What’s not to like about a car with a cute pink mustache and an app that shows a photo of the driver and tracks the car’s movement toward the corner where you’re waiting? Plenty, say Minneapolis cab drivers. A city council committee will take up the question of the currently unregulated “Transportation Network Companies” or TNCs during the week of July 7.
Taxi drivers see newcomers Uber and Lyft as unfair competition in an already-crowded market. To understand their concern, listen to Jim Morgan, whose experience as a cab driver, taxi company executive, and “Cab College” teacher stretches back more than 40 years. Here’s how he explained the system, and the way it has changed over time:
“When I first started as a driver at Yellow, it was 1971. I was going to the U and I needed a part time job. … Even then, I remember the guy who worked in the garage telling me – Yellow Cab had 125% turnover rate per year.
“I had to be a member of the Teamsters Union to work for that company. It was a closed shop. They paid on commission.
“Back then – the company paid for the gas. You went out with your cab — the driver kept, I think it was 48 percent [of fares] when you were full time. The other 52 percent went to the company. Plus you got tips. If you had a good night, you and the company made more money. If you had a bad night, you made less.
“Today you could actually lose money if you have a bad night. Today if I was going to drive a cab for 12 hours, I might pay $65 for the lease. I have to bring in $65 for the lease, plus I have to bring in gas money to pay for the gas. Round it off — maybe $100 a night total for the lease and gas. I’d have to bring in $100 before I make a buck as a driver. If I only bring in $75, I have to pay for the night — I actually would lose money.
“That didn’t happen when I drove. You always came home with something.”
One big change in the Minneapolis taxi industry since Morgan began driving in 1971 is “deregulation.” Since 2006, deregulation increased competition by removing the limit on the number of taxi licenses issued by the city, which more than doubled the number of cabs on the street. Other regulations remained in place: the city requires taxi drivers to take classes, pass tests, pay for special licenses, follow a city-prescribed dress code, have cabs washed weekly and inspected yearly, and much more.
Since they are independent contractors, drivers get no minimum wage, no overtime, no workers comp protection for injuries, no unemployment comp, and no paid vacation or sick time.
Drivers who own their own cabs still have to pay a service fee to the taxi company that they drive for, in exchange for dispatch calls and affiliation with a company, or “color rights.” Drivers must be affiliated with a specific company and need permission to switch to a different one.
Regulations also state that drivers need a separate license for each city where they pick up fares. A Minneapolis licensed driver can take a passenger to St. Paul, but can’t pick up a St. Paul fare for the return trip. The airport? That’s a city in itself, with its own cadre of drivers.
Uber and Lyft: Unregulated, but for how long?
Besides the hundreds of taxis competing for fares, two new companies now cruise Minneapolis streets. Uber and Lyft claim they are not transportation providers. They have described their operations as an app, ride-sharing, peer-to-peer rides, “your friend with a car.” Both are international corporations with funding from venture capital funds, and are rapidly expanding around the world. In Minneapolis, the city council is considering how to regulate the “Transportation Network Companies.”
So what are Lyft and Uber?
Both are large, international corporations, operating in many cities. They provide rides — like taxis — but the drivers use their own vehicles. Lyft and Uber use apps to connect drivers and passengers. Here’s how Lyft describes it:
STEP ONE Just tap the big green button [the app on your phone] to request a pickup. You’ll get matched with a friendly, background-checked driver from our community within minutes.
STEP TWO Track your driver’s route and ETA in the app. You’ll also see a photo of your driver and their car, so you always know who you’re riding with. That said, our pink car mustaches make us pretty hard to miss.
STEP THREE We’re your friend with a car. So hop into that front seat, and greet your driver with a friendly fistbump.
STEP FOUR When the ride ends, the app securely charges payment from your saved credit card. No need to carry cash!
STEP FIVE Passengers and drivers rate each other. If you rate someone 3 stars or below, you’ll never be matched with them again. It’s how we keep our community’s high-quality standards!
The theory behind Uber and Lyft is that anyone can drive for them at any time. Customers set up a credit-card-paid account with Uber or Lyft via a cell phone app. When a customer requests a ride, they can track the progress of the car via a map on their cell phone, which seems very cool and up-to-date.
Taxi companies are required to operate 24 hours a day, and to accept fares anywhere in the city. But Uber and Lyft are not bound by those regulations. The most that is even proposed by the city council is that they report how many trips they have made in each zip code — and that information would not be disclosed to the public.
An Uber or Lyft driver knows in advance who they are picking up and where they are going. The fare is agreed upon in advance, and paid by credit card, so no one can get away without paying.
Cab drivers can be sent to pick up a passenger whose name they don’t know, in any location in the city, and without knowing the destination. So they might be picking up a lawyer on the way to the airport (good fare, no problems), a drunk at a bar (potential hassles, uncertain fare), or a woman in a wheelchair at Cub, with five bags of groceries and a two-mile ride home (lots of time, low fare).
Taxi drivers can’t charge more than the fare set by the city — so much per mile, and so much per minute of wait time. But Uber and Lyft can (and do) charge whatever the market will bear — they can give discounts during slow times and jack up the prices during busy times. As Eric Roper reported in the Star Tribune:
“Unlike taxis, which are limited to charging the meter rate, Lyft and UberX increase rates based on demand. At 2:30 a.m. on a recent Saturday morning, for example, UberX was charging a $20 minimum and three times their normal rate under ‘surge pricing.'”
“Again, it’s the lower income people that aren’t going to be able to afford that,” said Jim Morgan. “It’s going to leave those people for the cabs to pick up. The people who are more affluent, who can afford the higher rates, will take Uber or Lyft.”
Taxi drivers themselves are among those lower income people. According to the Bureau of Labor Statistics, the average (mean) amount earned by a Minnesota cab driver is $24,070, which translates to an hourly wage of $11.57 for a 40-hour week. Many drivers regularly work 12-hour days, the max allowed by Minneapolis law, so their hourly rate would be even lower. For most, the money they earn is the money they, and their families, live on.
Many cab drivers are recent immigrants. Morgan teaches one of the Cab College classes at Hennepin Technical College. He said 85-90 percent of the people taking classes are from other countries. “That’s the way it’s been in New York City and Chicago for a long time. We’re just catching up with them. It’s a good way for immigrants to have a job.”
The Minneapolis City Council is considering some changes in taxi cab regulations and some possible regulations of the new TNCs. For the text of the proposed TNC regulations, see the Scribd document at the end of this Star Tribune article, and for proposed changes to taxi regulations, see the Scribd document at the end of this article.
St. Paul and other cities also face the challenge of regulating the new companies. Each city has its own regulations for cabs, with the Metropolitan Airport Commission regulating taxis at the airport as if it were a city.