The argument against Uber, Lyft and the other non-traditional taxi companies has always been that they disrupt the cosy cartel of the traditional taxi companies. This is obviously why Uber and Lyft are so to the benefit of actual passengers, their disruption of the cartel.
That cartel takes different forms in different places. In London it’s the insistence that black cab drivers take The Knowledge. Something that’s entirely redundant in today’s world of online mapping systems. But it does serve to limit entry and thus keep wages high. In New York City it was an artificial limitation on the number of cabs that could tout for hire. In order to do so you had to have a medallion, medallions were in short supply. So much so that one might sell for $1 million. Or be rented out for $40,000 a year per 12 hour daily shift.
You know, the restrictions upon entry just meaning riches for the rentiers who control the means of access. Uber and Lyft exploded that system to the benefit of everyone other than those rentiers. NYC is now reimposing the restrictions upon the number who may tout for business:
Uber and Lyft have stopped accepting new drivers on their respective platforms in New York City, Politico reports. The move comes after the city passed new rules that are designed to curb the explosive growth of ride-hail companies. On its website, Uber attributes the new policy to “new [Taxi and Limousine Commission] regulations.” (To find Lyft’s notice about not accepting new drivers, I had to go through the process of signing up as a new driver.) This is a reference to legislation passed by the New York City Council in December 2018, which requires ride-hail companies to pay drivers at least $17.22 an hour after expenses. The pay formula uses a so-called “utilization rate,” which accounts for the share of time a driver spends with passengers in their vehicles compared to time spent idle and waiting for a fare.
The rules penalize companies for running too many cars without passengers on city streets. The higher a company’s utilization rate, the less it has to pay drivers to meet the new wage floor requirement. The rules were intended to increase pay for drivers, while also addressing what many saw as an oversaturated market in New York City. In that sense, today’s news suggests the rules are having their desired effect. The wage rule was passed several months after the city council approved a new vehicle cap for Uber and Lyft in the hopes of reversing worsening traffic congestion. That rule doesn’t affect Uber and Lyft’s ability to onboard new drivers; it just restricts the number of vehicles that can be used to pick up passengers.
In economic terms this is the same thing. A restriction upon the number of vehicles that may tout for hire. This is at cost to passengers and benefits producers. It’s a guild, a trade restriction. And using exactly the same justification that was used last time too – the number of vehicles on the street leading to congestion.
So, there we have it, the way New York City is run. Loosening guild restrictions benefits consumers, better impose guild restrictions again.