A common aspiration for any taxi driver is to have their own medallion, a symbol of being their own boss. It’s the driving force for many workers in this field. However, since the value of the taxi medallions peaked at $1,000,000 in 2014, life for independent taxi drivers has gone downhill. Here’s why.
So, why is it such a competitive market?
It comes down to the sudden increased popularity in services like Uber and Lyft who run via smartphone apps. From a tap of the screen, you can arrange the booking, pay for your ride, notify the driver, and organize and track the route. These ride-share companies now dominate the market. Namely, because they’re incredibly accessible and their drivers don’t have to follow the same regulations as traditional taxi cabs — including the cap of running 13,600 active cabs at once. The number of ride-share cars goes unchecked and is therefore unlimited.
Uber and Lyft don’t have to shell out for staff to cover the phones, and there are so many drivers on hand at any one time that consumers don’t have to wait more than 10 minutes for a lift. Its company features like this that have undoubtedly boosted the popularity of ride-share apps in recent years. Since 2014, the usage of Ubers and Lyfts rose from 9% to 72.5%, needless to say; this is a driving force behind taxi usage plummetting from 38% to 5.2% during the same time period.
This is a massive problem for taxi drivers, both for those employed through a company and independent medallion owners. Their standard shift works out at around 12 hours a piece, which means that with the outgoing costs of leasing a car, filling it up with gas, and for the medallions owners paying off their debts — cab drivers are making huge losses on a daily basis.
Why then, are independent taxi drivers suffering more than most?
Independent cab drivers are suffering the most due to the enormous debts they incur purchasing their medallion. Gone are the days where this was once a badge of industrial freedom, now it’s more like a life sentence of crippling debt. The effect this is having on traditional cabbies is devastating, with the number of taxi drivers committing suicide increasing substantially. March 2018 saw a funeral for not one or two taxi drivers, but for four men who had taken their lives due to the burden of they extortionate repayments. When this matter is discussed with cab drivers, they all claim, “I’m going to be one of them.” They’re convinced their life is going to fall apart at any minute.
The cause of these tragedies lies with the wealthy and well to do. It all started in 1937 when unlicensed taxi cabs flooded the streets of New York. The city decided to make 12,000 special plates to represent a legitimate taxi service that was endorsed by the city. It became illegal to run a cab without one — each of these plates sold for $10 a piece, which in today’s money translates into $177.84.
They were treated like any asset with the owner being able to sell them on to others at will. However, it didn’t take long for businesspeople to clock onto the potential of the industry and want their own cut. They invested large amounts of money in buying the majority of the non-independent badges and running fleets of cabs, thus dominating the market and creating a cut-throat industry where independent drivers had to fight to survive.
But the drivers wouldn’t give in. The determination to attain a self-employed status was as rife as ever. Even the inflation in price wasn’t putting them off. The status of a medallion was associated with middle-class life, financial security, and a happy and comfortable future. Many people would emigrate to the US with hopes of one day owning a plate of their own and achieving ‘The American Dream.’
Unfortunately, the future wasn’t so bright for them. Savvy business owners were coming up with exorbitant schemes to rinse people of their life’s saving and the majority of their monthly paycheck in exchange for one of these badges. An investigation by the New York Times found hundreds of medallion owners tied into interest-only loans with ridiculously high monthly payments.
A real-life case
One source stated that he found himself with a debt of $780,000 and would work fourteen-hour shifts every day to pay the fees. He then discovered that he had only been paying off the interest and was forced into bankruptcy.
What made all of this worse was when the medallion market crashed in 2017. The worth of the medallions dropped to $200,000 per badge. For those who were in debt of nearly $1,000,000, this couldn’t have been worse. They no longer had the security of a valuable medallion to fall back on if times got really tough.
So, when you look over the taxi industry, you can see the crippling effect larger, more modern companies have on the smaller businesses and their owners. A cabbie from New York has been quoted, “You could work nine hours and easily make $200 in a day,” he recalled. “Now, you’re lucky if you make $50 or $60.” This is due to companies like Uber and Lyft saturating the market. Looking, then to the future; will these independent professionals last? Only time will tell.