATING: What are you going to do with 30 miles?

JAYME POWELL: When you're thinking about the kind of proximity of commute distance, I mean, that's when that is a really challenging concept. But when you are thinking about really dense urban areas, and I think we often struggle with density challenges here. And so it is an option for some, but not a very viable solution for the masses.

ERIN KEATING: Absolutely.
 
EMILY GARR PACETTI: I'll just jump. I do not have anything to weigh in specifically on this, but I will say the same group of foundations that I had referred to before, they, in 2019, ran a challenge, a competition for innovations and ideas for mobility and transit.

And that's where you can get-- where are these innovations that work for a specific community, in a specific neighborhood, with specific partners that really help to connect lower income workers to their jobs? And there were a lot of great examples that came out of that can be scaled.

And I'm not saying all of them were successful, but I think that's kind of a cool model to think about. Employers were very engaged. Nonprofits were very engaged. The community was very engaged. And a couple different partnerships came out of that.

One was it's not always about public transit. So a lot of them found out-- they gave the free bus passes. But then when they bought the free bus passes, the buses didn't always get them to the job they needed to go to. And so the wraparound services and the fees for car repairs were important. And the savings to be able to buy an affordable car were important.

But also there were other innovations in shared mobility and share rides, and working with employers to subsidize those rides. And so there was a lot of interesting things that came up that could potentially be sustainable for a community. And they were very catered and customized to that place. So just a thought.
 
RICK MATTOON: Great. So two years ago, we had a presenter who was very interesting and was related to this topic. And one of the things his organization did was make sure that particularly low-income people had access to reliable used cars, and also with a notion that they would have understanding of how to handle financial arrangements with them, what the cost of ownership. So there was educating the consumer to be able to be responsible, but also making sure that the vehicle that they were being given was something that was dependable as a possible solution.
 
How do you think about that as a possible answer? Again, if we're assuming that the answer in some places has to be autocentric, is there a way in which we can make it so that any consumer can have an access to a reasonably priced, reliable car, and exactly what are the inputs to making that happen? I mean, how deep of a subsidy do you have to do that? So I realize that's a lot of questions all at once. So I'll throw it open to whoever wants to jump-- take the jump off first.

ERIN KEATING: Erin? Oh, gosh. You're going to look at me.

I mean, again, we're about to hit a challenge with used cars because typically, if you want a used car, it means someone else had to have bought it in the first place and used it for a while, and it has to have been produced. And we did just go through unprecedented times.

I think it's an interesting thought. There certainly are-- the fleet business is a substantial amount of business in the market, and we've seen it going down, whether it's governmental fleets, or rental fleets, and so on and so forth. So I don't how it would exactly work.

And the question would be, I mean, I guess maybe that is somewhere where you think if there needs to be a state subsidized vehicle that's just less expensive, who raises their hand to do that?
 
RICK MATTOON: Right.
 
ERIN KEATING: And how do you afford that and how do you disperse the benefit, I think, is a challenge. Yeah. I don't know that I have a good answer for that. Sorry, Rick.
 
RICK MATTOON: Anybody else have a good answer to that?
 
ERIN KEATING: No one wants to step into that.

RICK MATTOON: So I guess the real question, everybody's been talking about this is, is exactly-- so what is particularly the role of firms in solving this problem? So I'm going to start with Emily first. And this is like, why should they be involved in transit solutions? What should be their role in doing that and how should we think about that?
 
EMILY GARR PACETTI: So the name of that competition that I refer to is the Paradox Prize. No car, no job, no job, no car. So that's why employers should care. It's their workforce. And their workforce are also their consumers.

So yeah. I think employer engagement is really important, but it's not-- I think it's hard to-- I mean, you can probably speak to this better than I can, because you live it every day. But yeah, it's hard to engage employers because you talk to one employer, you talk to one employer. They're all very different. They have different needs They're located in different places.

Some are small, some are large. I mean, these things matter when you're trying to develop a microtransit program, for example, or carpool to work, or figure out where the extension of the public transit bus goes. So I do think engagement matters. I think engagement is difficult. And I think I'm going to toss it to you, because I think you guys have some working models here.
 
JAYME POWELL: Yeah. I think I've been-- I don't want to belabor the points I think that I shared earlier, but I'd say our role is not just working employer by employer. Like you said, there will be a unique value proposition that some employers play. Some are able to do more than others, like small employers, for instance, maybe have greater challenges in supporting workers than maybe a very large Fortune 500 companies.

But part of what we are encouraging employers to do is really peer-to-peer collaboration. It should not be just one employer working with one public agency working with one intermediary. It is really a joint effort. And so I think the role of employers is to continue to push innovation.

We talked about that a little bit. It's really important, the solutions. And there have been some solutions that have proven to be effective. And we can work to expand or replicate those models. But there's also new innovations to be discovered.

And so while we certainly have to find solutions to both our public transit challenges and our infrastructure challenges, and the cost of owning a personal vehicle. I think Emily also just mentioned like, carpool incentives. How do you incentivize your workers to both support each other and to-- and I think that can also be done through their tenure over time. How do you provide greater incentives to those that are able to also retain their employment?

And so I think it's up to employers who are used to really pushing innovation, and pushing each other and I think that kind of regional collaboration where businesses are learning from each other. I mean, in a lot of our employer collaboratives, while we do a great job of lifting up research and the most unique value of time that we spend with each other are the businesses talking to each other and learning from each other. And that is when we get the most excitement and enthusiasm in the room. So I think a lot of the employers' responsibility is to push innovation to share what's working and what's not, even though they might be working side by side with their competitors.

This is a regional play for regional prosperity, one that both benefits those employers' bottom lines, their ability to increase their employee wellbeing, which then has a long-term effect on their ability to sustain a workforce and save cost. And so I think when employers can understand both the return that they get on investing in their workers and the solutions that work best for their workforce, we tend to both enable a greater discovery of how we build agency, and that's agency of choice. And so I think that's how we build up our region and thus the employers really get the benefit of it.

RICK MATTOON: Thanks.
 
ERIN KEATING: If I could just chime in really quickly on that. I mean, I came in here on Cox Automotive skis, so I'm going to jump out a little bit over my skis and just point something, out as you guys were talking about it.

I mean, having commercial fleets is not an unheard of thing. And certainly there are incentive packages, usually for executives and those that are higher ranked in companies that include company cars. It's not a foreign concept. It took us a long time to get to the 401(k) replace the pension. I think just this week, they're announcing over 50% adoption now of 401(k)s.
 
And health insurance didn't used to be provided by your company, but now it is. So I would imagine that a lot of businesses can also just look at what does that really mean to have a commercial fleet? What does it really mean to offer personal transportation as an incentive, or as a benefit to employees, regardless of what their rank and file is within the organization?

In the UK, it's a heavily commercialized business, where if you work for a company, a lot of people there have commercial vehicles. And so I would imagine that it might be a slow burn, but we have made changes along the way of employment, and benefits, and so forth. And again, you need someone driving the car to turn it into a used car.
This is exactly what OEMs do with the employee vehicles dealers. I mean, a lot of our dealers are major employers in the markets that they serve, and are major community contributors. And yes, they let their sales guys and their parts guys drive the vehicles, but it also produces a used vehicle they can then sell.

So there is a return on investment there if you're thinking creatively around how to leverage the need for the worker with the need for developing a used car market and so on and so forth. So just my two cents, as Erin Keating, not Cox Automotive.

EMILY GARR PACETTI: This is a difficult one for me, Rick, because I'm used to speaking to different audiences. So usually when someone says, hey, what can an employer do? Well, an employer can subsidize bus passes, or an employer can help support more flexible work hours. There are many ways that employers can engage with the public transit system.

And I'm trying to really think about what is most relevant for this audience and I'm coming up short, except I think when employers think about how to really increase access to jobs for their-- so I'm talking about my employers generally. When they think about providing access to workers, I do think it helps illuminate where the gaps are.

Because when you go offer a worker a bus pass, and they're like, thanks, but no thanks. It takes me-- I have to ride seven buses to get here every day. Oh, OK. Well, maybe that's why it might be a struggle to find workers.

I don't know. But it can illuminate other challenges. And that's the only thing that will get us to innovation, is when we really figure out what are the challenges today. Because the challenges today look very different than they did five years ago.

And so I do-- I guess the call out here is just for folks to engage on this issue, because it's such a big one, especially as cars are more expensive. And I do think the need for innovation is very great here, and employers do need to be engaged around some of the answers because they have a stake in the game.
 
RICK MATTOON: Emily, you have the last-- well, Jayme, if you can squeeze it in. We're almost at time.
 
JAYME POWELL: We got seven seconds? Well, I'll save it. I'll save it.

RICK MATTOON: OK. Well, anyway, thank you all for your incredibly insightful thoughts that you've shared with your audience and for your terrific answers to all of our questions, both mine and from our panelists. Please join me in thanking these wonderful panelists for their presentation.
 
[APPLAUSE]

We now have a 15-minute break, which means, of course, we're going to feed you again. Because remember, Central Bank runs on stomach. So we always have food. And then we will be back with Kristin Dziczek will be moderating the final panel of the day. And we're very excited for that to happen. So thanks again. Please get yourself some coffee or a drink, and--

ERIN KEATING: Thank you.

RICK MATTOON: Thanks again.
 
JAYME POWELL: Thank you.

EMILY GARR PACETTI: Thanks ladies.