a) The Concept of the Affordable Fare
Affordability is the important topic concerning equality and poor people. According to the World Bank study[1], the “Armstrong-Wright maxim” has often been interpreted as a reasonable rule for determining the level of a politically administered price. In that rule, more than 10 percent of households spend more than 15 percent of household incomes on work journeys can be regarded as discriminatory.
According to the survey[2] undertaken by the International Association of Public Transport (UITP), it shows households generally spend 10-20% of their disposable income on mobility (Figure 2.).
Figure 2. Overview of mobility budget expenses over total household expenses, sample 103 (UITP Social Fares Survey 2022)
Source: UITP
ADB’s guidelines[3] emphasizes the affordability by indicating that all in society should have an access to urban transport system which meets their mobility demand.
b) Affordability at fare MNT 5000 and its share of total income of individuals or households
Based on the average monthly salary in UB
According to recent statistics, the average monthly salary in UB represents MNT 2,621,900 (≈ USD 728 as of Q1‑2025). If we expect 2 rides per day that a person takes to and from work, this accounts for 8.8 percent of his/her daily income (Table 1.).
In terms of greater equality, we may examine the lower income group, specifically workers with elementary occupation. Average monthly salary for these individuals is MNT 1,798,200 as of Q1-2025. This translates to percentage income of 12.8% (Table 1.).
Table 1. Percentage of Daily Income at Fare Of 5000 MNT
Indicator | UB City Average Salary | Elementary Occupation’s Average Salary |
Monthly Average Salary (Q1 2025) | 2.6 million MNT | 1.8 million MNT |
Daily income (working 22 days) | 119,177 MNT/day | 81,736 MNT/day |
2 rides/day at 5,240 MNT = 10,480 MNT/day | 8.8% of income | 12.8% of income |
In the Figure 3., it illustrates percentage of daily income for individuals for each of fare points between MNT 2500 and MNT 6000. For workers with elementary occupation, fare at MNT 6000 accounts for 14.7% of daily income which may be a high figure. Setting the fare at 5,000 MNT would indeed represent a meaningful share of daily income, though still within affordability boundaries defined in the World Bank Study. It should be noted that this estimation does not take into account the lower income group.
Figure 3. Percentage of Daily Income (2 Rides/Day at Fare 5000), By Monthly Average Salary in UB and Monthly Average Salary in Elementary Occupation Source: National Statistics Office, Author’s Estimation
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Figure 4. Percentage of households, by income level, 1000 MNT
Source: National Statistics Office
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Based on the household’s monthly income in UB
If we take account household income data of 475k rather than individual’s salary, lower (first) decile or 10 percent of total household earns revenue of less than MNT 1100,000 per month. Specifically as presented data in the Figure 4., 4.9% of total household generates monthly income of MNT 700,000 or less than MNT 700,000 and 3.7% of total household generates revenue between MNT 700,001 and MNT 900,000. It accounts for 32.9% of daily income for the poorest group, which might be seen the profound burden on their budget.
4. Further Actions on the Fare Determination
In the FS, a fare of MNT 1250 is determined based on the Survey Result[4] and Affordability-Based Pricing model. In this study, however, a higher fare of MNT 5000, which maximizes daily revenue, is proposed under the same pricing model. Using household data, it is evident that this fare level would impose a significant burden on lower-income deciles, particularly the bottom 10%, raising concerns about equity and access. Therefore, fare determination should be further examined to ensure financial sustainability while simultaneously maintaining affordability for all passenger, using the following approaches:
· Cost-Recovery Pricing (Cost-Plus): Fare = (O&M cost + margin) / forecasted ridership
· Political Pricing: A lower fare is set based on social or political objectives, with the government providing operational subsidies to cover the gap between revenue and actual cost
[1] https://openknowledge.worldbank.org/server/api/core/bitstreams/38cf632c-5bb6-5689-8eb4-b6b3be7442e9/content
[2] https://cms.uitp.org/wp/wp-content/uploads/2025/05/20250505_Fare-Affordability_Policy-Brief_WEB.pdf
[3] https://www.adb.org/sites/default/files/institutional-document/855221/strategy-2030-transport-sector-directional-guide.pdf
[4] A Survey of 15,000 Households to Develop an Origin-Destination (OD) Matrix for Citizen Travel Movements, MMCG, 2022 and PMC Study Team
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