Regulation of Taxi Company in New York

The operation of taxis (cabs/ Taxicabs) in New York City began as early as 1907. Since then their operation has been debated through public forums to come up with the most effective way to regulate their operations. Through city regulations and mayoral commissions this vibrant industry has come to be one of the most efficiently ran public service operations. The debate on the best way to run these operations dominantly due to the big part cabs play in the day-to-day lives of the New York residents. Statistics from Devra L.D. (pp 24) shows that an adult who lives in New York’s averagely uses this service up to a hundred times per year. Those who hail in the Manhattan region use the service several hundred times per year. These show that this mode of transport is like a part of the lives in the people living in New York.

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In New York, the taxi cab industry is regulated by the local government through the Commission in charge of regulation of the taxi/cab industry. The commission is in-charge of making laws which back up the regulations they put in place for this industry. Further, the regulation is documented in a set of rules for companies that want to join the industry and the operators. Going against these penalties can lead to fines of up to $1000, suspension of licenses to operate and revocation of licenses in some situations.

This industry is made up of more than 14,000 cars that make up its fleet; this creates employment for about 40,000 people made up of Americans and immigrants who make up the largest percentage of these licensed drivers. The immigrants come to this form of employment as there is always vacancy and it’s an honest way to make a living. The presence of the immigrants has made the cab customers have some kind of complaint or another. There have been instances where a cab driver cannot get a customer to the place they want to be leading to delays, complaints and dissatisfaction.

In general terms regulation includes the provision of rules and frameworks by authorities for business and other activities. Some of the aspects in most businesses are self-regulating. An example is the media in many countries is regulated by a group appointed by the media fraternity. Nevertheless, in most areas it is highly paramount to establish some kind of regulations which are backed by some legal sanctions which would include jail sentences and fines.

Like most taxi markets that are heavily controlled, the New York cab industry is similarly regulated through price regulations and entry requirement limitations. There are some explanations that have been put forward to defend this regulation which include quality customer care and road safety. As discussed in many economic theories, business regulations can come at the price of the existing firms, reducing competition among them, increasing prices leading to higher profits. Estimation puts the current number of taxi permits to have reduced by 1400 by the year 2008 due to regulation; this is actually the opposite of what regulation should do. But on the other hand, deregulation may only work in the short-term with effects such as monopolization, price fixing with negative effects on consumers and low standards of services.

The clearest observation of the traits of New York taxis their ethnic diversity. Taxi drivers are so diverse that it is usually commented that they can form a virtual United Nations of countries and languages. Statistics have shown that 9 in 10 new drivers in the 1991 survey were immigrants from a total of 84 countries. Over 4 in 10 were born in the Southern Asian region, specifically Pakistan, Bangladesh and India. Africa, the Caribbean, the Middle East and republics of the former USSR were other common birthplaces (Elson D, pp. 1350).

In New York, like in other cities across the United States, cabs are gradually being recognized as a backbone of the city’s transportation service. This is probably because of the ability of the taxis to attract customers from all professions and walks of life. Whether on business or vacation, visitors and natives use cabs to and from airports, hotels, shopping malls, offices, residential areas or just leisure cruises. Despite this great service travelers usually meet some unpleasant rides from one moment to another. Therefore local government personnel have a hard time finding the best ways for dealing with this big transport sector.

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For all the differences occurring amongst the taxi drivers and the complexities of the operation and ownership of New York City’s eleven thousand seven hundred and eighty seven taxicabs, the work of driving a yellow cab is fundamentally the same for each driver: cruise the streets and pick up fares. Most of the clients are picked up by taxi cabs which are on the cruise; the rest are served at the waiting stands established at greatly trafficked regions. It has been a long time since Medallion cabs had telephone aided services since the removal of these devices from the taxis in the nineteen eighties. Consumers of these services are basically residents of Manhattan finding their way to and from work, airport, entertainment venues, residential areas, and shopping malls. Visitors alike form a reasonable percentage of customers to these cab services (Elson D, pp 1351).

Similar to most cities in the U.S., cabs are somewhat unequally distributed in the city. There appears a problem of too many of them serving the downtown areas and airport, while the residential (neighborhood) areas have very few of them. The location of the taxis with in the city is planned although it is not perfect. There are taxi stands located in strategic areas of the city, while they can also be hailed from the streets and airports which make up a substantial portion of taxi trips. They are highly significant to the image of the city more so in an economic development perspective. The dispute with stand, hail and airport trips is the fact that it is difficult to ensure matching supply and demand and therefore ensuring the accountability of drivers. Specifically this issue concerns driver don’t have affiliations to taxicab companies that in most cases exercises oversight for service quality.

It is a good thing to have one company running the operations of an industry so that there are gains from the economies of scale. On the contrary, it is also a good thing to have an industry ran by a group of companies to create competition. In the case where one operator is sluggish and under performs, competitors have a leeway to improve on these weaknesses to attract customers especially from competitors. Given the two scopes of benefits the New York Taxi regulator have found a balance by allowing some private operators to come up besides the mainstream medallion cabs. Even though the private operators are also regulated by the commission they offer higher quality and specialized services.

Unlike most regulators who prefer to resist change the New York taxi regulation commission is largely aware of the dynamism of the industry. This is shown by the reservation of rules sections in the official compilation of the Taxi rules of New York City awaiting changes and anticipating growth in the system. This seems good for the regulators in the long run as it is better to adopt changes when there is need than wait to be forced to change. Adopting the changes means that the regulators and operators together can have a high level of control and correct any errors than may occur.

Another element of a successful taxi system is the people who run its operations, for the New York City taxis are their drivers. Rules that have been stipulated by the New York taxi drivers’ rules ensure the best, safe and customer friendly services. A big challenge in the regulation of cabs is hence to regulate taxi entry. A major challenge for officials charged with regulating taxi entry is to reconcile the disparate needs of dispatch and cab stand and street hail markets, particularly in places with substantial trip volumes in both markets.

Entry for cabs into this market is not open to all, there are rules and regulations meant to limit and regulate the operators in this industry. Analysis by researchers shows that without control the cab stands and the hail markets may experience a surplus of cabs making the industry deteriorate in service quality. These rules and regulations are meant to:

  1. Restrictions should be put in place in cities where both cab stands and street hails make a large number of trips. Examples of these cities include air landing field taxi waiting stands and intense populated downtowns in the New York City. Without these numerical limits, this city would experience an oversupply of taxis/cabs leading to the deterioration of quality of driving and the vehicles standards.
  2. Sections in downtown New York which have predominance of telephone ordered trips have practically very few cabs that can get trips. Hence the need to have the typically authorize cab companies to operate a specific number of cabs. This number is usually specified by the regulation, in which case it needs to be adjusted regularly if demand for cab service is growing. Taxi firms may also be given flexibility in adjusting the number of cabs they operate and may be allowed to add or remove taxis from their fleets without regulatory approval.
  3. Cities with a mixed model of taxis the stands or street hail trips generally limit entry, in order to prevent oversupply of taxis like in point (1) above (Dolan GE, pp 80).

Even though there are differences in the drivers’ origins and the owners of the cab that ply the streets of New York’s nearly 12,000 medallion cabs, the driving job is basically the same for all the drivers i.e. cruising the streets and collecting fares.. Majority of the passengers who use these taxicabs are picked by cruising cabs. The rest of the customers are served by taxi stands. This factor has lead to the regulators of the city cabs to come up with ways to regulate the dispersion of cabs around the city. To achieve geographic balance in service levels, New York regulation on taxis has adopted geographical restrictions e.g. they are not allowed to pick passengers in the franchised areas allocated for private companies. Other service requirements such as companies and drivers have been allocated trips to specific underserved areas. The effectiveness of this service has increased slightly due to this allocation.

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Regulation in the New York taxi business was found necessary to maintain some minimum standards. These standards include ensuring customer safety and protection. The New York regulation laws encompass the safe driving and traffic accidents rules in the 2-21 section of the regulations. This section states the manner and speed at which the taxis should be driven, maintenance of the New York traffic rules while driving, and the actions to take after major or minor traffic accidents.

Another reason for the regulation of the New York taxi business is to provide a fair playground for all the operators in the business. Bigger companies tend work together to fix prices and take up some sections of the businesses which seem to be more marketable and have better businesses. In the rules governing the New York taxi business there it has been required that the taxis should have taxi meters to avoid overcharging passengers (section 2-33 an section 2-34). In addition there are penalties for overcharging passengers and incidents of drivers tampering with the taximeter in the same sections of the regulations.

Regulations help companies to maintain a given standard and code of conduct. Likewise the New York taxi regulators use the regulations to enable the maintenance of the standard of services and to enable the future growth if need be. In addition the rules in New York have been given vacancies for amendment and addition of more clauses to enable the maintenance of the taxi operation standards and provide room for improvement.

Due to regulation, New York City taxis have been found to be less prone to road accidents than drivers in other cities; due to this fact, passengers using this means of transport have a lower chance being involved or getting fatal injuries as a passenger using the taxicabs or the livery car than as an occupant of other vehicles, according to a study released by Schaller Consulting in 2004 (Elsen D, pp 1355).

In other studies on the New York accident data have shown that generally the rate of crashes are going lower by the years due to continuous regulation. The figures show that the rate has declined by a third for taxicabs and liveries as compared to other forms of road transportation in 2004. The exact figure was a rate of 4.6 taxicabs which were involved in accidents reported for every million miles covered while a rate of 3.7 liveries in accidents reported in every million miles covered; this is in comparison to a rate of 6.7 for every million miles covered for other vehicles reported in New York City.

Despite this success there is a significant shift in the New York taxi business to taxi/limo business. 2.5% of New York City taxi-limo drivers were made up of female drivers back in 2000; this had not been changed since the nineteen nineties and eighties. In New York City, car services, taxi/limo drivers comprising the yellow taxi and the black cars drivers. Adding up to that 84% of the drivers were found to be immigrants into the city, an increase from 64% in the year nineteen ninety and 38% in the year nineteen eighty, while 23% of the City’s drivers of the taxi/limo originated from west Indies which is the late day Dominican Republic and Haiti) and 20% were from South Asia Pakistan, India and Bangladesh.

From the information collected by the New York City Taxi-Limousine Commission and licensing medallion taxi drivers: Bangladesh has replaced Pakistan, and it is the number one country of origin of medallion cab drivers in New York City. In the last two years, eighteen percent of the new taxi drivers in New York City were from Bangladesh, up from ten percent in the year nineteen ninety one and one percent in the year nineteen eighty four. This influx was mostly due to the stable increase in immigrants coming from Bangladesh. Fifteen percent of the new drivers originate from Pakistan, down from twenty one percent in the year nineteen ninety one although still a great deal higher than the nineteen eighty four figure of three percent. 9% of drivers were born in the U.S., about the same as in 1991, when 10.5% were U.S.-born, but down from 26% in 1984 (Elsen D, pp1360).

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Regulation has enabled standardization of the New York cab services. Even though critics have put on a fight for deregulation, regulation works for the whole economy and not for the mighty few. A key aspect in the improvement of the cab business is the improvement of the quality of taxi drivers which in turn increases the quantity and quality of proficient career drivers who have a better remuneration, working conditions and greater security for them and their clients.

Works Cited

Gartner, M. Macroeconomics, 2nd Edition, FT Prentice Hall, 2006.

Devra, L. D. New York Taxicab regulation, New York: Basic Books, 2004.

Dolan, G. E, & Lindsey, D. E. Economics 6th edition, California: University of California Publishers, 1991.

Elson, D. & Cagatay, N. The social Dimension of macroeconomic policies, World Development Journal, 28(7): 1347-1363. 2000.

Hoffman, K. D., Turley, L. W. & Kelley, S. W. Pricing retail services, Journal of Business Research, Vol. 55 pp.1015-23. 2002

Sowell, T. Basic Economics, 3rd edition, New York: Basic Books, 2007.

New York Taxis and Drivers’ Regulations: Official compilation of the rules of the City of New York, New York: 2008.

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