Intended Consequences of Portland’s Restrictive Taxi Policy

While we here at Portland Transport generally stick to subjects like public transit, bicycling, and walking, the taxicab is another form of transit that can allow people the freedom to travel around at will without the burden of car ownership or the need to personally drive the car.

Taxis fill an important need for those trips that transit does not serve well, especially late at night. It would be very expensive and difficult for a transit agency like TriMet to send out a bunch of buses at 2am to pick up intoxicated people coming out of bars and events who really should not be driving home. Taxis, with their flexibility to respond to areas of demand, are ideally suited to this task and any great city has a fleet of them roaming the streets ready to be hailed or sitting in designated taxi zones.

Taxis can also be valuable for elderly and disable people with mobility problems, since they can deliver people directly from home to store and back again. Transit is ill-suited to this task, and the paratransit service TriMet does offer is extremely expensive to operate. Abundant taxis paired with publicly funded taxi vouchers might be a much more effective way to serve the mobility-impaired.

Unfortunately, taxi policies in most US cities are notoriously restrictive and are designed to protect incumbent taxi businesses by limiting competition and giving them leverage over their workforce. Last year Sightline published an excellent entry on taxis as part of their “Making Sustainability Legal” series. They show that Portland has one of the most restrictive taxi policies in the country, only allowing 382 cabs to operate in the entire city, or only 0.7 cabs per 1000 residents. Washington, DC, by contrast, does not put a cap on permits and they have a much healthier 12 cabs per 1000 residents.

The Portland Revenue Bureau enforces this strict cap and any increase has to be justified by showing that any new permits will not result in “market oversaturation.” City officials are expected to somehow decide how many taxis would be too much, and new taxi companies are required to prove there is a need for more taxis. Even if city officials approve an application for new permits (which almost never happens), any change has to go through a City Council which is put under enormous pressure by existing taxi companies to restrict any new entry by competitors. In practice, it has been almost impossible for new taxi companies to enter the marketplace and get permits. Four of the five taxi companies in Portland have been around since the 1970’s.

All this is prelude to this week’s article in the Portland Mercury that highlights the real human cost to these policies, not only for the public that would benefit from more taxi availability and lower prices, but also for the people who actually drive the taxis. The article describes 50 drivers who are trying to form a new employee-owned company because they are tired of working long hours for low wages that are further reduced because have to pay a big chunk of their earnings back to the company for the right to use the car. Rather than the company simply taking a fixed cut of fares, a driver has pay for the right to drive the car, then hope to get enough fares to pay back the company and still have some left over. This is generally an exploitative business model, usually associated with shady strip clubs (where strippers have to “rent” the stage), prostitution, and sharecropping to name a few.

A recent city study found that taxi drivers in Portland on average work 6 to 7 days a week, 12 to 14 hours per day, and make well below the minimum wage. Interestingly, the study found that at the one employee-owned company, Radio Cab, drivers worked shorter shifts and made a lot more money than at the privately owned companies, bolstering these drivers’ case that they should be allowed to form their own company.

The article makes clear that it will be very difficult for these drivers to form a new company, denying them any real bargaining power with their employers and, I would argue, denying them their basic rights. When a barista at Stumptown decides he or she wants to leave and open a new coffee shop, we don’t require proof that the coffee market isn’t already “saturated.” We don’t put a cap on the number of coffee shops that are allowed to operate in the city, and each increase doesn’t have to go directly before the City Council. If this was the case, there would be huge public outcry. For most types of businesses, the city is expected to issue business permits as long as the rules are followed and there isn’t some overriding reason to deny it.

One quote from the Mercury article really jumped out at me, from the Revenue Bureau’s Kathleen Butler: “An unintended consequence of the cap on permits is that drivers are not in a good bargaining position to find a company to work for.” This quote made me laugh because this is in fact a completely intended consequence of the cap on permits. It is designed to protect existing taxi companies from new competition, including the threat of their own employees going off to form a new company or switch to a different company. I’m not sure there’s a clearer example of government and private business colluding to prevent competition with no clear public benefit.

To be clear, regulation in the form of requirements that taxis be safely operated, clean, identifiable, etc., are perfectly reasonable. Even regulations on the metered rate might have some merit to provide a measure of confidence that taxi drivers or companies won’t suddenly raise the price once you’re in the cab. But the onerous restrictions on the number of permits and companies are indefensible, and we all, drivers and passengers alike, pay the cost.

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