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Contracting transit operations

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Despite these commonly held views, contracted service yields only moderate cost savings. In a study of 400 transit agencies spanning a 10 year period from 1992 to 2002, partially contracted service yielded a 7.8% cost savings while contracting all service yielded only a 5.5% savings.<ref name="Iseki 2004">Iseki, Hiroyuki (2004), “Does Contracting Matter? The Determinants of Contracting and Contracting’s Effects on Cost Efficiency in US Fixed-Route Bus Transit Service”, University of California, Los Angeles, unpublished dissertation.</ref> Research has also shown a strong self selection bias to be present among transit agencies. If an agency can achieve cost savings through contracting either a part or all of its service, it will do so. Other agencies efficiently delivering their own directly provided service are much less likely to contract service. Thus, transit agencies cannot necessarily look to other agencies for guidance on the choice of contracting.
==Effect of contracting on labor== 
Of the savings achieved through privatization of transit operations, the vast majority appears to come at the expense of labor rather than an increase in productivity. Contracted workers earn 38% less per hour and 34% less per year than their publicly employed counterparts. Benefits were the most severely different <ref>Kim, Songju (2005), “The Effects of Fixed-Route Transit Service Contracting on Labour”, University of California, Berkeley, unpublished dissertation.</ref>
==Additional effects from contracting==
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