Moneybox

New York’s Uber Cap Is Good News for Basically Everyone

NEW YORK, NY - AUGUST 8: Taxi cabs fill up at a BP Gas station on the West Side of Manhattan, August 8, 2018 in New York City. On Wednesday, New York City became the first American city to halt new vehicles for ride-hail services. The legislation passed by the New York City Council will cap the number of for-hire vehicles for one year while the city studies the industry. The move marks a setback for Uber in its largest U.S. market. (Photo by Drew Angerer/Getty Images)
A lifeline for a New York icon.
Drew Angerer/Getty Images

Wednesday was a good day for Bill de Blasio.

Three years ago, when the New York mayor attempted to cap the number of Uber vehicles in New York City, the Democrat was broken and humiliated by Uber’s ruthless PR campaign. At the time, the city made the case that Uber cars were responsible for Manhattan traffic having slowed to the pace of molasses. Uber deftly countered that its drivers had smashed the transportation redlining caused by the city’s limit on yellow cabs, bringing easy mobility to communities of color.

This week, de Blasio got his cap—or at least a one-year freeze on new licenses for the ride-hail companies, together with a minimum wage for drivers. This time, proponents of the bill didn’t focus on traffic, but on equity. The result is a first-of-its-kind wage floor for gig-economy workers, and you can bet it will be a talking point for de Blasio as he makes the case for New York as the country’s leading lab of progressive policy.

What galvanized the effort in New York were driver suicides. Six taxi and livery drivers have ended their lives since the end of last year after suffering from financial hardship.* Other drivers cited their deaths as evidence that the city had abandoned them. Several family members of the deceased drivers were on hand on Wednesday at City Hall.

The drivers are right: For decades, New York’s arbitrary cap on yellow cabs made a taxi medallion one of the world’s best investments. The limit drove medallion values over $1 million, luring both wealthy investors like the president’s lawyer Michael Cohen and immigrant drivers who banked their livelihoods on medallion values.

Then Uber and Lyft arrived. In permitting the companies to deploy tens of thousands of drivers, the city tacitly abandoned the medallion system and everyone who was invested in it. Medallion values fell more than 80 percent, and billions of dollars vanished overnight. Even yellow cab drivers who didn’t own medallions say they can’t drive enough to keep pace with the Ubers and Lyfts flooding the streets.

Back in 2013, before transportation network companies made landfall in New York, there were 378,000 taxi trips on the average weekday in the Manhattan central business district. By 2017, that number had fallen to 249,000, according to Schaller Consulting, a group that studies the issue. At the same time, TNCs delivered more than 200,000 trips of their own. But even those numbers don’t tell the whole story, as Midtown is the last stronghold of the yellow cab. Overall, TNC cars now outnumber medallion taxis by nearly six to one and complete twice as many trips.

This has had a number of ramifications that go beyond driver livelihood. Taxi speeds in the Midtown core fell from 6.5 mph in 2010 to 4.7 mph in 2016, a decline of more than 25 percent. The struggling subway system is shedding riders, apparently to TNC services. Air quality alerts, induced by heavy traffic on hot summer days, continue to plague those New Yorkers who aren’t inside an air-conditioned car.

Wednesday’s legislation will be recognized as a landmark moment for gig-economy workers. But the minimum wage only works with a driver cap. The limit keeps new entrants from oversaturating the market and should, as demand rises, give drivers a steady stream of paying customers. The cap is also justified by protecting yellow-cab livelihoods.

The root problem is that New York has too many full-time ride-hail drivers. Onerous licensing requirements, low car ownership, and (for a while) an enormous untapped demand for rides ensured that drivers who sought this work were serious about it, not retirees and students making a little extra cash with their cars. The Independent Drivers Guild, which represents more than 45,000 ride-hail drivers in New York (many work for one or more companies), says nine in 10 of its members do this work full time.

In other cities, gig workers might chase peak demand (rush hour, Saturday night) and then sign off. But having an army of full-time drivers, burdened with auto debt, bringing rush hour waits down to a minute or two created a pretty serious oversupply during the quieter hours.

The hidden triumph here? Strong incentives to reduce traffic congestion. The city can’t enact proper congestion pricing without the state. But the bill is a message that it can, and will, regulate the streets. Both the wage system and the cap will push Uber and its ilk to improve what are called “utilization rates,” or the percentage of miles during which the driver has a passenger. In 2017, that rate stood at just 58 percent, according to the TLC, meaning that TNC vehicles were driving empty more than 40 percent of the time. Despite the backing of an algorithm providing an endless stream of pick-ups, that’s scarcely an improvement over street-hail taxis, who (in 2014) had the meter running about 54 percent of the time.

As demand continues to increase (and it will, with a major subway line shutting down in less than a year’s time), the path forward looks like drivers clocking fewer, busier hours. That’s good news for existing drivers, good news for the environment, and good news for traffic congestion.

How it affects passengers is the big question. It might mean longer waits and higher fares, especially in traditionally underserved outer-borough neighborhoods where more people of color live. It might mean the companies lean into more efficient ways to transport people than strict door-to-door service. And it might, finally, create the conditions for the city and the companies to consider the opportunities that bikes, scooters, and other small electric vehicles can offer in a metropolis short on space.

Ultimately, surging demand for cabs in a city where midtown traffic moves slower than a jogger reflects that the city has dropped the ball on providing alternatives to car travel. Some of those—hello, Gov. Andrew Cuomo’s subway system—are out of its control. Others, like lanes for buses and bikes, are not.

Correction, Aug. 9, 2018: This post originally mischaracterized recent driver suicides as being that of yellow-cab drivers. The deaths have been of both taxi and livery drivers.