Taxi Cabs - Regulatory Policy

Taxi Cabs: Evaluation of Regulatory Policy’s Impact on

Taxi Service and Driver Safety

Taxi policy that is outdated or suboptimal can result in inefficient service, poor public perception
and unhealthy working conditions for drivers. Proactive policy decisions and regulatory updates
can ensure high-quality service.

Introduction

In the 21 st century, social interaction and recreation are concentrated in hospitality zones. As
Baby Boomers and Millennials simultaneously flock to cities on a national scale, mixed-use
districts are increasingly dependent on the efficient movement of people. Late-night
transportation is the locomotive driving social and economic vitality. The century-old taxi
industry is a pillar of nocturnal transportation, though policy has not kept pace with the
emergence of sociable cities. Taxi drivers can be empowered, ensuring public safety and
providing efficient service.

Urban taxi industries generally operate in limited-entry markets with subpar public perception.
Many reformers have sought to deregulate taxi industries and revitalize them through free
market competition. However, other policy solutions to improve service may be worth
considering.

This document outlines strategies for crafting effective taxi service regulatory policy. Taxi policy
that is outdated or suboptimal can result in negative impacts for both the taxi service industry
and users, including inefficient service, poor public perception and unhealthy working conditions
for drivers. Through proactive policy decisions, cities can empower taxi drivers and incorporate
them into stakeholder alliances. Efforts to contemporize current regulations can promote taxi
driver health, ensure high-quality service and overall nightlife vitality.

Industry Issues
Poor Public Perception

Poor public perception of taxi service is ubiquitous in many downtown communities. Although
some urban taxi drivers are seen as hardworking immigrants eager to earn an honest living,
they are also perceived as foreigners struggling with the English language, unable to navigate
the city, prone to overcharging, refusing service and abusing passengers. This perception is
often reinforced by sensationalist press accounts of drivers' misdeeds. Some argue that taxi

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drivers are divorced from the social benefits of the nightlife experienced by their customers and
their relationship to the district is considered parasitic, rather than symbiotic.

Risks to Drivers’ Safety

In 2008, CNN found taxi driving to be one of the nation’s most dangerous professions, with a
fatality rate of 19.3 per 100,000 workers. Drivers carry cash, making them more likely to be
victims of crime, and many are killed in robberies ("Most Dangerous Jobs in America"). A
Toronto, ON study found that “health issues in the taxi industry are tied to the social
marginalization of a largely immigrant and racialized work-force and their lower than
minimum-wage earnings.” In addition, the report found that crime against taxi drivers in Toronto
often goes unreported because of perceived racism from police officers (Abraham).

Risks to Patrons’ Safety

Drivers are known to take excessive risks, such as driving when tired and working very long
shifts, creating psychological and health problems for the driver and putting others at risk. In
February of 2011, a taxi driver in San Diego plowed into nightclub patrons in the Gaslamp
district, resulting in nearly two dozen injuries. Twenty-three people were taken to hospitals and
one woman’s leg had to be amputated below the knee after she was pinned against the wall by
the cab. The driver was extremely fatigued and had possibly just changed his diabetes
medications, according to his roommate. It’s possible that incidents like the one in San Diego
could be avoided by better working conditions and other regulatory changes.

Employment Inequities

In Austin, TX, a 2010 study reported that the average local taxi driver made $2.75 an hour and
on average worked 12 hours a day, 6.5 days a week, 51.5 weeks a year. Because the majority
of drivers are independent contractors (leasing taxi cabs from local franchises) they do not have
the legal protection, health insurance or other benefits that regular employees enjoy. According
to the Austin city code, owners of taxi franchises are responsible for rate change proposals,
requests for taxi zones and all other issues, without any input from taxi drivers, who fear
retaliation from franchises if they organize (Driving Austin, Driving Injustice).

Barriers to Accessing Hospitality Zones

There are several barriers that discourage taxi drivers from servicing hospitality zones at night,
one of the best locations and timeframes to consistently make money. Police road blocks and

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rerouting can make it difficult to access patrons, and drivers worry that patrons may get sick in
or otherwise damage their cab, their primary livelihood.

De-Regulation

Over the past few decades, taxi industry deregulation has increased internationally with mixed
results; in some countries, regulatory measures are being re-introduced. Proponents of
deregulation argue that the taxi industry is an industry with many firms and small fixed costs and
should therefore develop into a perfectly competitive industry, providing taxi service to
consumers at minimum costs. However, Andreas Kopp of the World Bank’s Sustainable
Development Network argues that repeat producer-customer relationships are rare in the taxi
industry, so taxi service consumers face uncertainty about the taxi quality. In other words, it’s
rare for a customer to explicitly choose the same service multiple times. The quality of the
information that customers typically have about the service they are purchasing is generally
very low; thus, the competitive pressures in the taxi industry will induce low-quality service
because providers will exploit this imperfect information. Kopp also maintains that deregulation
of entry and operation increases the average costs of the service because there is more idle
capacity in the form of cruising empty taxis or taxis waiting at the taxi stand (Kopp).

Kopp’s research suggests that increasing the number of market participants does not
necessarily lead to price reductions and quality improvements, because producers are
protected from competitive pressures by transaction costs in the form of search costs.
Customers don’t have the time or resources to conduct a thorough investigation into each
franchise (let alone driver) in a city; the result is imperfect information, as mentioned above, and
thus perfect competition is not attainable. Increased market participation leads instead to
additional excess capacity which drives up prices, though Kopp notes that reduced waiting
times partly offset higher prices. Finally, the pressures of deregulation can instigate significant
decreases in driver compensation and security (Kopp).

An Alternative Policy Solution

The following policy recommendations reflect a growing body of research that encourages
investment in taxi drivers. The studies referenced include four city-specific taxi industry studies,
in Austin, Toronto, Winnipeg and Santa Monica, research conducted by Andreas Kopp and a
collection of reports by Schaller Consulting, the research firm founded by Bruce Schaller,
current Deputy Commissioner for Planning and Sustainability at the New York City Department
of Transportation.

Entry Controls

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Among the most publicized and political taxi regulations are entry controls. These are
regulations that limit how many producers can enter a market; in the taxi industry, a city usually
sells a certain number of licenses (medallions) to operate taxi cabs in the city and lets the free
market set the price if a medallion owner wants to sell. In the heyday of deregulation, some
American cities adopted "open entry," while others maintained medallion caps or other types of
entry control. Recent research suggests, however, that the size of the community dictates how
efficient entry controls can be. In the dispatch markets of smaller communities, entry restrictions
can lead to deficiencies in taxicab availability. However, in medium- and large-sized cities
without entry controls, the cab stand and street hail market experiences an oversupply of cabs,
leading to deterioration of vehicle and driver quality. Numerical limits are essential in cities with
a high volume of taxi trips obtained at cab stands and by street hail, particularly for airport cab
stands and dense downtowns like New York City, Chicago, San Francisco, Boston and Toronto.

Franchise Applications & Employment Regulation

The process of issuing permits to taxi franchises allows cities a valuable opportunity to seek
stakeholder input and encourage better employment relations. The city council or department of
transportation can facilitate comprehensive evaluations of the following criteria:

- Permitting allocation formula

- Rate increase process
- Driver job security
- Living wage
- Vehicle and driver insurance coverage
- Permit transference
- Fees
- The propensity of drivers to lease, rather than own, taxi cabs.

Ideally, brokerages and plate owners would be required to negotiate collectively with
taxi-leasing drivers over lease, shift and brokerage fees. If possible, cities can move existing
taxi-leasing drivers to owner-operator and/or employee status.

There are many incentives for reorienting policies to ensure that taxi driver welfare is provided.
Drivers with better jobs provide better service, are involved in far fewer crashes and are more
willing to collaborate in public-private partnerships.

Incorporation

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Taxi drivers can be encouraged to organize to protect their interests. If this route is pursued, the
city council can consider amendments to city ordinances that require driver input in decisions
affecting their livelihood. This is also an opportunity to bring taxi drivers to the table for
stakeholder discussions in hospitality zones. Drivers, like all other interests in the nighttime
economy, may want to understand how they can contribute to a vibrant district and how they
can collaborate with businesses and police to minimize safety risks.

Partnerships

Collaborations between public and private interests in a hospitality zone can provide mutually
beneficial outcomes for all stakeholder groups. Innovative partnerships, such as taxi stands,
ride-sharing programs and simple service-coordination between police, venues and taxi
companies can promote safety and vibrancy for low costs. Collaborative customer-oriented
service reflects the efficiency of mutually-beneficial outcomes. Marketing is crucial to provide
new programs with new momentum; it also serves to improve public perception of taxi service.

City-commissioned Studies

City councils are encouraged to commission studies of the local taxi industry to accurately
assess the needs of a given community, the current state of the local taxi industry and the
opportunity for regulatory reform.

Conclusion

The central theme of this policy discussion has been incorporation. Cities can incorporate taxi
drivers into bargaining associations and stakeholder alliance; proactive, supportive policy can
empower taxi drivers as ambassadors of the nighttime economy. The sociable city is a city of
movement. Every stakeholder counts, especially those who drive the city forward.

Works Cited

Abraham, Sara, Aparna Sundar, and Dale Whitmore. "Toronto Taxi Drivers: Ambassadors of
the City." (2008). Toronto_taxi_working_conditions.pdf. www.taxi-library.org. Web. http://www.t
axi-library.org/toronto_taxi_working_conditions.pdf

Driving Austin, Driving Injustice. Rep. Austin: Legal Assistance to Micro-Enterprises, 2009.
Web. http://www.taxi-library.org/driving_austin.pdf

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Entry Conrols in Taxi Regulation. Rep. Schaller Consulting, 2004. Web. http://www.schallercon
sult.com/taxi/entrycontrol.pdf

Higher Pay, Safer Cabbies. Rep. Schaller Consulting, 2004. Web. http://www.schallerconsult.c
om/taxi/safercabs.pdf

Kopp, Andreas. "The Economics of Taxi Industry Regulation." European Transport Conference.
Web. 12 Apr. 2011.
<http://www.etcproceedings.org/paper/the-economics-of-taxi-industry-regulation>.

"Most Dangerous Jobs in America." Most Dangerous Jobs in America. CNN. Web. http://mone
y.cnn.com/galleries/2010/news/1004/gallery.Most_dangerous_jobs/10.html

Mundy, Ray. Winnipeg Taxi Study. Rep. Tennessee Logistics and Transportation Foundation,
2009. Winnipeg-2009-Study-Volume-1. Tennessee Logistics
and Transportation Foundation. Web.
http://www.taxi-library.org/winnipeg-2009-study-volume-1.pdf

"Police: Taxi Cab Hits Crowd outside San Diego Club - CNN." Featured Articles from CNN.
CNN, 12 Feb. 2011. Web. 02 June 2011.
<http://articles.cnn.com/2011-02-12/us/california.taxi.incident_1_cab-driver-taxi-cab-accident?_
s=PM:US>.

Santa Monica Taxi Study. Rep. Santa Monica: Nelson Nygaard Consulting Associates, 2008.
Web. http://www01.smgov.net/business/SANTA%20MONICA%20taxi
%20TECH%20MEMO%20Final.pdf

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