Friday, January 08, 2010

Taxicab confessions

Regular readers of this blog may recall a couple of posts of mine last year on the District of Columbia's decision to abandon its zone system for calculating taxi fares in favor of meters. Today's New York Times has a story on how the new system is working out. What it reveals is that meters have been a big win for consumers -- and taxi drivers aren't happy:
A year and a half after meters were installed in taxis here, cabdrivers have seen their income drop 30 percent or more, representatives from the drivers’ associations said Thursday at a City Council hearing.

The associations also said that since the meters were installed in June 2008, replacing a zone system for computing fares, drivers now are paid the lowest per-mile rate in the nation.

Many drivers who fought the change out of fear that their income would drop sharply now say they favor the meters because they make fares more predictable and clearer to riders, reducing conflict.

But they also say the rates are too low.

“This month I borrowed money from my wife to pay off my car note,” said John T. Bugg, 72, who has been a cabdriver in the city since 1960. “I’m holding on, and it’s costing me everything I got. This has turned into some form of modern-day slavery. I’m not exaggerating.”

...Advocates for the drivers say the city has failed to live up to promises made during the negotiations over the meters, pointing to the minutes of a public meeting last April in which the Taxi Commission committed to conducting a study of the rates and to raising rates by Sept. 15, 2009. Neither has occurred.

In that meeting, the commission also said it would not raise the licensing fees for drivers until it has raised how much they were paid per mile. But the city raised licensing fees in November without adjusting mileage rates. The city is also required by law to conduct a study of mileage rates every two years but has not done so since 2006, advocates said.

...[Nathan Price, chairman of the D.C. Professional Taxicab Drivers Association, which represents about 1,000 drivers] added that the city had failed to put a cap on the number of cabs in the city, so the market was currently glutted, driving earnings down even further. Washington has about 6,000 to 7,000 taxicabs to serve a population of around 600,000; New York City, with a population of more than 8 million, has around 13,000 cabs.

...The Web site, which tracks rates around the country, ranked Washington 25th among 28 major cities for the estimated fare of a typical five-mile trip.

A few points:
  • There is not a glut of taxis in Washington. If there were, people would stop operating them as it was no longer worth their while.
  • The fact that income from taxi drivers has declined demonstrates they were overpaid under the previous regime, and were beneficiaries of regulation which artificially boosted their compensation.
  • To the extent I have sympathy for the taxidrivers, it's that they must deal with the D.C. bureaucracy, pay licensing fees and have their fees set by bureaucrats instead of the marketplace.
  • It's worth further noting that government regulation of taxis disproportionately harms the poor.
The appropriate level of regulation for taxis is zero. Taxi transactions should simply be between customer and driver, and are the business of no one else. Regulation pits drivers and consumers against one another, with each competing to use the government for their own ends. It creates a tension which does not need to exist.

No comments: