Regina Taxi Regulations: Quit fiddling and cure the disease

Commentary, Regulation, David Seymour

Too often those in politics focus on symptoms while a disease lingers untreated. This past week’s debate about the Regina taxi industry is a perfect example. It should be whisked into a Politics 101 textbook or, better still, into the history books. Public dissatisfaction with taxi service in this city can be traced back to a failed regulatory model that favours a few industry operators over the general public. Strong political leaders should follow other countries’ lead and just get rid of it.

Taxis are regulated so bizarrely compared to almost every other industry that a few facts need to be pointed out: Only 125 cabs are allowed on the road at any one time, except for winter when 36 additional licenses may be issued. This artificial shortage means that licenses trade on a kind of grey market for a reported $135,000 a piece, six or seven times the cost of an actual cab. Many cabbies don’t actually own one; they must rent them off “license magnates” for up to $1,000 per month. Fares are set by the city council, who face a perennial headache of guessing what a fair fare really is.

Try and imagine any other industry being regulated this way; it’s surreal, but the results are predictable enough. Shortages occur, and people lean towards other transport options or avoid travelling. Poorer neighborhoods are hit hardest when drivers who can’t serve everybody lean towards leafier suburbs. Would-be drivers are held out of the market by the cap on the number of driving jobs; those who do drive lose significant income to license rentals; and remaining license costs are recovered from higher fares for customers.

The commonly discussed remedies amount to fiddling around the edges of these problems. For example, to increase the fares for airport trips might bring more cabs to the airport, but it amounts to pulling more of the limited taxi fleet “blanket” over to one side of the bed. The real problem is a city-wide shortage.

The current regulatory process proves it serves the wrong interests when it holds the number of licences constant, as it has since 1994. A recent report commissioned for City Hall indicates a 17 per cent increase in demand since then, but regulators seem to favour limited competition and high licence values over the public interest.

A few industry players—who seem to believe the law exists to protect them from competition—are always the first to comment on regulatory changes. They bring to mind the old warning: “beware vested interests masquerading as moral principle.” Their doublespeak that higher prices and limited competition are somehow in the public interest is insulting.

Let them trot out the self-serving line that removing price controls and license caps will “decimate the taxi industry. ” More imaginative policy makers should look at what has happened in other countries: new and increased demand, more money for taxi drivers instead of monopolistic taxi licence holders, and better overall service.

For example, after the Irish High Court ruled that barring qualified people from the taxi industry was a human rights violation, caps were lifted and Dublin taxi numbers tripled. Public satisfaction went up and waiting times went down –dramatically. After New Zealand removed price and entry controls, fares went down and one academic study found the following: “Far from being an industry apart, ungovernable without stringent regulation, the removal of entry and fare restrictions has released forces which have led to a new and considerably more vibrant industry.”

The real question is whether our political leaders choose to fiddle around the edges of an antiquated regulatory system that serves narrow interests, or fix it properly for wider public interest.