NYC taxis

The real reason cab drivers hate Uber

Well one reason at least

In April this year, traffic stopped around Trafalgar Square and Whitehall in Central London. It’s a familiar sight – London’s black cabs had come to standstill, blocking the roads, in protest against Uber.

The scene’s been repeated across Europe, the US and elsewhere. And it's got a lot to do with how much those guys had to pay to get to where they are.

To become a taxi driver, there are different hurdles and requirements you need to overcome. These artificial complications could be anything from having to purchase an expensive licence, to a qualification that can be obtained only by passing a difficult exam. In economics, they're called 'barriers to entry' – things you have to do before you can do the thing you actually want to do.

Why? Workers and companies in a given industry (like cab drivers) introduce barriers to make it harder for other people to start doing the same job as them, so that they can get more customers and charge higher prices. It comes down to one of the basic theories that underpin a lot of economics – the more there is of something, the less that something is worth.

The problem is, Uber drivers don't have the same barriers, and there are now more Ubers in London and NYC than traditional cab drivers. Which kind of undermines the whole 'competition makes things better and drives down prices' thing for cabbies.

To drive a cab in New York City you would need to buy a licence (the famous ‘medallion’). This licence can be traded and sold to other people, and because there are so few of them, they cost quite a lot.

In London, you can’t buy a licence from another driver, but you do need to pass a difficult exam, called the ‘Knowledge of London’ test. This test was introduced in 1865, and requires students to memorise the name and location of all roads in central London. It usually takes three to four years of studying to pass – that’s a big investment.

The Knowledge
London cab drivers have to learn THIS ENTIRE MAP before they get a license. Uber drivers don't

In the places where licences can be bought and sold, cab drivers pressure the government and local authorities to limit the number of licences issued. Keeping this number low limits the supply of licences, which increases their price. This is why, for example, in 2014 a licence to operate cabs in New York City could be sold for more than a million dollars. Today, a licence to operate a cab in Milan can cost around 180 thousand euros (about $212,000).

But to become a Uber driver in New York City you don’t need to buy a licence, which makes it much cheaper. Because Ubers and cabs compete for the same customers, more Uber drivers mean less work for regular cabbies.

Cab drivers in cities like New York City and Milan have bought expensive licenses in order to operate, and are now fearing that allowing Uber drivers to operate freely will make their license lose value. Many of them keep their license until retirement, and sell it away to pay for their pension. If the license loses value, then it becomes a bad investment.

 

 

The value of a cab licence does seem to go down when Uber drivers begin to circulate. Take NYC, while in 2014 a cab licence was worth on average $1 million, it could be bought for as little as $690.000 in 2015, and earlier this year a medallion sold for $241.000.

The more Uber drivers take on the job, the more a cab licence loses its value, the more a cab licence becomes a really bad investment.

It's not the only thing behind cab drivers' resentment of Uber in cities like New York and Milan, but it definitely is one of the major ones – and it explains why they pressured so much to ban Uber or restrict the number of drivers that are allowed to join its ranks.

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Reader Comments

  • RW

    Your right to a degree. You mentioned “the wandering Jew”.

    I elaborate that the Jewish people, historically have tended to migrate almost exclusively to locations that are economically and culturally vibrant already. I would speculate that Jews have thrived in these places and have often improved the bounds of their economies and knowledge base.

    You can also ask; how many massive entertainment conglomerates, Nobel winners or billionaires has Isreal developed? If Jews are so capable, why isn’t Tel Aviv the Rome of our time?

    Jews are successful because they value education, maintain a strong social cohesive, they actively monitor and have a good sense for Zeitgeist wherever they are and they carefully choose the places they settle and congregate themselves heavily in these choice locations.

    But most importantly (haulocaust increased the importance of this aspect), they actually designed their culture for success. They not only attend Harvard, they use what they learned to better the group as a whole. With as much, they studied intricate networking systems, adapted to it and in many cases improved upon them. (See how Japan acquired Aegis warships and made them better).

    Of course there is nothing wrong with any of this. It’s when you elaborately gain disproportionate power in any society where you would stand out, you must take care when attempting to make a society better (Civil Rights movement) and rewriting that society all together (mass immigration). Ask blacks in China, Mexico, Philippines or India how much opportunity they have? Go to businesses owned by their American diaspora and see how many blacks they hire. Go to Silicon Valley and see how many East or South Asian tech workers wish they could work with more black people. California might work as a state, but as a nation, I think your rolling the nuclear dice here. I hope we can succeed as a tolerant pluralistic superpower but at this stage in human societal development, it’s a pipe dream.

    And if Jews really are the icon for success, they would see that fundamental human successes happen over generations. Just look at the rest of the planet? Are we ready?