What is the Relationship Between Transportation and the Economy?

by Josh Biggs in Business on 23rd January 2023

Transportation is one of the most important parts of a working economy. It allows for the transportation of inputs and production supplies to manufacturing plants where they are needed, as well as labor to these manufacturing plants, and outputs of production to customers. 

Context Matters

The relationship between transportation and the economy is typically dependent on the context. For example, some businesses thrive as part of a small cluster of interconnected businesses not requiring much transportation between themselves. On the other hand, some businesses rely on region-wide and even international connectivity.

Leveraging an Understanding of Transportation

Businesses that understand how transportation works, including the challenges and opportunities it presents, put themselves in a better position to develop investment strategies that increase competitiveness and productivity. Such investments can also influence how the labor market behaves because if people are unable to move from home to work and back, then productivity, competitiveness, and economic output all decline. 

While how transportation impacts the three can take time to manifest, understanding them is critical for the distribution of not only labor but also economic activity. All three can also impact the attractiveness of certain cities and towns, the quality of life, and the environment.

Reducing Transportation Costs

Transportation is a significant cost for businesses and as we have seen, it can impact different parts of a business. Governments also understand how and why the distribution of economic activity and labor impacts the economy and this is why they are keen on ensuring improvements in transportation connectivity.

These improvements are realized by increasing network capacity. Governments at different levels engage with engineering companies to build this capacity. Working with a transportation engineering company like Civil Design Inc which has a multidisciplinary team of engineers is often how they achieve increased network connectivity. The result is reduced travel times, transportation reliability, and reduction in transportation costs. 

The Benefits of Reduced Transportation Costs

Increased transportation connectivity that leads to a reduction in transportation costs can make it easier for businesses to connect with suppliers. This enables businesses to access higher-quality products, or better products at a lower cost. It also helps make connecting with customers much easier. Businesses can channel some of their savings into reaching more last-mile customers and supply markets further from them. 

Businesses also have a much bigger pool of candidates to choose from. Transportation costs are critical for many people who do not want to work far from offices while also enduring poor transportation connectivity. Businesses located in areas with good transportation can attract better candidates which means they are more likely to get better matches for open opportunities.

Lastly, lower transportation costs make it easier for businesses to allow a wider pool of customers access to their products. They can also sell their products at a lower rate, passing on their savings to their customers, thereby increasing competitiveness.

Transportation investments, from the government or businesses, influence the location of economic activity. This can allow businesses to relocate to productive locations with a better labor pool. They also allow candidates and customers access to businesses they would not otherwise.

Categories: Business