Bailout

Labor vs capital datapoint of the day, NYC taxi edition

By Felix Salmon

New York taxis are a textbook example of gains going to capital rather than to labor. They’re generally owned by one person — the person with the capital — and driven by another — the person with the labor. And the person with the capital has made out very well of late. When the stock market peaked in October 2007, medallions were trading at $425,000 apiece. (All data from this page.) By the time the market had plunged by more than half in February 2009, medallions had risen in value to $552,000. And they’ve only gone up in value since: in December 2010, the average medallion changed hands for $624,000; last Wednesday, a new all-time record was set for a corporate medallion which sold for $880,000.

Meanwhile, drivers earn nothing like that kind of money. Getting reliable statistics for taxi-driver income is not easy, but it seems to average out somewhere around $130 per shift — which is actually less than the the amount the drivers pay to lease the taxi. And remember that the owner leases out the car for two shifts per day, while the driver can only work one shift.

It’s pretty clear to me what’s happening here. The medallion owners hold the power, and will charge whatever they can to drivers. If anything happens (a fare hike, say) which improves drivers’ income, then the rents just get jacked up: there’s a lot of demand for taxi-driving jobs, and so essentially the owners just rent out their taxis to the drivers willing to pay the highest shift fee and therefore take home the lowest income.

When someone like Melissa Plaut, then, starts complaining about a proposed rule change on the grounds that it will reduce drivers’ income, I think that she’s missing the bigger picture. It’s the owners who reduce drivers’ income, by charging them as much money for the privilege of driving a cab as they can possibly get away with.

Meanwhile, it’s the mayor’s job to try to create a system where yellow cabs and livery cabs coexist to maximize the welfare of New Yorkers — the general population first, and the drivers second. The medallion owners come a distant third.

Somehow, annoyingly, the medallion owners always end up the winners here, and that doesn’t seem fair to me. None of them were hurting when medallions were fluctuating in value between $200,000 and $250,000 in the years from 1998 through 2003. And for the past eight years or so they’ve been laughing all the way to the bank.

If drivers have an issue with their income, then, they should take up their beef with the medallion owners. But instead, every time that the city proposes something to improve the taxi system more generally — like issuing more medallions, or putting credit-card readers in cabs, or putting meters in livery cars — the drivers reflexively side with the owners. Anything which might hurt medallion owners, they assume, will automatically hurt drivers as well.

Which I’d agree with, if it weren’t for the fact that drivers have signally failed to participate in the good fortune of the owners over the past decade. It’s time I think for the mayor to start putting in protections for cab drivers, which might get an important constituency on his side when it comes to making these kind of changes. Even if doing so annoys a handful of politically-powerful medallion owners.

Update: Plaut responds in the comments.

Full post as published by Macroprudential on January 22, 2011 (boomark / email).