Posted on 05/20/2019 7:13:27 AM PDT by Kaslin
This is a subject we’ve been tackling here for a while now. With the advent of Uber, Lyft and other gig-economy outfits, a lot of pressure has been put on taxi drivers that don’t deliver a similar quality of service. Part of the resulting economic distress has come from a simple lack of customers, but the problem runs deeper than that. Under the traditional, corrupt system of taxi “medallions,” the municipal government has been able to regulate how many people are able to attempt to earn a living by offering rides. In exchange, they had to pay an increasing amount of money for one of these medallions. The government effectively created an artificial market for a product with zero real-world value because they controlled the scarcity of it.
The situation quickly grew out of control, with the cost of medallions ballooning past a million dollars. This left the drivers (or their employers) in deep financial holes. When the gig economy arrived, the value of the medallions plummeted, resulting in some drivers being so financially ruined that they took their own lives. But whose fault was it really? The New York Times has published a deep dive on this phenomenon showing how the greed of the government destroyed the livelihood of these drivers while profiting handsomely. (The linked article is part two of a series. Read part one of the Times’ report about “reckless loans” and the damage to taxi drivers here.)
Despite years of warning signs, at least seven government agencies did little to stop the collapse, The New York Times found.
Instead, eager to profit off medallions or blinded by the taxi industry’s political connections, the agencies that were supposed to police the industry helped a small group of bankers and brokers to reshape it into their own moneymaking machine, according to internal records and interviews with more than 50 former government employees.
For more than a decade, the agencies reduced oversight of the taxi trade, exempted it from regulations, subsidized its operations and promoted its practices, records and interviews showed.
Their actions turned one of the best-known symbols of New York — its signature yellow cabs — into a financial trap for thousands of immigrant drivers. More than 950 have filed for bankruptcy, according to a Times analysis of court records, and many more struggle to stay afloat.
While the Times at least highlights the fact that questionable banking practices played into the challenges the drivers face, the story goes deeper than that. Once it became established that you had to have a medallion to drive and that the medallions were suddenly worth massive amounts of money (for no reason other than government dictate), a market was created. The government had a vested interest in keeping the cost of the medallions as high as possible, even though they had no actual value, so it was a virtually recession-proof scheme. A cottage industry of credit unions cropped up, catering almost exclusively to the drivers and allowing them to take out massive loans against the value of the medallions.
Then Uber and Lyft came to town and the value of the medallions plunged. But nobody was about to let the drivers off the hook and the credit unions still wanted their pound of flesh. That brings us where we are today.
So who was it that buried the cab drivers financially? Uber and Lyft, the credit unions, or the municipal government that constructed this rolling scheme in the first place? We report, you decide.
Yellow Cab? Dat’s racist...
Is Uber unionized in New York City? If not where’s is the Union on this?
Not that Im in a union , but I thought it was kind of went without saying that New York City the Union rules. Or what?
The one with the disco lights.
New York City has been involved in an ongoing discussion about issuing more taxi medallions for years.
The biggest obstacle is that it sees limiting the medallion count as mainly an exercise in limiting traffic congestion in midtown Manhattan. It is believed that allowing more cabs on the street will simply worsen the congestion in these areas without providing any more service in outlying parts of the city where cabs are hard to find.
I’m surprised that NYC didn’t try to protect the “value” of the medallions by mandating that Uber and Lyft drivers were required to have them also. After all, it’s a one-party dictatorship. How hard would it have been to do that. How often does a tyranny drop the ball like this and allow actual freedom to seep in?
“Thousands of immigrant drivers”? Having quoted that, I’ve been a passenger of a NYC taxi with a driver from Russia and another one from Africa, friendly, proud and worth the money I paid them. Sad to think they have to fight New York City corrupt powers-that-be.
I’ve seen youtube videos that say that by the time an uber driver pays for expenses, that there is not enough left over to pay for the wear and tear on the car.
Thus uber drivers are liquidating their cars and not making enough to buy another one.
Nobody questions but that the system was corrupt and bad. But of course it was the gig economy with Uber and Lyft that left the sucker recent medallion owners holding the bag.
Almost without exception government effs up everything it touches.
L
I don’t know if it’s true elsewhere, but in my neck of the woods all the Yellow Cab drivers are independent contractors. So they are able to refuse trips.
And that’s happened to me. I called to book a Yellow Cab, and the dispatcher said “Okee-dokie! One is one the way.”
But no cab showed up, ever. When I called back, I was told “Oh, sorry pal. No one picked up your run.”
That caused me to have to reschedule a very important appointment. I will never, ever use Yellow Cab again.
1G12 or 3128
This puzzles me as well.
I was in New York City this past weekend. Wanted to go from the restaurant back to the hotel. Uber was 16 minutes away, and was going to charge $35 without tip. I managed to hail a cab within two minutes, cost of $13, tip included. I don’t know if it’s always like this, or if I just lucked out.
Hard to say what would have happened if Uber and Lyft weren’t LOSING Money on every ride, they might be charging the same rates as Taxi’s , maybe more.
As an aside, how is it, that driving a cab evolved into a job done almost exclusively by people not born in this country?
Unbelievable!
That’s a good question.
I live here and i am not sure.
Uber can charge by how busy the company is.
That can result in devastatingly higher costs at certain times.
“The situation quickly grew out of control, with the cost of medallions ballooning past a million dollars.
Unbelievable!”
Not really.
Fishing licenses in Alaska cost millions of dollars due to the limited supply.
In Montana there are only so many ‘all spirits’ liquor licenses and also a limited number of ‘beer and wine’ licenses. The MAJORITY of these licenses are fixed to a town or city. A very, very few can be moved throughout the state. Towns like Ringling or Two Dot don’t have much of an issue, but my town - Bozeman - has $1,000,000+ ‘all spirit’ licenses and $500,000 ‘beer and wine’ licenses.
Government regulation increases prices.
I used to sell commercial real estate in Seattle back in the early 80’s. What I learned back then about how retail space rental really shocked me. The triple net lease is a fun one, but also how shopping malls did it. And then I learned about special “tax zones”. That is, if a location (mall, etc) is particularly profitable, the city will add an additional sales tax to just that location.
But the bottom line is this: The whole thing is like mafia “protection money” with various layers. If you are in a major mall, the mall sees your books and charges you a percentage of your profit. Same for building owners in high traffic areas. It means that “just paying your rent isn’t enough. If you are not doing all that well, though you can afford your rent, they’ll replace you with a more profitable tenant.
Frankly, when I see a small storefront doing a ton of buisiness in an area like this, I wonder how much of their profit is going to the landlord and the city, rather than the business owner.
The whole thing is corrupt, at least to me. Oddly, this is one reason I’ve not bought anything in a large shopping mall for at least 20 years, and I use Amazon* or Costco (or other online) as much as possible. Starve the beast.
*Yes, I know I’m hurting one collective “bad guy” to favor another, but still...
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