The Uber Scam and False Democrats

America is not just what it has become because of Reagan and Bill Gates. American has become what it is because its citizens have not yet learned what the things they look at really are, and what they almost always tend to translate into. The open-entry/non-medallion introduction of Ubers into the New York City landscape is just another one of these illusions, and represents just another scam by faux-Democrat Mayor DeBlasio to enrich the obscenely-rich and starve the lower middle class by deluding New Yorkers into the false euphoria of thinking they actually have more and better public transportation choices.

The nationwide phenomenon of Uber has sinister-enough consequences throughout the rest of the country. It introduced a variation of an existing mode of transportation into the national landscape that is not only accessible only to those on the high-tech side of the internet divide (Google is a major supporter/investor, and already sits on Uber’s Board of Directors), and not accessible to any disabled mobility-device users who cannot transfer out of them, but whose safety characteristics at both the vehicle and driver level don’t even compare favorably with those of conventional taxicabs, vehicles at least responsibly insured and whose drivers are “common carriers” — held to the highest standard and duty of care — and who generally receive a modicum of training. The qualification for Uber drivers, beyond possessing a “civilian’s” Class-C license is that they merely have to breath. There are no vehicle requirements (at least in most states), no driver requirements, no testing, even no hiring requirements. You want to become a Uber driver? Just hop into your jalopy. Pay a small fee and go sign up.

Does this phenomenon create jobs? Of course not. It does not change the demand for taxi service, and the fares are generally the same (or perhaps in a few localities, barely regulated as they are, slightly lower). So the number of taxi trips will not change. The wait time may or may not be shortened for riders, while traditional Medallion taxi drivers will spend more time waiting for, or driving around looking for, patrons. This is because Ubers can be dispatched — a capability stripped away from NYC taxis decades ago because in Manhattan’s former mixed dispatch environment, some residents were angry when empty taxis dispatched to pick up passengers were passed by patrons trying to “hail them” while on their way to their dispatched pickups. So this City’s insipid response was not to explain this reality to its residents — as does virtually every other City in the country whose residents experience the same phenomenon — but to simply strip its taxis of their dispatching capabilities. As a result, would-be taxi riders stranded from “hailing” them by geographic realities (residing, e.g., on York Avenue or other pockets where taxis rarely “cruise”), temporal realities (times of the night when hailing a taxi is challenging) or medical/physical constraints (e.g., would-be users too frail or disabled to stand on the sidewalk and wait for the rare taxi to appear, particularly in inclement weather). But not only were the new Ubers exempted from the $1M/unit medallion fee charged to convention taxi owners, but given dispatching privileges as well. You could not “hail” them in the traditional sense, but allowed to do so through an enhanced privilege as the Ubers are equipped with receptors permitting cell-phone users to hail the nearest unit simply via an “app” in one’s cell-phone. Given this form of hailing, the arrival of a Uber is accelerated by the “app’s” contacting the nearest taxi. In comparison, the arrival of a conventional, Medallion cab it a hit-or-miss possibility, and as every New Yorker knows, the chances are particularly slim in certain geographic areas (e.g., Harlem) or during key temporal periods (the ill-thought-out shift change was recently modified from 6 AM and PM to 5 AM and PM — making the hailing of a taxi during the PM 4-to-6 PM shift change – right in the heart of the PM rush hour period — even more difficult than it was before. Of course, no thought that I know of was ever given to making the existing taxi fleet more rational, usable or profitable. Instead, it is simply being replaced — “supplemented” is only a transitional phenomenon — by an inferior fleet operated by drivers with little or no familiarity with the service area.  Perhaps the deep thinkers of this phenomenon feel that this driver capability is no longer of any value now that most vehicles have digital navigators (or if they don’t, their drivers cell phones contain one via yet another app).

Supply, Demand, and Density

The number of medallion taxis operating in Manhattan, and the selling price of their medallions, is governed by the natural phenomenon of supply and demand: Were too many taxis flooding the market for the demand needed, the percentage of time passengers would use them (this is known as “passenger time” in the taxi industry) would decrease, and the value of medallions would decrease in response to it. Were too few taxis available, they would be packed, while those needing them would increasingly be stranded, resulting in a gradual increase in both taxis and the value of their medallions in response to the unmet need. This natural dynamic of supply and demand would tend to result in a fleet somewhat the appropriate size to both meet the needs of its riders and create enough revenue to keep both the few dozen taxi owners and their 26,000 or so drivers barely alive. The key to this “balance” — I use the term loosely — still places both taxi owners and driver under great stress: The costs of a medallion amortized against the useful life of the vehicle required the latter’s use almost 24/7 — resulting in a typical arrangement of two tiers of 12-hour driver splits operating six days a week, and the vehicle’s owners barely breaking even on their investments (which is why all but five taxi companies, with one vehicle each, are owned by individuals or consortiums owning hundreds of units).

The poor drivers, forced to work roughly 72 hours a week — only 60 hours a week are even legal under the Federal Hours-of-Service requirements, placing their passengers, drivers, fellow motorists, pedestrians and bicyclists at tremendous risk from the drivers’ fatigue — must pay roughly $200 per 12-hour shift for the right to “lease” a taxi without even the dispatch support that accompanies lesser shift costs in most parts of the country, where, without the burden of the medallion’s cost, taxis are generally leased for roughly $150/day a fee split by the two or three drivers who alternate shifts to operate them throughout each 24-hour period. So NYC taxi drivers are forced to work practically a double shift to earn a crude pre-tax “living” of roughly $30,000 a year — a sum, when divided by the typical 3600 hours a year taxi drivers operate (assuming each takes two weeks off for vacations and holidays), their hourly wage is roughly $8.33 — BELOW minimum wage if they were paid time-and-a-half for overtime work.

At the other end of the spectrum, by charging $200/shift for 12 shifts a week, the medallion cab owners manage to bring in $2400/week. So over the same 50-week period, they take in $120,000/year. But given the cost of the medallions (and even discounting the cost of the vehicle), each vehicle must remain on the street for roughly 8 1/3 years for these owners to “break even.” This last dynamic is somewhat exaggerated, since taxis are simply replaced when they “wear out:” And when the vehicle is replaced, its owner doesn’t have to purchase a new medallion for it; he/she simply transfers the medallion to the newer vehicle. Still, one could have to purchase several vehicles over the period of time it would take to amortize the cost of the medallion – effectively increasing the cost of owning a medallion by a hundred thousand or so dollars more.) Keep in mind these drivers also have insurance premiums and other costs to pay. Driven somewhat maniacally over the City’s crumbling roads and bridges for at least 144 hours a week, the handful of  vehicles purchased to do this would have to travel 72,000 miles a year. If they covered 20 mph, they would travel 144,000 miles a year. Frankly, both the arithmetic and the life-spans of a taxi vehicle (usually bought used to begin with) suggests that making ends meet under the medallion system is physically impossible without, as noted, purchasing a replacement vehicle every year or two over the span of time it would take to amortize the cost of a single medallion – or roughly 9 to 18 vehicles – whose costs would be added to the cost of the medallion itself. Frankly, because a typical slightly-used taxicab sedan lasts roughly 150,000 miles before its relegation to the “junk heap” – or its hyperbolically-increasing maintenance costs will make it cost even more. That this reality results in a fair number of taxi vehicles barely “street worthy” is just another risk of traditional medallion taxis. With no vehicle standards, the streetworthiness of the Ubers would, in a few years, become even worse.

Compounding the Idiotic and Inequitable

Given this situation, when Ubers are suddenly introduced into this equation, the already-existing hardships of traditional medallion taxicabs become compounded almost exponentially. The essence of a rational taxi system is the delicate balance between supply and demand. As noted, the New York City’s medallion system has already distorted this dynamic to the point where, even in perfect balance, the providers of service (i.e., the owners and drivers) tread on the brink of minimal profit. Now, suddenly thousands of new vehicles are introduced into the equation with advantages that existing taxi providers do not have:

  • They pay negligible entry fees
  • driver and vehicle standards are almost non-existent
  • they operate beneath the regulatory radar
  • their cell-phone-oriented dispatch capabilities often give them a timely advantage over taxies that merely cruise, with those exceptions in parts of Manhattan where fleet and user densities are saturated, and traditional access to taxicabs is effortless
  • the excess of vehicles otherwise “thins the density” of potential taxi users compared to the fleet available to meet it — as a result, increasing the percentage of the traditional taxicab’s time spent “deadheading” with no passengers and no revenue

These dynamics have two enormous impacts on medallion taxi drivers and owners:

  • For taxi drivers already working practically a double shift to eke out a living below minimum-wage level, the introduction of Ubers to the equation will necessarily decrease their earning, since (a) the average distance now traveled to pick up a fare will increase, and as a result, (b) not only will fuel and maintenance costs increase, but (c) the percentage of time that a taxi is occupied will diminish — all translating into even lesser earnings than these individuals accumulated before. As a practical matter, these dynamics will only decrease taxi service safety, as the already hysterical dynamics of taxi service (speeding, merging, weaving, accelerating and decelerating too quickly, never allowing passenger to affix their seatbelts before the taxi pulls out, etc.) will naturally be exaggerated because even more safety procedures will be compromised in order to compensate for the thinning out of customers. Otherwise, the already-exhausted, grossly-overworked, lower-middle-class medallion taxi driver will sink to treading water on the crust of the working poor. Will middle class taxpayers soon be subsidizing the income of these individuals, just as they are now doing for more traditional minimum wage employees? Will leasing costs be forced to increase to offset to deflated value of taxi medallions, further increasing the drivers’ costs and decreasing their income?
  • For medallion taxi owners, their investments in their medallions were predicated on some semblance of stability that included two basic tenets: (a) additional entry into the field would be allowed only when the demand for responsive taxi service could no longer be met by the existing fleet, and (b) those admitted into the field would be expected to purchase a medallion — with both tenets maintaining a relative stability in the value of the medallion, protecting its owner from the risk of blatant deflation, and providing for a gradual increase in the value of the medallion — the one dynamic that could offset the fact that no serious money could be derived from normal dynamics of taxi service — fares patrons are willing to pay without a fall-off in demand, a stable percentage of passenger service compared to deadhead service, a limited number of operating hours per week, and the limits of the useful age of a vehicle typically deployed in taxi service. 

Roughly six months ago, a taxi medallion sold for roughly $1M. Now, six months later, one sells for roughly $700,000. Given an estimated 13,000 medallion taxis in the City (there are slightly more), the decrease in the value of these medallions is, collectively, $39,000,000. This is effectively the total value that medallion taxi owners lost as a result of the City’s permitting Ubers to enter the service area at practically no costs – in a matter of a few short months.

Results and Unknowns

Assuming that an owner of several hundred medallion taxis is not a pauper — or at least was not until recently — the Uber phenomenon has effected a curious new form of Robin Hood never before seen in this planet’s history: The ultra-rich stealing from the merely rich. In the process of course, this dynamic has transformed tens of thousands of lower middle class drivers into tens of thousands of working poor drivers. In truth, those Uber drivers who were not employed at all prior to their entry into the business at least added to the employment rolls — although what it added was mostly another wave of the working poor, unless and until the Ubers wipe out medallion taxis altogether, or medallion drivers cease leasing them, and instead, simply buy or lease a cheap vehicle and enter the market as a Uber driver. One taxi driver I spoke with recently told me that he has already cut down the amount of time he leases  his medallion cab, and instead, deploys his regular, personal car in service as an Uber.

It is very clear who sufferes as a consequence of this phenomenon. And it is, of course, clear, which giant companies benefitted from the explosion of Ubers throughout the country: Uber, and more recently Google — which is a major Uber shareholder, and which sells “apps” on its Android cell-phones through which Ubers can be summoned, not to mention its increase in the sale of Android cell-phones in order to possess a phone with this capability. And as computer techies all know, Google is embroiled in a bitter internet war with Apple, and the Uber “app” is simply another weapon in the war by which Apple owners or would-be Apple purchasers would instead purchase an Android instead of an I-phone, which does not have this capability. Of course, in the pursuit of victory in this hugely-scaled commercial war, the Uber is simply another weapon, while the landscape is littered with all type and manner of victims, some of whom were, ironically, well-off before these dynamics began to unfold.

Realities of Entry into the Transportation Business

As the goal of any form of transportation is to balance demand and supply to a point where some semblance of equity is reached for both the providers and the users, relatively cost-free entry into the service area of a vast number of vehicle unneeded in the first place not only upsets, but eventually destroys this balance. This is the reason certain modes, like fixed route transit, enjoy virtual monopolies, and undercutting their highly-subsidized revenues by allowing additional competition to provide cheaper service will decimate their sustenance even further, resulting in the need for even more taxpayers’ money to subsidize existing services.

To a degree, this dynamic began to occur in transit service about 25 years ago (although not largely in New York City), where many transit agencies began — over strong union objections — to contract out service to private contractors with far lower cost structures — cost structures achieved primarily through significantly lower drivers’ and mechanics’ wages, while the high-priced “lead agency” structures with highly-paid white-collar staff were left in place largely to duplicate the management functions provided by the contractors because the public agencies don’t trust them. In many states where public agencies enjoy all forms of immunity from liability, this contracting actually increased certain costs, because the private contractors replacing public service providers do not enjoy this immunity, compounding their insurance woes since they are also obligated to indemnify their public agency employers for their part of any wrongdoing deemed liable.  In the case of medallion taxies versus Ubers, it must be noted that Medallion taxis typically possess exponentially higher insurance coverage than their Uber counterparts. Therefore, another victim in the Uber scam is someone injured in an accident or incident while riding in, boarding or alighting from an Uber.

Conclusions

The Uber phenomenon is nothing but another chapter of the history of America’s transfer of more wealth from the middle and lower classes to the obscenely rich. While the vast majority of citizens to not recognize it, it would be hard to imagine the City’s elected officials not recognizing that this is all this phenomenon is — since it effectively provides no genuine benefits to anyone or any entity involved other than Uber and Google. So while I have no evidence to prove whose pockets may have been lined along the way to this transition, and will not make even an inference of one in this piece, it is hard to not harbor suspicions of serious graft along the way. That any such graft was paid for by the sweat of the City’s working classes and, ironically, an unusual shift of money from the rich to the Uber-rich, is merely consistent with the themes that have increasingly permeated this country for the last 34 years, and which have increasingly impoverished those individuals whose sleep, rest and marginal incomes had been facilitating the movement of our entire population, rich and poor, for decades.   

For further information, review the following articles on www.transalt.com, under the heading Articles and Publications by Ned Einstein:

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