Canadian taxi regulators need to heed public dissatisfaction with taxi service and look at other countries such as New Zealand and Ireland that have removed regulations on cab numbers and fare prices, this according to a discussion paper released by the Frontier Centre for Public Policy.
According to David Seymour, who authored the paper which analyzes three Western cities—Calgary, Saskatoon and Winnipeg, “If Calgary had issued new taxi licenses in line with growth in the workforce since 1986 there would now be 2,495 instead of 1,311. Instead, the number has not changed since 23 years ago.”
In the case of the other two cities, if growth in licenses had kept pace with the rest of the economy for the last 20 years, Saskatoon would now have 222 instead of 160 and Winnipeg would have 496 instead of 410.
“The artificial scarcity of licenses has created a hidden market where privileged license holders trade licenses or rent them to drivers who want to work but do not have one of their own,” notes Seymour. “The cost of taxi licenses has risen dramatically due to artificial scarcity. The average price of a licence in Saskatoon in 2008 was $79,565. That gave the monopoly holders of such licences a total asset value of almost $13-million—at the expense of consumers.” In Winnipeg, it is estimated license holders extract a $9-million return per year from their monopoly position.
“There is clearly something wrong with an industry where regulation creates such high barriers to entry. The losers are existing taxi drivers who are forced to rent licenses at up to $100 per shift, residents who face an artificial shortage of taxis, and would-be drivers who would join the industry if they were allowed to by authorities.” Seymour noted that in particular, it is the elderly and low-income earners who suffer most from taxi shortages.
In contrast to Canada, Ireland and New Zealand removed price and entry controls from their taxi markets in 1989 and 2000, respectively. The results have been three times as many taxis in Ireland and twice as many in New Zealand. In New Zealand significant extra jobs were created in a time of recession, and fares went down. The Irish found improved customer satisfaction in public surveys.
Adopting international best practice taxi regulations does not mean a laissez-fare approach to regulation. Drivers are still tested for competence, cars for safety, and fares must be reported to authorities and displayed on cab windows. The difference is that authorities do not try to second guess the market as to how many taxis there should be and what they should charge.
The real challenge is one of political leadership. It is clear that deregulation would have significant benefits for the public and many non licence-owning drivers. However the experience of taxi regulators around the world is one of fierce opposition from incumbents. The Irish had to face down street blockades and court challenges. Canada’s provincial and municipal leaders will also have to be strong to do what’s right for the public.
For more information, contact:
Saskatchewan Director – Frontier Centre for Public Policy