The economist Walter Williams has pointed out for many years that government effectively discriminates against blacks through minimum wage and occupational licensing laws. Minimum wage laws price lower skilled workers out of the market while denying them the chance to get their foot on the bottom rung of the economic ladder. Occupational licensing laws prevent newcomers from entering markets where they may undercut entrenched, politically-connected, vested interests. A prime example of the latter is the taxicab market.
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Driving a cab doesn’t require extensive skills and ordinarily would not require a large amount of capital; all that is required is a decent car in running order. However, municipal governments have enacted laws that severely limit market entry, exorbitantly raise the cost of owning and operating a cab, and keep cab fares artificially high. Since blacks are disproportionately represented among those having lower work skills (often due to a fraudulent public education) and modest amounts of investment capital, these protectionist laws have the racially discriminatory effect of preventing many blacks from entering the taxicab industry.
Most American cities place a limit on the number of cabs allowed on their streets. New York caps the number at 13,347; for Chicago it’s 6,800, Boston: fixed at 1,825. Additionally, some cities like New York, Chicago, Philadelphia, San Francisco and Miami established taxi “medallion” systems decades ago that give transferable property rights to licensed insiders. Medallions, physically represented by metal badges bolted to the hoods of cabs, are typically bought and sold at prices ranging from $300,000 in Miami upwards to over a million dollars in New York City. They represent ownership rights in a cartel established by government to keep competitors out. Markets exist to broker and finance taxi medallions with the result that their cost dwarfs that of any automobile that they might be attached to and make it difficult for newcomers to enter the taxicab market.
Washington DC, while not using a medallion system, nevertheless requires each taxicab to have a permit which have not (until recently) been issued for years. Additionally, each cabbie must have a special permit which is also strictly rationed. DC taxicabs must meet minimum weight requirements that keep smaller, cheaper cars from being used. High prices are dictated by the DC Taxicab Commission as well as a raft of rules and regulations designed to keep new competitors out.
In addition to difficulty breaking into the taxicab industry as drivers, black people also have problems just catching a cab. Drivers often engage in racial profiling – especially in high crime areas where it is often not possible to get a cab at all. Cabbies also don’t like to make trips to low-income neighborhoods where they may not easily find a return fare to make the trip economical. Even though government regulations require taxicabs to serve all citizens and areas of the city, this doesn’t happen – often for very good reasons.
Uber’s revolutionary “ridesharing” smartphone app has unleashed a staggering amount of underutilized economic capacity by matching people who need a ride with drivers using their own cars. In doing so, it has provided opportunities for the unemployed, for entrepreneurs and for people who drive part time to supplement their income. To become an Uber driver, a person must have their own car with proper insurance and must pass a DMV and background check. Uber also provides $1 million in insurance which is in effect while the driver is transporting a rider. Beyond that, there are no barriers to entry. This author has been transported by Uber drivers who were full-time drivers, retirees, college students and recently one gentleman working evenings to supplement his income in order to pay his wife’s unexpected medical bills.
Uber combats racial profiling by drivers in multiple ways. When a person requests a ride using their smartphone, Uber assigns a driver without regard to the rider’s skin color. Because Uber wants to deliver as many rides as possible it fines or terminates drivers who don’t pick up riders. Since Uber knows and records the name, time, route and credit card number of the rider, customers are less likely to assault or rob the driver and cannot stiff the driver for the fare. And since the whole business is cashless, the motive for robbery is greatly reduced. Finally, since Uber’s system directs the driver to pickup requests in close proximity for the return, trips to and from outlying areas are economically worthwhile. Municipal governments have given years of lip service to eliminating racial profiling in the taxicab industry but have done nothing about it. Uber – and a free, unregulated market – have effectively solved the problem overnight: simply and elegantly.
One might think that the Democrats who run the big cities where taxicab cartels operate might enthusiastically welcome transportation alternatives that give blacks greater economic opportunities as drivers and allow them as consumers to be able to catch a cab anytime and anywhere as easily as a white person. However, it has not quite worked out that way. Opposition in the big American cities to Uber has been intense. From Boston to New York, Chicago, San Francisco, Washington DC, and Miami: cease and desist letters, sting operations, arrests, fines and the impoundment of driver’s cars have been the initial responses. The Teamsters union – who donate to the Democrats – have staged noisy protests by drivers who snarled traffic for hours in downtown Washington DC. Nevertheless, consumers love Uber and politicians have ultimately been reluctant to stand athwart progress.
Beyond the streets of Manhattan, it’s hard to see the taxi industry surviving in anything remotely similar to its current form – and that’s a good thing. Unfettered capitalism has shown itself again to be an emancipating force for removing barriers to upward mobility.