The Sharing Economy and the Mystery of the Mystery of Inequality
Dean Baker
Last week I had a fascinating 3:00 A.M. cab ride from San Francisco airport to a hotel in downtown Oakland. My cab driver was an immigrant from Pakistan who was putting two kids through college. After working for years as a driver he managed to save enough money to buy his own cab, and more importantly to buy the medallion that gives him the right to operate a cab in San Francisco. The medallion cost $250,000. He is still paying $2,300 a month on the loan to get the medallion in an addition to annual fee to the city of $1,500.
The medallion is far from the only cost the city imposes on cab drivers. It requires a special license, which involves four days of classes (i.e. lost work time), plus fees. They also must get a special background check by the F.B.I. and a special badge, both of which involve additional fees. In addition, cab owners must have a special safety inspection for their car and brakes, which means yet more time and fees. And they must carry a $1 million insurance policy to protect passengers, which costs around $750 a month.
I apologize for the Thomas Friedmanesque digression, but there is a point. My cab driver was complaining about all of these expenses because he has to compete against two ride services, Uber and Lyft, that have largely escaped the same set of regulations. These companies and their drivers are not subjected to the same set of rules that are imposed on traditional cab services. This has put my cab driver and others like him at an enormous disadvantage, and made Uber the latest Wall Street wonder with an implicit market capitalization of $17 billion.
It shouldnt be surprising that a business can makes lots of money if it is exempted from the regulations that apply to its competitors. This is largely the story of Amazons success. It avoided collecting sales taxes in most states for most of its existence. (The company claimed that its staff was too incompetent to figure out the appropriate tax rates.)
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Warren Stupidity
(48,181 posts)most taxi medallions are owned by fleet operators, not by individuals. Metro cab services are routinely horrible. Filthy cars, drivers clueless about routes, poor service times badly maintained vehicles, the list goes on.
The industry was ripe for disruption.
That said, I am mostly concerned about the "deal" uber drivers are getting. It isn't clear to me that they understand the true cost of operating a car as a cab service.