A multinomial logit model of downtown Los Angeles commuters is used to assess the effect of employer-paid parking on mode choice and parking demand. Employer-paid parking significantly increases the probability that an employee will drive to work alone. The best performing models predict that between 25 and 34 percent fewer automobiles are driven to work when workers have to pay to park, as compared to when they park free. This analysis provides support for the notion that public policies concerning traffic congestion, air pollution and energy use must address employer-paid parking.

Employer-paid parking is a form of matching grant whereby an employer offers to pay the cost of parking if employees are wiling to pay all the other costs of driving to work. In this paper we estimate how employer-paid parking increases the number of vehicle miles travelled to work, the energy consumed by commuting, and total spending on parking and automobile commuting. We then attribute the ubiquity of employer-paid parking to the anomalous federal and state income exemption of employer-paid parking subsidies, and propose a tax policy that will encourage employers to offer their employees the option to choose a cash travel allowance in lieu of a parking subsidy. Finally, we estimate the benefits of cashing out parking subsides, and argue that cashing out parking subsidies is a fair, efficient, and simple first step to improve transportation pricing.

One way to illustrate how parking subsidies strongly influence commuters' travel costs is to compare the average employer-paid parking subsidy to a hypothetical congestion toll. For commuters who receive employer-paid parking in downtown Los Angeles,, the average employer-paid parking subsidy is equivalent to 11 cents per mile travelled to and from work. Thus, imposing a congestion toll of 11 cents per vehicle mile travelled would raise the cost of driving to the Los Angeles CBD by only as much as employer-paid parking already lowers it.

This article reviews empirical studies of how employer-paid parking affects employees' travel choices. A strong effect is found: parking subsidies greatly increase solo driving.When employers reduce or remove parking subsidies, a significant number of solo drivers shift to carpools and/or transit. This conclusion is based on studies of parking subsidies in a variety of circumstances, including central city and suburban areas, private and public employers, and clerical and professional employees. Three measures are developed to compare changes in commute patterns: changes in the share of solo drivers, changes in the number of autos driven to work per 100 employees, and the parking price elasticity of demand for solo driving. The studies reviewed here show that 19 to 81 percent fewer employees drive to work alone when they pay for their own parking. Because 90 percent of American commuters who drive to work receive employer-paid parking, these findings are significant for designing transportation policies to reduce air pollution, traffic congestion, and energy consumption.

Employer-paid parking is a popular fringe benefit that invites commuters to drive to work alone. Thus, employer-paid parking works at cross purposes with costly public policies designed to reduce traffic congestion, energy consumption, and air pollution. This article (1) explores the problems created by employer parking subsidies, (2) proposes a policy of requiring employers who offer an employee a parking subsidy to also offer that employee the option to receive, in lieu of the parking subsidy, the fair market value of the parking subsidy either as a cash commute allowance or as a mass transit or ridesharing subsidy, and (3) predicts the consequences of the policy proposal with new data derived from research on commuters to downtown Los Angeles.