Few urban experiences are less pleasant than waiting for a taxi in the middle of a Canadian winter. When temperatures dip, demand soars. Ordinary citizens begin to hijack other peoples’ taxis to avoid intolerable waits. It’s every man, woman, and child for him, her, or it-self when it comes to getting taxis at -40 C.
Taxi shortages in Canadian cities aren’t due to lack of demand. Cities artificially restrict the number of cabs. This doesn’t just result in the occasional fisticuffs over a taxi; it leads to more people drinking and driving, and impedes mobility for seniors and non-drivers. Fortunately, there is a solution to be found in the American Midwest: deregulation.
Most Canadians outside of downtown Montreal, Toronto, and Vancouver cannot reliably access taxis in a timely fashion. It would take days for everyone to get home from their Friday night destinations if most residents obeyed impaired driving laws. Moreover, taxis aren’t always an option for short trips between downtown destinations. Since it costs several dollars to start the meter, and drivers don’t want to turn down more lucrative long trips in favour of shorter trips, short trips are scarcer than they would be absent restrictions.
Deregulation would result in more cabs, which would in turn spur demand since customers would develop an expectation that they could rely on taxis (at reasonable prices).
Several Midwestern American (and adjacent) cities have lifted their caps on the number of taxi licences, including Minneapolis, Denver, Indianapolis, Cincinnati, and Milwaukee.
When Minneapolis deregulated its taxi industry the number of cabs more than doubled within five years. It isn’t just downtown that is benefitting. Many new entrants are focussing on suburban areas that were dramatically under-serviced.
Milwaukee recently ended its taxi licensing cap after a taxi driver successfully challenged the constitutionality of the cap with the help of the non-profit Institute for Justice. After the cap was implemented in 1991, the value of licences spiked from $85 to $150,000. That is slightly higher than the value of a license in Regina, but far lower than in Winnipeg or Vancouver.
Unsurprisingly, Denver and Minneapolis have low ratios of residents to taxis, 480 and 492 residents per taxi, respectively. Those are impressive numbers of residents per taxi compared to: Winnipeg (1,911), Regina (1,755), Saskatoon (1,554), Vancouver (,1026), Ottawa (697), Edmonton (619), and Calgary (790).
Licence owners argue that deregulation would unfairly deprive them of hundreds of thousands of licence value, if not millions for those who hold large numbers of licences.
However, that value was created by government policies that privileged a narrow interest group. Moreover, most licences were purchased long ago for trivial amounts, and owners have benefitted from them for decades.
A pro-rated payout to recent licence purchasers might make sense. But if people are going to benefit from gaming the regulatory system, they should also suffer associated losses.
Taxi drivers worry new licences would cost them revenue. However, deregulation would mean that the vast majority of drivers who don’t themselves hold taxi licenses, would no longer be required to spend several hundred dollars plus per month to licence holders for the right to drive. That would mitigate the impact of lost revenue per taxi.
To further mitigate fears of declining revenue, we could look just outside the American Midwest to Bentonville, Arkansas. The city, home to Walmart, issues taxi vouchers to senior citizens to help them get around. This would induce new demand, and would be a practical way to improve mobility for seniors at a modest cost.
Deregulation combined with taxi vouchers could greatly improve mobility for seniors, and the spillover effect of re-invigorated taxi industries would benefit all residents. Especially in winter.
Steve Lafleur is a policy analyst with the Frontier Centre for Public Policy. This article in the second part in a 12-part series on lessons from Midwestern American cities.