Taxi Medallions Shackle Cabbies

Have you ever met a sharecropper? If you’ve been in a taxi in Boston – or virtually any major US city – the answer is almost surely yes.

Like tenant farmers in colonial Ireland or the post-Civil War South, the typical modern cabbie pays dearly for the right to do his job. Taxi medallions – the government-issued licenses that let a car be used to transport passengers for hire – are insanely expensive: The going rate for one in Boston is about $500,000. Most would-be cabbies thus have little choice but to rent a medallion from somebody who owns one, paying through the nose for the privilege of working long shifts at low wages, in a job with high expenses, no paid vacation, and little prospect of ever being in business for themselves.

A lawsuit aimed at improving the cabbies’ difficult lot was filed in Suffolk Superior Court last week. Boston cabdrivers Pierre Duchemin and Bernard Sebago argue that they should be classified not as independent contractors, but as employees of the taxi fleets and radio dispatch associations they drive for.

To read the cabbies’ complaint is to realize just how shackled taxi sharecroppers are by rents, middlemen, and regulations most workers would find intolerable.

Drivers typically work shifts of 12 or more hours, paying a “shift fee” of up to $150 in order to lease the taxi from its owner – generally one of the city’s powerful fleet moguls or an investor who bought a medallion for the purpose of renting it to drivers.

But the shift fee is only the first bite taken from whatever fares and tips cabbies earn. They also must pay for gasoline, airport fees, insurance, tickets, tolls (when there is no passenger), and certain repairs. When customers use a credit card, cabbies are charged a 6 percent fee – and must wait 24 hours for the transaction to clear.

Since the cabbie retains nothing until all these up-front costs are paid, the plaintiffs’ lawsuit observes, “it is not uncommon for drivers to end up earning less than minimum wage for their shifts.” Long workweeks are common, but “shift drivers are not paid any overtime for working more than 40 hours.” And drivers are at the mercy of multiple masters: the Police Department’s Hackney Unit, the taxi fleet owner they lease from, and the radio association they depend on for referrals. A cabbie who runs afoul of any of them can find himself blackballed, deprived of work.

Reclassifying cabdrivers as regular employees would arguably entitle them to legal protections they now lack, such as minimum wages, overtime, and the reimbursement of expenses. But no adjustment of their legal status will fix the underlying problem: the feudal system that has turned the taxi industry into a protected cartel, unfairly enriching a handful of medallion owners by severely restricting the number of taxis allowed on the roads.

In Boston as in most cities, the number of authorized cabs is kept well below the public demand for cab service. That is why the price of medallions – which have no intrinsic value; they represent nothing but permission to be in the cab business – is so obscene. Reasonable minds can differ on how much regulation the taxi industry requires. But medallions aren’t regulation, they are brute protectionism. They strangle competition, distort the market, and empower the politically wired. Medallions are why cab fares are so high – and why cabbies’ earnings are so low.

“The single most powerful thing an employee can say to his employer is ‘If you don’t treat me better, I’m g oing to work for the competition or start my own firm,’” says Robert McNamara of the Institute for Justice, a public-interest law firm that has challenged taxi oligopolies nationwide. “In most cities in this country, taxi drivers can’t say that. That is why they get such a raw deal.”

The existing system isn’t chiseled in granite. In Minneapolis, which lifted its cap on new taxi businesses in 2006, both consumers and cabbies are benefiting from competition. The number of taxis serving passengers in the city has doubled, while the lease rates drivers have to pay to operate a cab have dropped significantly, sometimes by hundreds of dollars per week.

Competition can work wonders. What Boston cabbies need is economic power, and there is no better way to achieve that power than by unshackling the market. Sharecroppers belong in the history books, not behind the wheel of the city’s cabs.

The Patriot Post® · Taxi Medallions Shackle Cabbies