Meetings

June at HANC: How the Sharing Economy is Changing the Taxi Industry

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At HANC’s June 2015 meeting we looked at one aspect of how the sharing economy is changing transportation: app-based ride services such as Uber, Lyft and Sidecar. While all three services (called transportation network companies, or TNCs, by the state) have headquarters in San Francisco, their sights are set on “disrupting” the taxi industry globally. Two panelists with detailed knowledge of the industry helped us dig into the benefits that TNCs may bring and the damage they may be causing.

Veena Dubal, an attorney and associate professor at UC Hastings, explained the parallels between the history of labor relations in San Francisco’s taxi industry and the push by TNCs to have their drivers deemed to be independent contractors. Taxi drivers actually achieved substantial employment protections through labor organizing the early 20th century. But from the 1950s onwards the taxi companies sought creative legal routes to redefine drivers as independent contractors, which increased the companies’ profitability. In San Francisco this change really took hold in the 1970s, after which there was essentially a two-tier system, with a small number of medallion holders each affiliated with a taxi company renting their cabs to a pool of contract drivers who had few guarantees of shifts or income.

The limited supply of taxi medallions made them very valuable commodities and reduced the incentive for companies to improve service for customers or conditions for drivers. By the early 2000s, national organizing by drivers had started to achieve modest improvements in some cities, such as guaranteed hours. Ironically, San Francisco cabs actually wanted to put in place a centralized dispatch system but were barred from doing this by the city. Now that centralized dispatch has become such an attractive feature of TNC services, San Francisco has allowed taxi companies to affiliate via the Flywheel app, which lets passengers locate any taxi from a participating company.

 

Offering a sexy app that brings you a car and driver within a predictable time is clearly one big reason that TNCs were able to grow so fast. But what were the other factors? While anyone with a credit card and a smartphone can book a ride, the most avid Bay Area TNC customers have been young, white, educated tech workers with high disposable income. Dubal noted that during the early growth of TNCs many of the drivers were also young, white and educated, just less well paid. While TNC users often cite cleanliness, courtesy and safety as reasons to use these services, maybe these terms are sometimes an acceptable way to justify a preference for “being driven by someone like me”.

Charles Rathbone, an assistant manager with Luxor, explained that there are important differences between TNCs and taxis in areas such as driver training, licensing, inspections and insurance. Initially, TNCs contended that all these areas were the individual responsibility of drivers. After pushback from regulators and insurers, and some unfavorable press coverage, the companies also began to offer drivers insurance packages that would cover them while transporting a paying customer. Following accidents caused by drivers “between fares” but logged in to the TNC’s app, there have been changes to offer limited coverage in those situations. Even so, there still is not parity between the coverage carried by the two types of drivers.

TNC press releases often play up how careful these companies are about driver selection. But as taxi driver and instructor Ruach Graffis told the meeting, training for most TNC drivers consists of a one-hour video. In contrast, all new SF taxi drivers must attended a 4-day course covering areas such as vehicle and passenger safety, legal requirements, sexual harassment, accessibility, navigation and many other topics.

Rathbone also highlighted the significant increase in congestion downtown and in the city’s eastern neighborhoods because of the high number of TNC drivers hoping for fares during peak periods.

The ease with which TNC drivers can get started and the apparently good money they can make in gross receipts are likely a big factor in the booming number of TNC drivers working in and around SF, with as many as 20,000 working for Uber in the Bay Area alone. However, many new TNC drivers fail to account for the costs they will need to pay out of their receipts, including commission, insurance, fuel, maintenance, car payments and various taxes on their self-employment income. One study calculated that a TNC driver would need to make more than $100 per shift just to break even.

For another view of how the competition between taxis and TNCs is playing out in San Francisco, attend Laborfest’s screening of Driving for Hire by SF taxi driver John Han at 7 pm on Friday July 10 at 518 Valencia Street.