Are D.C. Cab Fares Too Low?

Washington D.C.'s two largest cab driver associations filed suit yesterday against Mayor Vincent C. Gray and the city's Taxi Commission because, they say, fares are too low. The lawsuit claims "the current rate structure is breaking families, forcing drivers to spend increased time away from their spouses and children, as well as putting hundreds of middle class families under increasing financial strain."

Actually, if anything, cab fares in D.C. are too high. Here's how we know this: 

Since 2010, the D.C. Taxi Commission hasn't been issuing licenses to new cabbies. There's no official waiting list, but a representative from the commission told me she receives calls "all day, every day" from potential applicants. In other words, want-to-be cab drivers are clamoring to get into the industry at the going rate.

That's because D.C. cab drivers do well. The lawsuit alludes to a study by Edgeworth Economics showing that D.C.'s taxis are among the cheapest in the nation, but in many other cities drivers have to pay as much as $150 a day to rent a medallion. Thankfully, D.C. doesn't have medallions (yet) and the industry is dominated by owner-operators, so drivers keep what they earn after expenses. The drivers I've met (including the leaders of the D.C. Professional Drivers Association, which is a co-plaintiff in the suit) speak with pride about earning enough to send their kids to college, owning their homes, and funding their retirements.

Anyone who can drive a car and wants a taxi license should be able to get one. Then rates would inevitably fall, which would be good for riders and most drivers. Higher fares only create incentives to keep new entrants out of the industry, which until recently was unsually open to immigrants and African Americans shut out of other professions.

In July, Nick Gillespie and I looked at how the unusual freedom and prosperity enjoyed by D.C. cabbies is in jeopardy because of a proposed medallion system: