New York City Mayor Bill de Blasio approved a package of eight bills targeting Uber, Lyft, and other ridesharing companies doing business in the city.
The bills impose a cap on the total number of ridesharing vehicles allowed to operate within the city limits, create mandatory minimum wages and new inspection regulations for ridesharing drivers, and add other new regulations. The cap will be maintained for one year while the city studies whether for-hire transportation is adding to traffic congestion on city roads. De Blasio signed the package into law on August 14.
According to the city’s Taxi and Limousine Commission, the board responsible for enforcing the new restrictions, the number of licensed ridesharing drivers in New York City has increased from 38,600 in 2011 to 112,000 in July 2018, a 190 percent increase.
Destination: Service Shortages
Matthew Mitchell, a senior research fellow at the Mercatus Center at George Mason University, says the new restrictions will create a shortage of for-hire transportation in the city.
“This is simple economics here: a supply restriction raises prices and reduces the quantity of services consumed,” Mitchell said. “This means that people will pay more for rides and there will be fewer app-hailed rides taken, at least compared with the number of rides they would have taken in the absence of this legislation. People may wait longer for rides, but it’s also likely that price increases will be enough to discourage people from using these services.”
Says Ridesharing Benefits All
Mitchell says ridesharing offers a win-win, free-market solution to the problem of getting around the city.
“For riders, it offers a cheaper, safer, and more readily available means of transportation,” Mitchell says. “And for drivers, it offers a convenient way to make extra money without any special training or experience.”
The Trouble with Taxis
Steven Young, a resident of the Bronx and a part-time driver for Lyft, says the taxicab or “yellow cab” industry is declining because it has failed to innovate and serve people well.
“The reason ‘yellow cab’ is going down the drain is because they failed to make their product better,” Young said. “Uber and Lyft came out with a product that is incredibly convenient: you can order a car at home in bed. You don’t have to wait outside on the street. Minorities don’t have to worry about being discriminated against — a lot of traditional cabs won’t stop for minorities, believe it or not.”
Young says the new ordinances are motivated by city lawmakers’ desires to please lobbyists representing the taxi industry.
“I think they’re going the wrong way with this,” Young said. “My honest opinion is that they’re not doing this because of congestion but because the yellow-cab lobbyists have pressured New York into this.”
Expects Ripple Effect
The costs of government interference in the for-hire transportation market ripple out into other markets, Mitchell says.
“They will make more money, but it will come at the expense of consumers and other would-be drivers who weren’t able to get a license,” he says. “Tourists will pay more for rides and will waste more time getting around. That will afford them less time and money to see the sights and to patronize local businesses.”
Calls for Road User Fees
Mitchell says the city’s lawmakers should tackle jammed-up roads through congestion pricing, a fee or user charge based on how much demand there is for highway space at a given time.
“A better solution to the congestion problem would be to use congestion pricing,” Mitchell said. “Drivers would be charged for using public streets, and the prices would vary according to the current amount of congestion at that moment. General taxes that now fund transportation could be reduced.
A better solution to the congestion problem would be to use congestion pricing,” Mitchell said. “Drivers would be charged for using public streets and the prices would vary according to the current amount of congestion at that moment. General taxes that now fund transportation could be reduced. This would be a fairer way to fund public roads, because those who use the roads would bear the cost of maintaining them. It would also encourage people to economize on their use of roads, carpooling or adjusting their travel times to reduce costs, thereby minimizing congestion.”