The Next City
September 21, 1997
Taxi regulations take consumers for a ride while exploiting drivers, clogging our cities, and promoting suburban sprawl
I WALK OR BIKE TO WORK, DEPENDING ON MY MOOD and the weather, and I often rent a car on weekends to visit my mom in the suburbs or friends at their cottage. But for most trips around town I use taxis. Nothing beats getting into an air-conditioned cab whose driver is listening to soothing classical music, knows where he’s going, acts professionally, and can break a twenty. If only those experiences weren’t so rare. More often, to make change for a driver just starting his shift, I find myself cruising the streets to buy a pack of gum I don’t need — once a cabby, pointing me to a 7 Eleven, even insisted I leave my leather jacket behind as security. I’m losing patience with dirty cabs, with mysterious odors, with sunken backseats, with listening to exasperated dispatchers chewing out hapless drivers miles from their fare. Experiences like these, and knowing that every ride, no matter how short, will cost at least $10, have put me in the market for a car, even though I’ve calculated — as many of my friends have — that owning a car would end up costing me far more.
It’s a shame because I like taking cabs, and, despite the odd questionable character, I’m fond of cabbies. But for all too many taxi users it’s much more than a shame. For the poor, the cab is less a luxury than a necessity — the means by which the weekly load of groceries makes it home from the supermarket, the means by which late-night workers get home from the end of the transit line. A study commissioned by the Urban Mass Transit Administration in the United States found that, by every measure, low-income individuals “rely more heavily on taxicabs than do higher income individuals.”
The sad state of taxis is also a shame for women — 60 per cent of cab users — who need door-to-door service after hours (and in dodgy neighborhoods at all hours), explaining why they’re much more dependent than men on the taxi industry. And it’s a shame for our cities, which needlessly get clogged up by reluctant people like me in private cars, which now need road space plus a patch of concrete at home and at work. Paving contractors get rich while pedestrians and cyclists have less urban greenery to look at and less fresh air to breathe.
You’d think there’d be a law against all this. The problem is, there is. Across Canada and the U.S., local licensing commissions control all aspects of the taxi industry, not just the safety of the vehicle and the trustworthiness of the driver but how many cabs to allow on the road, who owns them, and how much to let drivers charge. They have their reasons.
Preventing “ruinous competition”
BEFORE 1930, ANYONE WHO COULD RENT OR BORROW A CAR was allowed into the taxi business. One popular form of transportation was the “jitney” — slang for the five-cent piece they then charged — which picked up passengers for a fixed fare along designated routes. When their popularity peaked in 1915, 62,000 jitneys operated in the U.S., perhaps 6,000 in Canada. A few years later, the streetcar companies successfully lobbied for laws preventing competition from automobiles.
Restrictions on cabs came next. With support from streetcar operators, cab companies set up a cartel for themselves by arguing that plentiful labor, caused by the Great Depression in the early 1930s, was driving down wages and de-priving cabbies of a decent living. To prevent this “ruinous competition,” the taxi industry invited the government to regulate it as a natural monopoly on the same basis as oth-er public utilities. That was the case made to the Manitoba Legislature when it passed the Taxicab Act of 1935. In the U.S., pressure to restrict cabs came from the American Transit Commission, public transit firms, and the National Association of Taxicab Owners. By the mid-1930s, 43 U.S. cities with populations over 100,000 restricted entry into the cab industry, and some, like Boston, have issued no new licences since then. By 1983, 87 per cent of U.S. cities with populations over 50,000 restricted entry. In Canada, virtually every major city restricts the supply of cabs — Montreal even decreased its taxi fleet from 1985 to 1990 by buying back 25 per cent of the outstanding licences.
But taxi drivers — among the poorest paid members of society — have not benefited from the drastic limitations on supply, as intended, and for good reason. Making licences scarce makes licences, not drivers who lease them, more expensive. When Montreal reduced the number of taxi licences, their value increased from $10,000 to $55,000. Because licensing commissions everywhere don’t issue enough to keep up with demand, licence holders get a windfall. In Toronto, the street price of a licence now runs at about $80,000, in Ottawa at $90,000, and in Vancouver $110,000. The owners of the licences — mostly investors who then lease them out to drivers — get a rent increase with every increase in licence value.
Making licences scarce also creates a shortage of taxi-driving jobs, leading to a relative surplus of drivers, driving down their income. Many drivers end up working for less than the minimum wage, and for unconscionably long hours. The Committee to Restore the Boston Taxi Industry estimated in 1992 that about 1,500 cabbies work around the clock, napping in their taxis during the wee hours of the morning to recover the high cost of renting a licence. Most cabbies work 12-hour days, often six days a week.
In Toronto, Canada’s largest taxi market with about 10,000 cabbies, Norman Gardner, a councillor and ally of the taxi owners, describes cabbies as “fighting like animals in the jungle for food.” Another Toronto councillor, Howard Moscoe, agrees, saying, “there’s so many people sucking money out of the taxi that there’s nothing left for the driver at the end of the line.” Even the licensing commission chair, Carol Ruddell-Foster, acknowledges that regulation has created a system under which absentee owners get rich while “the guy at the bottom — the guy who actually relates to the public — is getting the least out of the business.”
Drivers understand their plight better than anyone. Last year, in a presentation to the licensing commission, Eugene Meikle, president of the Metro Toronto Taxi Drivers Association, made the following submission:
“Mr. Chairman, the reason the drivers are fighting like animals is that they cannot earn enough to sustain themselves and their families. And the reason for this is that the prices they pay for shifts/leases are way too high.
“I would like to relate to you an incident which occurred approximately four months ago. I had the displeasure of witnessing a driver paying for his shift. The driver after paying for the gas and the shift asked the ‘cash in’ man to loan him $20. The ‘cash in’ man asked the driver why should he lend him $20. The driver replied that he only had $7, and his wife just had a baby and he needed money to buy milk, diapers and sanitary napkins. Sir, I died a little that day.
“Mr. Chairman, history teems with good men who have sat and watched in silence while atrocities have been committed against the least able in society. I implore you to come to the aid of the drivers.”
On another occasion, Meikle — who wants to free Toronto drivers from the yoke of regulation, likened the licensing system to slavery. Yet the Toronto councillors — the ultimate regulators — decided to continue restricting licences, accepting the owners’ arguments that more competition would only harm drivers more. After half a century and more of economic regulation, justified then and now in large part on the need to protect drivers against ruinous competition, the drivers are the ones who have been ruined.
Protecting the consumer
REGULATIONS ALSO PURPORT TO PROTECT CONSUMERS AGAINST unethical drivers who, knowing they’ll never see the customer again, don’t need to compete on quality and price to win repeat business — someone waiting for a taxi late at night isn’t likely to let a cab pass by or to quibble about price.
Some gullible customers, no doubt, have been spared from unscrupulous cabbies who would have charged them $50 for a $20 ride. But the $50,000 to $100,000 and more that licences fetch throughout Canada didn’t materialize out of the smog — most of the windfall, the part that isn’t squeezed out of drivers through lower pay, ultimately comes from passengers paying higher fares. One study of the Toronto taxi market pegged the surcharge at 25 per cent. A more comprehensive study published by the Economic Council of Canada found that taxicab regulation pushes up the cost of taxi service in Canadian cities by 30 to 50 per cent.
Last year, New York City provided a real life demonstration of such economic calculations in practice. To raise $80 million for the city’s coffers, Mayor Giuliani decided to auction off 400 taxi licences at $200,000 a piece, boosting the number from 11,787, a number which had not changed since the 1940s, to 12,187. To compensate the existing taxi licence holders, whose cabs would now be sharing the city with 400 additions, the mayor let the owners boost the lease rate to drivers by 14 per cent, and the fares charged customers by 20 per cent. Economic regulation, it turns out, has been just as ruinous for the customer as for the cabbies.
Providing safer vehicles
BECAUSE RUINOUS COMPETITION LOWERS DRIVERS’ INCOMES, reason supporters of regulation, drivers can’t afford to maintain their vehicles, jeopardizing public safety. Economic regulations would protect the consumer by providing drivers with a stable income. Would that they could. In reality, the regulatory system bleeds drivers dry, preventing them from keeping up their cabs, and turns a blind eye to the dilapidated taxi fleets that result.
The cost of the neglect can be counted in a mounting body count, according to a 1995 report from the coroner’s jury that investigated the death of 21-month-old Caitlyn Lonetto, struck three years earlier by a Toronto taxicab. The coroner’s jury didn’t indict the driver, it indicted Toronto’s licensing commission through sweeping recommendations for safety reform aimed directly at an unaccountable system involving absentee owners and ill-trained drivers — separated by Byzantine layers of agents and brokers — who take little or no responsibility for their vehicles’ condition. In Toronto, drivers often provide their own car, insurance, brokerage fees, and around $28,000 in operating expenses to say nothing of gas before hitting the road. Last year, leasing costs ate up 36 per cent of gross revenues compared with 25 per cent a decade earlier. A cab driver with 10 years experience can expect to earn about $30,000 a year, working 70-hour weeks; a novice earns $10,000.
Unable to keep cars fit, desperate drivers drive them unfit, and for as long as possible. That’s why half the taxi fleet in Toronto has logged over one million kilometers, and 56 per cent of all Toronto cabs are six years or older. That’s why, in a check by provincial inspectors of Vancouver and Burnaby taxis earlier this year, over 40 per cent were found to be so unsafe that they were ordered towed away. Washington, D.C., averaged 10 cab accidents a day — 3,800 annually. The industry is so derelict and decrepit that, like a slum on wheels, it has become a magnet for thieves and worse. Cabbies need size up each fare to weigh the chances of being mugged or killed. For good reason, the National Institute of Occupational Safety and Health has declared taxi driving, which suffers the highest homicide rate of any profession, the most dangerous profession in America. Pleas from cabbies to regulators to allow them to take precautionary measures — such as avoiding suspicious looking fares, or demanding that suspicious fares prepay long journeys to remote, potentially dangerous locations — have all too often fallen on deaf ears; regulators disapprove of discrimination, insisting that all customers be treated uniformly. Economic regulation does not discriminate: It kills cabbies and members of the public alike.
Providing better service
THE TORONTO STAR CALLS THE CITY’S TAXI INDUSTRY “a civic embarrassment.” Because a cab ride into the city from the train station or the airport often provides a visitor with his first impression of a city, it reports, taxis should be ambassadors on wheels, yet dirty, rickety cabs, and unkept drivers too often trash the city’s image.
Toronto’s licensing commission says that there’s little it can do. “We don’t have, as far as I know, an undercover operation that is going around hailing cabs to see if they are smelly or not,” explains one exasperated commissioner. The general manager explains that cabs are inspected three times a year for safety, but there is no way for the commission to know between inspections if a driver is bad or if his cab is in good working order.
A concerned Metro Toronto Board of Trade complains that unsafe taxis manned by discourteous, dirty drivers are hurting the local tourist business, and it thinks it has the answer — more regulation. Following the board’s recommendation, Toronto taxi drivers who used to sit through a four-day driver course, now sit through 16 days of lectures into why it’s important to be courteous and helpful to passengers, including to the elderly and disabled.
Toronto is Anytown, Canada, and Anytown, U.S.A. In major cities across the continent, the local paper makes the same plea, the local licensing commission the same apology, the local board of trade the same suggestions, to the same non-effect. Regulations have brought us rootless drivers roaming cities in old and dirty cars — the very ills regulators claim to have eliminated.
Reducing traffic congestion and pollution
REGULATORS ALSO CLAIM THAT CONTROLLING THE INDUSTRY YIELDS environmental benefits. With wide-open competition, they argue, the roads will overrun with drivers fighting for customers, aggravating an already overcrowded traffic problem, and worsening an already bad pollution problem with higher levels of auto emissions.
Cities are congested during rush-hour periods when neither parking nor cabs can be found. Extra cabs at rush hour would replace private cars while relieving parking-related traffic congestion. The environmental gain would jump again if regulators didn’t outlaw shared cabs — a jitney-like service allowing cabs to pick up more than one fare going in the same direction. At off-peak hours, meantime, cabs harm the environment by cruising the city unoccupied because of artificially high prices.
But regulations blacken the environment in other ways. Cabs from one jurisdiction that drop off passengers in another must often come back empty — effectively doubling the fuel consumption and the number of vehicles clogging the roads for cross-border trips. Taxi fare regulation also unwittingly promotes urban sprawl, especially in the U.S., where taxi trips outnumber those by all forms of mass transit combined. Because cabbies need to charge more for trips that take them into low density suburbs, from which they’re unlikely to find customers to drive back with, regulators stepped in — on grounds of fairness — to fix low fares. To compensate taxis for their loss on one-way trips, regulators also decided taxis could overcharge customers in urban areas. At once, regulators made dense, environmentally sound urban life artificially expensive and low density, suburban life artificially cheap.
The on-again, off-again taxi business
“WHEN YOU DON’T NEED A CAB, THEY’RE EVERYWHERE, BUT YOU CAN NEVER get a cab when you want one.” People treat this common lament as a trick the mind plays on us, but the perception is reality. In rush hour and other busy times, when people need transportation, there aren’t enough taxis to go around, making long waits commonplace. And for most of the rest of the time, surplus cabs search city streets for a fare, or come to a rest at the end of an already long queue at a cabstand.
Under the regulatory system in place throughout most of North America, cabbies work 12-hour shifts to keep the cabs on the road 24 hours a day. Any system that promotes as many taxis at 4 a.m. as at 4 p.m. will suffer from fits and starts. A more logical system would match supply to demand by trimming the full-time fleets to meet the off-peak needs of customers, and by putting on additional taxi services in peak periods — part-time drivers in part-time cabs — to meet commuter demand.
During the energy crises of the 1970s and the environmental earnestness of the 1980s, governments promoted these part-time taxi services as car pooling. In the name of national security, energy conservation, and environmental protection, workplaces got organized and established informal routes. Governments did not require car pool drivers to have a chauffeur driver’s licence, did not require car pool cars to undergo safety inspections, did not worry whether the passengers were adequately insured. Car pooling still survives in many pockets across the continent, but because car pool organizers and chauffeurs aren’t permitted to profit for their services, this peak-hour passenger service has fizzled instead of soared.
Now imagine how things would have turned out if every car making the trek from home to work was a potential cab — if all qualified drivers driving qualified cars had the right to pick up passengers for a fee.
Because the car and driver would bear few additional costs in running this service, the fare would be low, often competitive with the inferior service of the public transit monopolies, creating a huge pool of potential passengers. The role of the car pool organizers — the new companies offering these part-time taxi services — would be to add value to each trip by finding compatible passengers, whether by a common interest in sports or politics, or by the music they like to hear. Smokers forced out of public transit vehicles would now have an inexpensive alternative, too.
Without price regulation, passengers wishing to drive to work in style — say, in a convertible or a Cadillac — could pay a premium to do so; those needing the roominess of a minivan — say to store their wheelchair — could get it, too. Payment would be per trip for occasional commuters but more often by the week or month for regular commuters.
Allowing every car to be a cab wouldn’t just give customers additional options — it would also open up a world of opportunity to the drivers. A commuter who cannot afford a vehicle could help finance a purchase by offering taxi services during the time he’d anyway be travelling to and from work. Those who reluctantly commute three or four hours a day in order to afford a house in the suburbs would be able to live much closer to work. Students passing the driving grade would take a break from their studies to meet unpredictable taxi markets — the overflow from concerts and sporting events, during wet weather or other times that taxis become in short supply. Peak-hour cabs would become a cottage industry of part-time cab drivers picking up their friends, neighbors, co-workers, and fellow students on the way to work or play.
Where car pooling based on altruism failed, making every car a potentially profitable cab would succeed, relieving traffic congestion and pollution by taking cars off the road, saving money for driver and passenger and time for everyone. Because people would be driving their own family cars, they would tend to be well maintained — in the full-time taxi business, pride of ownership brings safer cars while shift drivers draw disproportionately more consumer complaints. Ironically, this proliferation of part-time cabs would represent salvation, not ruin, for their competitors, the full-time taxi industry and the public transit industry.
Public transit’s bottom line suffers from having to meet peak demand by purchasing vehicles — and paying drivers — that sit idle most of the day: It generally costs transit companies two to three times as much to run buses at rush hour as at other times. Every part-time cab, operating solely at rush hour, puts money in the public transit system’s coffers. And with the irregular, disruptive peak-hour traffic needs met by these part-time entrepreneurs, the career cabbie — the full-time professional — now has an open road of steady bread-and-butter work from corporate customers, tourists, and others who need reliable taxi services.
Corporations tend to have accounts with cab companies that deliver on price and service, and other local taxi users also tend to be repeat customers, phoning the same local taxi company until they have reason to switch. But tourists — an important taxi market in most cities — do need protection against unknown cabbies, a characteristic regulators claim is unique to taxis.
But the problem of dealing with an unfamiliar retailer is not at all unique. People in a different part of town, let alone a different city, have the same problem looking for a decent cup of coffee or a hamburger that isn’t rancid. Because so many people in our highly mobile society have been burned by their ventures into greasy spoons, Starbucks and Tim Horton’s materialized to give consumers dependably high-quality coffee, and McDonald’s and Wendy’s to provide a predictable burger. To avoid auto repair rip-offs, many car owners opt for the security of GM’s Goodwrench chain or Petrocan’s Certiguard service. To get a clean hotel room, travellers select Hilton or Holiday Inn. To ensure a safe and clean rental car, tourists will book a Hertz or Avis vehicle, knowing that head office, wherever it may be, will set high standards across the country. Head office, for its part, knows that a customer shoddily treated in one city will know enough to shop in future at a competitor’s establishment in all cities.
Had government regulators controlled the rental car business, a Hertz car would look no different than a Rent-A-Wreck; had governments regulated the coffee shop business, Starbucks would be as likely to water down its coffee as any other establishment. Had government regulators not bal-kanized the taxi industry with their patchwork controls, we’d have nationally recognizable chains offering a range of reliable taxi services. Tourists would demand — and receive — polite and professional service, never fearing being taken for a ride by an unscrupulous cabby (and if one ever was ripped off, head office would quickly compensate the customer and discipline the driver).
In some local markets — such as fares to and from airports — service is also alive and well. Only in a system lacking competition, in fact, can rude people persist in a service industry. Instead of the world of chaos we now have, with empty cabs desperately cruising streets when they’re not needed and frantically trying to keep up with a surplus of customers during peak hours, vastly increasing the supply of part-time taxis in peak hours to complement a professional fleet at all hours would transform how citizens get around the city.
Why halfhearted deregulation backfires
NOTHING SIGNALS ECONOMIC FAILURE IN A LEGITIMATE BUSINESS MORE clearly than a black market — here we see people willing to operate outside the law to service willing customers, with buyers and sellers both benefiting in the process. The taxi regulator has created the continent’s largest corps of black-market workers, in the process making criminal an activity that should be universally viewed as upstanding.
In New York City, estimates of the number of illegal cabs run from 5,000 to as high as 20,000. In Washington, D.C., one in four drivers operates without a licence. At Toronto’s Pearson airport alone, an estimated 100 “scoopers,” or bandits, work the area using unlicensed and often poorly insured vehicles. Toronto’s drivers in increasing numbers are purchasing passenger cars and illegally using them as taxicabs, in the process affecting licensed operators — competition has forced some Toronto cab companies to offer discounts of up to 33 per cent off the meter rate to corporations and individuals alike.
Because regulation over the taxi industry has been such an abject failure in terms of the cost to cabbies, to the customer, to public health, and to the environment, and because regulatory systems so often trash a city’s image, some U.S. cities took steps toward deregulation. Some, like Houston, opened up the market by issuing 49 additional licences, mostly to companies other than Yellow Cab, which controlled 70 per cent of the city’s permits. Some, like Washington, D.C., allowed any company to enter the business. Some, like Seattle, allowed cabs to set their own fares.
But all deregulations were half steps. Houston continued to control routes to airports as well as the number of cabs to license and the amounts cabbies could charge. Washington, D.C., controlled fares through a zone system that subsidized long trips at the expense of short ones. All cities neglected to deregulate the most important segment of the taxi business, the only one that has never been subject to any competition at all — the taxi stand.
In most cities, mayhem ruled, with large numbers of unskilled drivers entering the taxi business. Poor drivers who don’t know where to find fares seek refuge at cabstands, places where talent means nothing because, as long as they wait their turn, they are guaranteed a fare, regardless of the cleanliness or fitness of their cab. After Atlanta deregulated, 300 to 400 taxis lined up at airport queues; waits of three to four hours became common, and even waits of six hours were reported.
This flood of unskilled drivers to cabstands then affected other segments of the taxi business — telephone and radio dispatch and cruising cabs, where skill counts and competition plays a role.
Skilled drivers know the market enough to be in different places at different times: They cruise the theatre district after the last curtain call, and they’ll wait at the train station cabstand to greet arriving passengers. But with the cab- stand queue snaking around the block with inexperienced drivers, skilled drivers lost this market and the revenue that came with it, sometimes leading to fare increases. But fare increases especially occurred at the cabstand, where cap-tive customers obediently took the cab at the front of the line.
As explained by Paul Dempsey, a law professor at the University of Denver and a leading critic of taxi regulation, “Putting more taxis on the roads merely increases the number of taxis and the lengths of the queues at the taxi stands. . . . Cabstand rate increases were even more pronounced. This is because there is, and can be, little comparative shopping at the cabstand because of the formal and informal pressure patrons feel to take the next taxi in the queue un-der the first-in, first-out rule. Because of the overcapacity created by unlimited entry, queues lengthen, discourag- ing drivers from competing on the basis of price. Therefore there is little effective competition.”
A Price Waterhouse study of 21 cities came to the very same conclusion. While the number of taxis increased by an average of 23 per cent following partial deregulation, it found, “most new service was concentrated at already well-served locations — such as airports and major cabstands. The cities that re-regulated were led by the largest cities with the most airport activity” where the largest cabstands can be found.
“The cabstand markets on which these operators focused their services are generally price insensitive, and, because of the first-in, first-out nature of the taxi queues, comparison shopping is discouraged. For these reasons, the new entrants had no incentive to introduce price competition.”
These studies concluded that the cabstand — a harbor of monopoly for the unskilled, who cannot hack competition — defeated deregulation. But the studies would have been more astute to conclude that the taxicab stand must be deregulated to realize the benefits of competition. If the cabstands aren’t deregulated, neither are the cities.
THE CABSTAND BRINGS TOGETHER A LARGE NUMBER OF VEHICLES in one place — it should be a form of bazaar, or marketplace, in which customers can choose from an array of different vehicles being offered at different prices.
Deregulating taxi stands requires privatizing existing stands and allowing new ones. Under competition, the stands would be designed to allow any cab — not just the one in front — to be easily selected. Cities, who typically own stands, have never thought to meter cabs at stands or otherwise ration cabstand use by price instead of congestion. No cab will wait in a stand for one hour, let alone four or six, if the charge to do so wipes out his fare, and no customer, when presented with a choice of cab in the new cab marketplace that’s created, will take a dirty, derelict, overpriced cab over a clean, reasonably priced vehicle.
The taxi industry, and the public, deserve more than halfhearted taxi reforms that often do more harm than good. The taxi industry should be fully deregulated to allow competition to bring the price of service down and the quality of service up. And it needs to be uncompromisingly regulated for safety — something today’s regulators have spectacularly failed to do.
REGULATORS IN CHARGE OF BOTH AN INDUSTRY’S SAFETY and economic viability tend to strike a balance between the two: If they’re too strict enforcing safety, they threaten its viability. Regulators charged strictly with enforcing safety suffer no such conflict.
Under full economic deregulation, good training and high driving standards would become more important than ever — in some places, important for the first time as public safety became the regulators’ only concern. Licensing commissions would require drivers to obtain stricter driver’s licences — chauffeur licences — and to keep their cars road worthy. They would confirm that the driver was carrying adequate passenger insurance. Cabs approved by the reg-ulatory authorities might sport a decal showing the car to be fit, and a photo ID affirming the driver’s trustworthiness. And good safety regulators would insist on spot checks to prevent common taxi driver practices, such as replacing bald tires with good ones for the day of inspection.
But competition itself will also do much to enforce high standards — even the illegal and unregulated competitive taxi markets develop enforcement procedures. Jitneys servicing Detroit’s shoppers generally don’t attach themselves to an entire shopping centre: Instead they service an individual store, where they become well known to the store’s personnel as well as to its customers. Once a store is confident about a driver, it will recommend him to customers, knowing that reliable, low-cost transportation boosts its own business. Some stores actually give drivers a card that drivers then display in their cars, much as taxis display their licences. Other stores — usually independent grocers — list the name and number of a jitney service in their circulars.
IN THE SIX WEEKS THAT IT’S TAKEN TO RESEARCH AND WRITE THIS ARTICLE, I’ve gone to the auto dealer and picked out a VW Jetta. But I did so with a heavy heart, because, personally, I’d rather be free of the responsibility of car ownership, and more generally, society would be better off without my Jetta, too.
But I didn’t buy the car outright — I opted for a two-year lease — because I also know there’s good reason to be hopeful. Citizens groups in Canada and the U.S. are making inroads in arguing for full economic deregulation, and then there are all the Eugene Meikles out there, the taxi drivers now relegated to the bottom of the regulatory heap, who understand how corrupt and counterproductive the current system is, and who will be keeping up the pressure for reform until reform comes.
Tim Gladney Toronto, responds: September 26, 1997
Ken Eakin Lima, Peru, responds: March 6, 1998
Tim Gladney, Toronto, responds: September 26, 1997
Great article. I’ve forwarded it to my Metro councillor.
I was a cab driver in Toronto for 15 years. My fellow cab drivers and I were delighted when the truth about the taxi business finally started coming out in the mainstream media.
The public used to put shift-driving cabbies and multi-millionaire fleet owners in the same basket — we were all lowlifes. Of course this was very convenient for the multi-plate owners who could pass the blame for high fares and poor service onto the “new immigrant, smelly refugees.”
The real problem with the taxi industry in Toronto is neither drivers nor the Metro Licensing Commission (MLC); it is the Metro Human Services and their “lobbied” members whose only purpose is to protect the fortunes of retired taxi barons, many of them living in Florida. The owners associations recently spent $250,000 on lobbying politicians to stop MLC reforms. I may be biased in my views, but you can get the official dirt from Howard Moscoe, one of the councillors in MLC, who did his best to reform this business but was surprised by an anti-democratic, banana republic style campaign.
I read this article with considerable interest, since the taxi situation in Lima is quite different from the typical North American one.
Lima, Peru, offers a perfect model of an entirely unregulated taxi industry, both in terms of economics and safety.
The only requirements for being a cab driver in Lima is a driver’s licence, a car and a little plastic sign (easily available from street vendors) that reads “TAXI” and sticks to the inside of the windshield. Every car is potentially a cab. The driver’s license requirement is not all that commonly enforced, because if one is stopped by the police in a spot check, one can usually give the officer 5 soles (US$1.75) “for his soft drink” as the expression goes down here. Police here are given the nickname tragamonedas, which signifies slot machines, but, translated literally, means “coin swallowers.” (I should add that police are not inherently corrupt but are paid very low wages, like most of Peru’s workforce. I have not witnessed an officer taking a bribe. I have learned about this practice through talking to cabbies.)
There are no meters on any cabs. There are no special licenses or photo IDs that are displayed. The quality of the cars varies tremendously, from the most broken down, ramshackle Volkswagen Bug to a new Lexus (although there are many more of the former). The most popular model is a small 4-door Japanese Tico which, because of changes in import taxes a few years ago, are relatively affordable cars. They are usually only a few years old, and while they won’t win any races, they generally do the job for short hops around this huge, sprawling, congested city. I have been in a car that had no headlights or bumpers, a cracked windshield, no glove compartment, no working meters on the dash, no rear view mirrors, no hub caps, and bald tires — four wheels and another one for steering in a rusty shell of metal. But it wasn’t as if I didn’t have a choice; I was just in a hurry.
The competition in this completely open market is savage. The price is always bargained before the ride. You can work out all sorts of deals, say, if you and your friends are going to different spots — a cabbie may charge a flat rate of, say, 3 soles (US$1.10) per person and then drop everyone off at their respective houses. Needless to say, the prices here are very comfortable for the consumer, especially if travelling in a group of two or more. The price of gasoline is the same as in Canada — which is outrageously expensive for Canada, never mind Peru. But the price of a cab is low because of competition. Often you flag down a cab and three more line up behind it while you are haggling for a price. If the first cab doesn’t give you a price that you want, you just go to the next one down the line. Usually, however, the price is right when the cabbie literally sees competition in the rear view mirror. Standing on a street corner for more than 10 seconds causes several cabs to slow down and honk at you (many times) to get your attention — a somewhat annoying experience when you are just trying to cross the street in an already extremely noisy city.
The fact is that there is a surfeit of cabs in Lima. One can find a cab at any time, virtually any place within a few minutes. Prices tend to go up for various reasons: if it is late at night and there are fewer cabs on the road or if it is rush hour and the traffic will mean longer delays. Also, cabbies have the not erroneous notion that gringos down here have money (relative to Peruvians, if not North Americans) and are much more disposed toward taking a cab. Tourists in the city will not know what to bargain for, and will usually end up paying more. If you are going to or from a rich neighborhood (or, conversely, a poor one where crime is known to be high), or if you are wearing nice clothes, or simply are white, the prices (at least at the start of the bargaining process) tend to be higher.
Fair enough. Oddly, however, the prices rarely have anything to do with the quality of the car. So the consumer is free to choose a better looking (and smelling) cab over a shabby one usually without paying more.
There are no cab stands as North Americans know them. Cabs line up at the airport as well as shopping malls, supermarkets, movie theatres, discos, and so on, but there is never the expectation that you have to take the first in line. It is, like you imagine, a bazaar, with drivers coming up to you and offering their wares, “Taxi, meester, taxi?” It is a rider’s market.
There are also jitneys. During peak hours, cabs run up and down the major traffic arteries with a sign in the window saying the street number. They usually hold four passengers (three in back, one in front), and the drivers hold up as many fingers as correspond to empty seats when they pass tired people waiting at bus stops. Once the car is full, it zips along, stopping for no one, until a passenger indicates that he/she wants to get off. The best thing about these so-called jitneys is that they cost only 30 centimos (US$0.11) more than the bus does, and they are usually much quicker and more comfortable.
There exist, as well, apart from the hordes of informal cabs, real cab companies that take calls and dispatch cars. Their cabbies are licensed, the cars are clean and in good condition, and they have CB radios or cellular phones in them, and are generally safe and have relatively fixed rates. These are good for trips to the airport when you are carrying a lot of valuable luggage, for instance. But you will pay two to four times more than you would from flagging down any old cab in the street. These companies hold the corporate accounts and a lot of the upscale tourist trade.
The system seems to be a perfect example of what you are proposing in your article: a large, unregulated informal cab fleet, which, by nature, will be in full force during rush hours, and a 24-hour, more established — still unregulated — industry composed of a few recognizable brand names known for slightly higher prices but a boring, reliable, don’t-take-your-chances standardization of service (e.g. the Holiday Inn of cab companies).
There are problems, however, with the system, some of which your article dealt with. One is that the many cabs that stop for you hold up traffic, especially during rush hour, while you bargain out a price. This is met with an enfilade of honking horns and shouts from drivers behind you. You never just jump in and go. A metered system would fix this, of course, but then the rates would rise because the fixed prices — as you have pointed out — would have to compensate for long one-way fares to the suburbs by charging a lot for shorter downtown runs. I like the way the unrestricted money-for-service bargaining system works here, but I can’t claim that it helps traffic flow.
A more serious problem is safety. Essentially, the vast majority of cabs are legal scoopers, that is, not affiliated with any company. The cabbies own their own cars (or more often a family or friends will share the cab, bought on credit, so that it is on the road almost 24 hours a day). There is no mechanism for ensuring that the cars are in good condition, that the driver will know where he is going (he will always say he does, then pull out a map or go around the block a few times asking out the window to pedestrians). There is no way, beyond the potential rider’s senses and first impressions, of knowing if the cabbie is drunk, or worse, if he is going to rob or rape or kidnap you. There is no head office to hear complaints. There is no enforcement of drunk driving laws. There is no judicial means for litigation if you are in an accident and are injured. And if you are raped or stabbed or simply stripped of all your possessions, it is unlikely the perpetrator will ever be caught.
That said, most Lima cab drivers are harmless, friendly, and helpful. Nothing bad has happened to me (knock on wood). I don’t hear too many stories in the papers of cabbies robbing people (despite the fact that Lima is a poor city with a high crime rate). But taking a cab in Lima is as safe as hitchhiking. You have to put your faith in the altruism of the drivers. Once I was trying to get a cab, and struck out with one at a street corner — he wasn’t going that way. So the car behind me offered me a ride. He didn’t have a sign in his windshield, and was just a regular guy (from appearances) who happened to be out driving. My first instinct was not to get into a stranger’s car (especially because I was carrying a couple thousand dollars of camera equipment with me). Then I thought that the only thing separating this guy and any other cabbie in the city is a sticker that says “TAXI.” In the end the guy didn’t rob me. He didn’t even charge me. I had made small talk with him along the way and he liked me enough, I suppose, to give me a free ride. We exchanged business cards as a courteous way of saying “we’ll never see each other again.”
But for the unregulated system to work, and I am in complete agreement with you, safety has to be enforced on all levels — ID cards, certificates, independent consumer protection boards, a vigilant police force. In a recent conversation I had with author and journalist John Ross, based in Mexico City, I learned that the latest trend in crime in Mexico is for thieves to masquerade as taxi drivers. You get in and they lock the doors automatically, drive around the block into an alleyway, open the locks, two or three others get in with you . . . and you can imagine the rest. If you are lucky they will just take your wallet and watch, not your life. Similar reports of these sorts of attacks are increasing in Lima, although they are usually not thieves masquerading as cabbies, but simply thieves in cars who kidnap you at gunpoint.
Now Canada certainly does not have the kind of poverty or crime that Mexico or Peru has. Not anywhere close. But a large, relatively poor population is necessary for a large pool of cheap, relatively unskilled labor and hence cheap cab drivers. Lima’s system of cabs is so convenient for the reason that there are so many out of work or underpaid people in Lima (most estimates put the rate at 70 per cent in Peru, which amounts to 5.6 million of Lima’s 8 million residents). The small quantity of people in the middle and upper classes have maids and servants. Street vendors and beggars abound. People will do anything for survival, including thievery, understandably. Cab driving is one of the many strategies of making a buck, although it tends to attract a slightly better off class because of the requisite car ownership. Sometimes you find highly qualified PhDs driving your cab. (A flippant congressman boasted recently that Peru probably has the best educated cab drivers in the world, a comment that was not appreciated by many with lots of education and no decent job.)
In Peru, it seems at times as though there are almost more people who drive cabs than take them. Although a cab ride of about US$2.50 for most places in the city sounds like a bargain to First World ears, in a country where the legal minimum wage is US$110 per month, cabs are expensive. The middle classes can afford them fairly frequently, however, because of the large, cheap labor supply (hence the surplus of cabs) and the unregulated prices. Cabbies are available at all hours because it is often their only means of income. In a park near my house, during the slow hours between lunch and evening rush hour, dozens of cabbies park and snooze. It is not like they have another job to go to.
Usually people who advance arguments for a large unprotected informal labor force are the same ones who advocate “flexible labor markets” in the Third World. No long-term contracts or benefits like health and safety provisions — just a basic survival wage for workers. I have seen it first hand in the Peruvian Andes. Foreign companies (some Canadian) pull gold, silver, and copper from the mines at record low cost-per-ounce rates, while paying peasant farmers whose land has failed yield US$10 per day (meals not included) for 14 hours of hard, manual, unskilled labor for periods of two to three months a year. If the farmer gets sick from the chemicals (like cyanide and lead) or otherwise injured, too bad, no job. If he makes it through, he can go back to his family and maybe they can buy a small bull that year with his savings. No wonder Lima is so full of immigrant cab drivers from the Andes.
I don’t think Canada has, or wants, a wide segment of its population that is poor and/or unemployed like Peru. But then who is to fill the need, in your scheme, for the rush hour, part-time cabbies? Are there enough students with their own cars? Do people on the dole usually own their own cars? Will part-time cab driving be as financially viable as other part-time work for those who don’t have a full-time job? The answer might come from those office commuters who want to make an extra buck — but if they already own the car, do they really need or want the work? And those aspiring car owners who might work a cab on a drive-to-own basis would be like they were chasing their own tail: Why own a car if cabs are so cheap? If cabs are to be cheap, then we need people to want to buy private cars and thus exit the supply and demand business of taxis.
I think that some of the void might be filled by people between jobs, or the relatively poor or unemployable (e.g. graduate students of the humanities, recent immigrants who don’t yet know English or French well enough to be competitive in other job markets), but who have the means to buy a car or a family member who could lend them one for a few key hours a day. Both these situations, to really work, would entail maintaining a fairly high level of unemployment and/or a high level of immigration of unskilled and/or non-English-speaking (or, in Quebec, non-French-speaking) workers. I’m not sure if the majority of Canadians would be in favor of either situation. Even if a huge labor pool already exists just waiting to get into the taxi business, I’m not so sure that there wouldn’t appear on the scene an oligarchy of top heavy companies that lease their fleets of pre-certified cabs to mooching students and the non-car-owning underemployed, similar to the current situation, and force up prices artificially, and taking money from the drivers. And then the black market returns.
Moreover, the black market for cabs can only be avoided within a deregulated system if safety standards that are not costly for the cabbies, i.e. if getting regular safety inspections means an increase in price, then a cheaper black market will arise. Those that can’t afford the licensed or certified cabs will end up being most at risk from unsafe cabs — hardly fair for those who already face some financial hardship. The money for regular cab inspection and repair would have to fall on the taxpayer, which is fine in my view, because it is a service to everyone to have good cabs on the road.
I personally would like to see a more flexible, deregulated taxi system in Canada, my country of birth and citizenship. But it cannot be as savage as the system in Lima — it has to be good for the customer and good for the cab driver. Anytown, Canada is not Anytown, U.S.A., because in many large U.S. cities people live in ghettos similar to those in the Third World. Canadian cities do not have this feature, at least not as noticeably.
Taxis work very well for me in Lima, provided I don’t get mugged or killed. I talk to cabbies about where they are from, what they think of the current politic scandal, how crazy the Lima traffic is. They ask me what other countries I’ve travelled to. They, of course, have never left Peru. Thus, in small but obvious ways, I always am made to think of the fact that I can take inexpensive cabs — and choose the cleaner, nicer ones — not because I am rich (I am far from rich in Canadian terms, and even in Peruvian terms I am middle class), but because 70 per cent of Peru is poor.
But can it work in Canada where the majority are middle class and want it to stay that way?
Ken Eakin, Lima, Peru, responds: March 6, 1998
Ahmet Cengiz Gulkan, Brampton, Ontario, responds: October 8, 1997