Policy dissonance when wearing the “employer hat”: The practice of governmental vehicle reimbursement among public sector employees

Abstract

Transport-related benefits can have a significant impact on employees’ vehicle ownership and use. Policy implemented by governments, which are often both large-scale employers and models for the private sector, are especially important in determining travel behavior. The research focuses on the Israeli practice of providing substantial subsidies for public sector employees to own cars, through the salary benefit of “vehicle reimbursement”. The benefit, originally created to circumvent salary caps, today provides a substantial income supplement for more than half of the country’s public sector workers, translating to 10% of all Israeli employees (in addition to 10% of employees who receive a company car). The article explores the extent to which vehicle reimbursement encourages car ownership and car usage among public workers. It also seeks to assess the willingness of workers, the labor union and the government to replace the vehicle reimbursement salary component for a substitute that does not require car ownership. Analysis of both a survey of employees (n = 276) and interviews with government and labor union officials, suggests that Israel’s “vehicle reimbursement” constitutes a classic perverse incentive, driving and perpetuating private car ownership and usage, thereby affecting workers’ transport preferences in both the short and long terms. While the majority of public employees are willing to consider accepting salary compensation in lieu of car ownership, institutional and legal obstacles currently stand in the way of policy reform. This case study offers a first exploration of the role of historical employment arrangements in shaping employee and employer transportation decisions.