Transportation Policy

Taxi Deregulation Removes Cab Drivers' Economic Shackles

Government doesn't decide the number of gardeners or car-repair shops. Why should it do that for taxis?

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SACRAMENTO — After the Civil War, newly freed slaves and poor whites in the Deep South often became "sharecroppers" who farmed land owned by others and paid a share of the crops. Barely able to eke out a living and unable to buy farms, they became indebted to the owners and locked into a life of poverty.

It sounds strange at first, but San Diego's taxicab system — like such systems elsewhere – has parallels to that antiquated economic model. Eighty-nine percent of the city's cab drivers rent cabs. Because of a city-imposed cap on the number of cabs, these drivers cannot go out on their own.

They pay around $1,200 a month to lease their cabs to pay for those high medallion costs. The results are predictable. According to the 2013 "Driven to Despair" survey from San Diego State University and the Center on Policy Initiatives, "San Diego taxi drivers earn a median of less than $5 an hour. … Virtually no drivers have job-related health coverage … ." Drivers are encouraged to "drive when tired or sick."

That all will change. On Monday, the San Diego City Council overwhelmingly approved a proposal from council member Marti Emerald to remove the cap on the number of city-issued permits. The meeting was held at a large auditorium given the high level of interest from drivers and company owners.

The latter have been vocal in their opposition for obvious reasons. As cab owners, they benefit from a cap that eliminates new competition. They often speculate on the value of these city-issued permits, which now are worth up to $140,000. If the system opens up, the value of the permits evaporates, and they no longer have drivers with little choice but to accept their terms and conditions.

"Our drivers want to be owner operators," said Sarah Saez, program director of the United Taxi Workers of San Diego, which represents more than 700 drivers. "They want to be small business owners," she added, noting how excited many of the drivers are to be able to implement new ideas and compete against ride-sharing services. "This is the only way to save the taxi industry."

In September, hundreds of cab owners attended a council meeting to oppose the proposal. Many wore T-shirts saying, "I took out a loan & 401k to acquire my permit." But supporters argue there is no property right in these permits. "They are not stocks or bonds," but are just the right to have a taxi, said City Attorney Jan Goldsmith.

The city can legally change or remove the 993-permit limit, according to its legal opinion from August: "No vested rights are associated with the granting or prohibiting of permits, so no fundamental rights are affected …."

The debate is not simply between the 11 percent who own their cabs and have paid oftentimes exorbitant prices for the permits against the 89 percent who may want to be their own bosses. It's a big matter for consumers and the local economy, too. So it's worth looking at the results in other cities that have taken this approach.

When Minneapolis had a cap, its market was dominated by 10 companies. Now there are 38 companies. The new competitive system created niche players – including a Spanish-language dispatch system and companies that serve neighborhoods that had been under served. Also, those illegal gypsy cabs have disappeared, explained Lee McGrath, an attorney with the Institute for Justice's (IJ) Minnesota branch. The economic-rights group litigated a case that forced Milwaukee to also open up its taxi-permit system.

Under the San Diego proposal, cabbies would still conform to licensing, insurance and safety rules. That's the traditional American approach — let the market set the number of businesses, while using the government to set some ground rules. Government doesn't decide the number of gardeners or car-repair shops. Why should it do that for taxis?

And why should city council members, who have long been concerned about the plight of low-wage workers, tolerate a rule that locks drivers into low pay and 70-hour weeks? Taxi drivers need to be freed from this system of "urban sharecropping," IJ's McGrath added. Yes, it's time to remove their economic shackles.

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  1. It’s the Jews, isn’t it? Just nod.

  2. Too little too late, assholes. I use Uber now when going downtown to the Gas Lamp district.

    I swore that place off after my wife and I had to wake up my sister-in-law one too many times because cabs are impossible to get after 1am (this was before ride-sharing became mainstream, if it even existed).

    Then, more recently, we went with a friend who called up an Uber car and have been doing that since.

  3. If you think that Uber doesn’t take its cut from the driver – then you’re mistaken.

    It’s the same cut %.

    The only difference between local taxicabs and ride0sharing monopoly is that with ride-sharing criminals that cut is tax-evaded and taken offshore, while with taxicabs that cut was paid taxes on and stayed, in majority of cases local.

    If you think that uber driver is an owner now – you are mistaken again, uber driver owns a tool, an expense – which is a vehicle,
    he NEVER own any part of uber or its business.

    With taxi system, a driver had a chance to grow and become its own
    independent small business, with uber – you can drive for uber till
    you drop dead, owning nothing, having nothing to leave to your
    children BUT enriching alredy filthy rich offshore oligarch who
    own uber.

    Don’t believe uber tales…. Enron had stories to tell too.

    1. You’re a taxi driver, aren’t you?

      1. My guess was medallion owner.
        Also, this is the wrong forum to claim tax evasion is a bad thing.

        1. Line breaks suggest cut ‘n paste warrior – paid by the comment?

          1. That’s another strong possibility.

            1. We can wait to see if another line broken block o’ text gets spliced in, I suppose – there could be a ‘Part B’.

    2. Your tears are delicious.

    3. Damn, I totally forgot you existed.

      Do you get notifications each time there is a taxi article on Reason or do you check back every hour and lay in wait for it?

      Fuck off, rentseeker

    4. tax-evaded and taken offshore

      Citation needed. Uber corporate HQ is in San Francisco. They also have offices in Seattle, Philadelphia, Washington DC, and other U.S. cities.

      criminals

      Because you don’t like them? I do not think this word means what you think it means.

      I’ve been in many UberX cars now that were owned by their drivers. About half of them were U.S.-born, white, English-speaking red-blooded Americans. Sometimes multiple people pool together to own a specialty Uber car, like a limousine.

  4. Deregulate taxis? Great, now riding in cars is going to be as unsafe as flying on an airplane.

    1. You mean the person in the front seat is going to lean their chair back and crush my knees?

      1. Yes. On the other hand, you will get 2 microliters of Coke Zero as compensation.

        1. 🙁 British Airways at least gave me as many 100mL cans of Diet Coke as I asked for. I don’t want Coke Zero, even in trace quantities, it tastes like crap.

  5. My classmate’s mother-in-law makes $73 every hour on the computer . She has been without work for five months but last month her check was $14391 just working on the computer for a few hours. why not try this out.
    vi?????????sit hom?????????epage ????? http://www.jobsfish.com

  6. Here in the communist hinterland of Rochester, NY, Lyft has abandoned operations and looks unlikely to restart them. The city council has declared that they will be allowed to operate “when they submit an acceptable proposal” aka “when they operate exactly like a traditional cab company”. Even if I had to pay 3x the price I’d rather take Uber or Lyft.

  7. my friend’s step-sister makes $62 every hour on the laptop . She has been without a job for 7 months but last month her income was $19712 just working on the laptop for a few hours. visit the site…

    ?????? http://www.netjob70.com

  8. So typical of government: first it screws over the workers by locking them into the slave system described above. Then when the company owners have “bought in” to the system, government screws them over by making their investments in medallions worthless. Figure at $140K a pop, a company with 20 cars stands to have their $2.8 MILLION dollar buy-in rendered worthless.

    Now consider how things would have been different with NO government action in the first place.

    This isn’t a question about whether we’re better off when workers have few choices, or when companies are raped by government fiat. It’s a question of whether we should allow government to be involved in the first place… and whether we even need government.

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