The Chicago Way: Bringing a subsidy to a fight over ridesharing
Uber became so popular so fast because it filled voids the regular taxi industry did not: its drivers would go into non-touristy neighborhoods, pick up African-American customers and were available when people got out of work.
Uber and its rideshare counterparts, Lyft and Sidecar, stepped in to meet needs that riders had for years, but the taxi industry in most cities ignored. The taxi industry’s response has been, for the most part, to fight ridesharing rather than make their practices friendlier.
Here in Chicago, the taxi industry has clung to one advantage: a requirement that drivers-for-hire picking up passengers at O’Hare and Midway airports must have a chauffeur’s license. This, in effect, gave cab companies a monopoly and made it less profitable for rideshare drivers to do airport drop-offs. On Monday, the Chicago City Council Transportation Committee members agreed to allow rideshare companies to pick up at the airports. A vote by the full council is scheduled for today.
Of course, there are conditions. Specifically, rideshare users will now pay a $0.30 per-trip fee to the City of Chicago. The fee will increase to $0.50 for all riders and to $0.52 for airport pickups. In addition, taxis will continue to pay a fee of $4 for access to the airports, while rideshare companies will now pay $5 for access to airport pickups and to drop off or pick up at McCormick Place (Chicago’s convention center) or Navy Pier (Chicago’s tourist trap). Meanwhile, the city is increasing taxi fares by 15 percent.
It might tolerable if the new fees were feeding Chicago’s starving city coffers, but instead, some of the money will go right back the taxi industry. Specifically, it will be used to offset the costs of fingerprinting, background checks, drug testing, driver-training classes and chauffeur license fees.
Taxis also retain certain explicit advantages over ridesharing. Most obviously, taxis can pick up riders off the street. They work without apps. (On more than one occasion, I’ve hailed a taxi because my cellphone battery was dead.) Cabbies accept cash, and at least a few aren’t paying taxes on all of the cash they accept. Cabs carry advertising, which generates additional income. And now, they are receiving a subsidy from Uber riders.
Does that make sense?
In what world are companies taxed specifically to make their competitors more efficient, while also making their service more expensive for consumers?
It’s even more egregious when you consider that some of those fee-paying riders are African-Americans or South Side residents that taxi drivers long have avoided. Chicago is a majority-minority city covering 234 square miles. It’s an open secret in Chicago that the taxi industry has mostly served white people downtown and on the North Side. That may have worked well for them all these years, but it isn’t working now. Instead of changing to meet the competition, taxi companies appear to be retrenching.
I’m not completely unsympathetic to the problems facing taxi drivers. I’m a Chicago resident who rides Uber or takes taxis a few times a week. Both are often cheaper than paying for parking and more convenient than taking the El. Driving a taxi is dangerous work, and some of the problems with cabs are the faults of the companies, not their drivers.
But I also see how much my African-American friends love Uber because, at long last, they can get rides. People of all races living far from downtown can get picked up and dropped off with no grumbling. My high-school kid can use it to get home from parties in the suburbs where there is no taxi service or where trips would involve meter-and-a-half rates. Uber drivers tell me they like knowing that they will get paid at the end of the ride, because users have credit cards on file.
Deregulating the taxi industry might help drivers, but it would further damage the monopoly power of the medallion owners. Rather than asking the medallion owners to learn to compete, the Chicago City Council is giving them a subsidy to continue business as usual. That’s wrong.
It also won’t work. A rideshare-subsidized drop in the chauffeur license fee from $15 to $5 isn’t going to be enough to offset that ridesharing companies still have a better product. The taxi companies will be come back to City Council, asking for more help, because that’s easier than making fundamental changes to their business model.
In the meantime, I’ll probably still mostly take the El to the airport. Neither Uber nor a taxi can solve the problem of traffic on the Kennedy Expressway.
