It’s Not an Uber Cap — It’s a Course Correction for an Industry That’s Dangerously Out of Whack

The City Council is on the verge of passing bills that will help workers in the for-hire car industry and cut down on excess traffic.

Photo via The New School
Photo via The New School

Don’t call it an Uber cap.

Yes, the City Council is expected to pass a package of bills today that limit the growth of licenses for companies like Uber and Lyft over the next 12 months. But that’s not the big breakthrough in the legislation.

The real lever to manage traffic will come not from the cap, but from new powers vested in the Taxi and Limousine Commission to shift incentives for Uber and Lyft, curbing their mileage while increasing driver wages.

TLC regulatory authority isn’t the most gripping subject. But you should get excited. In a few short years, Uber and Lyft have tilted the city’s surface transportation system toward car-based growth, exacerbating traffic jams on the city’s most congested streets. With its new authority, the TLC will be able to nudge the companies to reduce the time their drivers spend cruising for fares and clogging streets without carrying any passengers.

To understand how the bills work and why they’re a big deal, it helps to catch up on analyst Bruce Schaller’s groundbreaking research on the modern for-hire vehicle industry. In successive reports, Schaller demonstrated how Uber and Lyft trips have increased daily traffic on NYC streets by millions of miles a day, and that mileage without a paying customer in the car accounts for a disproportionate share of this added traffic.

More drivers cruising around without passengers shorten wait times for Uber and Lyft customers when they request a ride, but make the transportation system worse for everyone else — including Uber and Lyft customers in the backseat, stewing in traffic. One of Schaller’s key insights is that Uber and Lyft traffic can be reduced with a negligible effect on wait times, since drivers spend the period between trips mostly waiting to be dispatched, not heading to pick up a fare.

For-hire drivers, meanwhile, have to work punishing hours for little pay because “there just aren’t enough fares to go around,” as Uber driver Tidiane Samassa recently wrote in the Daily News. “All of us are competing for a smaller slice of the pie as Uber adds more cars to the streets each month with no limit.”

The industry is out of whack. “The tension here is between limiting traffic and having service on the street,” Schaller told Streetsblog. “I think the balance has been tilted too far toward having vehicles on the street.”

Citywide, Uber and Lyft vehicles have no passenger 45 percent of the time they’re in service, according to Schaller’s analysis of trip data. To reduce that unoccupied time, the centerpiece of the City Council legislative package, Intro 144 (sponsored by Council Member Steve Levin), enables the TLC to establish “vehicle utilization standards” in specific parts of the city.

To give an example, Uber and Lyft could be required to reduce the rate of drivers’ unoccupied time to 20 percent in Manhattan below 96th Street, and pay a penalty if their fleets fail to attain that target within a given 24-hour period. The geographic boundaries and mandated “utilization rates” would be left to the TLC to determine.

Also pushing in the direction of higher occupancy rates and less traffic will be the minimum wage standards enabled by Intro 890, sponsored by Council Member Brad Lander. Setting a compensation floor for Uber and Lyft drivers will increase the share of vehicles’ time with a paying passenger. As with Levin’s bill, the actual rate-setting would be up to the TLC.

“The council wanted to set the broad parameters, and give the TLC authority to respond in a way that adapts to changing conditions,” Schaller said. “That’s the right instinct.”

While Uber and Lyft have argued that the bills would deprive the boroughs outside Manhattan of service, the TLC is expected to calibrate incentives in the other direction. Mandating higher utilization rates in Manhattan, for instance, should lead more drivers to circulate outside the central business district, as long as Uber and Lyft respond in good faith and don’t try to sabotage the new rules.

The legislation is not a substitute for congestion pricing, which would pack a much stronger punch as a traffic reducing mechanism. Nor is it the assault on Uber and Lyft that the companies have made it out to be. It’s not even a cap — the limit on new licenses for Uber and Lyft doesn’t apply to wheelchair-accessible vehicles and may serve as an incentive to make fleets accessible more than a hard constraint on growth.

The City Council has drafted a course correction that will help workers in the for-hire car industry and cut down on excess traffic. It will also set a precedent for other large American cities where Uber and Lyft are straining transportation systems in similar fashion.

“New York has tremendous market power, both in the simple sense, and the symbolic sense,” said Schaller. “This is landmark legislation. It will be highly influential.”

  • Daphna

    I disagree with this editorial viewpoint!!
    There should be less control over Uber and ride hail applications, not more. In other places, Uber drivers do not need to get a license through a taxi and limousine commission. And elsewhere driver wages are determined by market forces. Uber and Lyft agreed to the requirement that their drivers get the TLC license because NYC was such a big market and they wanted to enter it, otherwise they would have declined to enter this market. In smaller markets that put up regulatory hoops to jump through, Uber declined to enter. To add more regulation is not the solution. There should be congestion pricing, not some patchwork of limiting license availability for ride hail drivers that is framed as a distorted attempt to reduce congestion when it really is assistance to the yellow cab industry.

  • What specifically is the harm that you think will be caused by this legislation?

  • James H

    The consumer harm is trivially obvious: A supply-constrained, distorted market for private transportation services (i.e., ride-hailing). That clearly means higher prices, longer wait times, and subsequently fewer people moving around the city. This a real negative impact to not just consumer welfare, but the property values and commercial viability of neighborhoods all over NYC, particularly outside of Manhattan.

    What makes it even more obvious is that we’ve been here before in NYC! What rational person looked at the impacts of Taxi Medallion caps and decided, “let’s go back to that strategy!”?

    To be clear I am in favor of regulation in the industry – such as an intelligent minimum earnings level for drivers (in the $16-$18 range, commensurate with the job’s qualification requirements and thus minimally market-warping and minimally generative of economic dead-weight loss ). A cap is just bad policy and bad economics – the only purpose it seems to serve that would not be better addressed via minimum earnings levels and congestion pricing, is a punitive effect on Uber and Lyft, and a re-allocation of trips from a superior service (Uber and Lyft) to an inferior one (traditional taxi and black car). New York City’s economy, efficiency, and its residents’ welfare in aggregate will suffer.

  • Are you aware that other people use NYC streets besides people hailing cars?

  • James H

    Sure – the majority of usage/vehicle traffic on NYC streets comes from individually-owned cars. Cars that spend ~95% of their time taking up millions of square feet of street parking space in the city with the most valuable/constrained real estate in the world. The other ~5% of their time they spend ferrying what’s usually a single passenger.

    Surely you don’t suggest individually-owned cars should be incentivized above ride-hailing via city policy?

  • The majority of usage of NYC streets comes from people walking.

  • James H

    … which is irrelevant to the discussion of vehicle traffic. Might as well say the actual majority of usage of NYC streets is from pigeons.

    Unless you think ride-hailing should be capped because of sidewalk foot traffic??

  • Joe R.

    I think a big part of the problem is Uber and the other e-hail companies ended up being full-time gigs instead of part-time as they were originally intended. When I first saw Uber commercials, I was under the impression it was sold as a way for a person with a job to earn a little extra money either after work or on their days off. It was never meant to replace a job. NYC requiring a TLC license might be one reason so many who drive do so as a full-time job. A part-timer seeking to earn a little extra cash isn’t going to go through the hoops of getting a TLC license. The market could have absorbed the number of Ubers it has while still providing good hourly income if the drivers were mostly part-timers. No so when most aren’t.

  • Joe R.

    See my post above. The TLC license requirement distorted the market by adding an extra hoop which only full-time drivers would consider worthwhile jumping through. Uber was never meant to replace a job. It was only supposed to be a part-time way to earn extra cash. However, it’s too much of a burden for a part-timer to bother getting a TLC license. And the market can only absorb so many full-timers before their income suffers. So one answer might indeed be to ditch the TLC license requirement so as to encourage more part-timers (and fewer full-timers) to drive.

  • Joe R.

    The biggest problem with the medallion system is the fact we didn’t add to the number of medallions as the population grew. A second problem is we allowed medallions to be bought and sold as commodities rather than treated as a business license. Of course, when that happened private industry monetized them, used them as collateral, and so forth, with the expected harmful results we’re now seeing. Rather, a medallion should cost whatever the actual filing process costs the city. Prospective drivers could take a test and if they pass be put on a waiting list for the next available medallion. No person or corporation would be allowed to own more than one medallion, nor could a medallion owner lease their vehicle to another driver. The idea is to go back to owner-operated taxis, not fleets which gouge drivers while the owner does nothing and makes tons of money off their backs.

  • James H

    The lack of part-time drivers in NYC is a function of TLC policy (the large expense and wait times associated with obtaining a TLC license), not the fault of Uber or Lyft. Your proposal – eliminating TLC license requirements and legalizing the peer-to-peer, part-timer friendly model of ride-hailing in NYC (the model that exists in every other US city) – is one that goes far beyond rejecting the currently proposed cap, although I agree with it.

    Some drivers would be part-time, some would do it full-time for a few months or a year or two; just like other directly comparable jobs that in many cases pay less. If we believe that a societal minimum wage should in the range of $13-15 per hour (slightly below median Uber driver earnings today), I honestly don’t understand why NYC wants to hurt consumer welfare by forcing wages to an even higher level for drivers in particular (when rideshare drivers have zero required qualifications) and subsequently decreasing transportation via high prices and wait times. Surely the resources would be better spent subsidizing social workers or early childhood teachers’ wages instead.

    Re: Property values – my point wasn’t clear enough. Ride-hailing has increased the geographic SPREAD of property value gains and commercial viability, particularly in places like Queens, the Bronx, and outer Brooklyn. In many ways, it MITIGATES the deleterious and inequality-generating effects of recent property value increases by spreading the wealth. Instead of value gains only going to centrally located properties in downtown Manhattan, it’s going to a much wider set of neighborhoods. The counterfactual, where commuting from the boroughs would be much more difficult, would have resulted in much more concentrated gains and rent-seeking.

  • Daphna

    The harm is fewer job opportunities for New York City residents desiring to be drivers. The harm is higher prices, longer wait times and less availability for consumers who want rides.
    This will not lead to less congestion. It will lead to a shift of riders back to yellow taxis instead of ride hail apps. It will deprive some working class people of the chance to make income through driving independently. It will force them to rent yellow taxis instead if they want to drive. It will prop up medallion values for investors.

  • I agree with your enthusiasm for congestion pricing and the wage standard relative to the numerical cap, and that private motoring is a bigger drag than the TNCs.

    I part ways when you assert that fewer people will be able to move around the city because of these bills.

    “Consumer welfare” in the context of NYC transportation can’t be narrowly construed in terms of FHV passengers. Their travel decisions affect the welfare of other road users — bus riders, bike riders, pedestrians, and commercial drivers. Those road users are worse off because Uber/Lyft are exacerbating congestion.

    My view is that congestion pricing is the ideal mechanism to optimize motor vehicle traffic on NYC roadways. But as Schaller has shown, to use pricing to reduce FHV congestion, you need to dial up the price on FHV trips to a higher level than anything that has been proposed in Albany so far.

    In the absence of a guarantee that any type of road pricing is forthcoming, you have to lock down what you can get. I think these bills will make most people using the surface transportation system better off.

  • Joe R.

    A similar issue affects job opportunities everywhere, not just for jobs driving. A good example is the recent push for a “living wage”, even in jobs which were never meant to be permanent or full-time. We also see the same type of thinking with the aversion of labor unions to part-time positions. Basically, the common theme here is a job isn’t worthwhile unless it’s a full-time job which pays a living wage and has health insurance. Ignored in all this are those who might not want to work full time, have insurance coverage through someone else (or are healthy enough to not need it), those who don’t plan to make a career of a job but just want to make for extra money for a year or two, as well as those trying to supplement their full-time income.

    The hard fact is there are a lot more people willing to work part-time than there are positions for them due to the market manipulation I just described. So we might have a handful of full-timers who benefit by getting higher wages and so forth, but what about the far larger number who have no income whatsoever as a result of these policies?

    Consumers are hurt by this also. In an economy as fluid as ours, I’d say part-time gigs should be the new normal. The needs of people for goods and services change so rapidly that nobody can count on being able to do the same job for 50 years like my late grandfather. Part-time employment gives the employer flexibility to adjust the workforce to their needs. It gives the employee flexibility to adjust their work schedule to their life, instead of doing a lump it or leave it Monday to Friday, 9 to 5 job which they have to work the rest of their life around.

  • Driver

    “The hard fact is there are a lot more people willing to work part-time
    than there are positions for them due to the market manipulation I just
    described.”
    If that’s a hard fact can you back it up with some supporting data?

  • 1ifbyrain2ifbytrain

    When a subway rider can decide that enough is enough and abandon a stifling urine smelling station when the next train is 12 minutes away is a huge benefit. Making that benefit more expensive and less convenient is wrong.

  • By that logic, even congestion pricing is bad, and cheaper and more abundant cars-for-hire is an unalloyed social good. But it’s clearly not.

    For every would-be subway rider who gets somewhere faster in an FHV, there are many, many more bus riders whose trips are delayed, in part, because of the additional traffic Uber and Lyft are generating.

  • Chase Atkinson

    I don’t think they were originally intended to be part time. Sure their marketing tried to portray that, but I think that was more of a way for them to establish different regulatory standards compared to taxi’s.

  • Joe R.

    Agreed but FHVs serve the purpose of giving the MTA competition. If the MTA wants to get or keep riders, then they have to improve their service. Right now they operate as if they have a captive audience who will ride no matter how bad the service gets. As we saw in the 1970s and early 1980s, people will abandon the subway in droves if service is lousy, even without as many viable alternatives. With more alternatives, they will abandon it even more rapidly, perhaps giving the MTA the real-time incentive it needs to fix things.

  • Al Wasserberger

    They are part-time everywhere else in the world except here where they are required to drive commercially licensed and insured vehicles and be licensed as livery drivers. It’s NYC that created this mess.

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