Why Cab Drivers Are Poor. An Analysis of SF's Taxi Industry. By John Han.

Photo by John Han.

(Originally published January, 2011)  Portions of this essay are edits from a previous essay I wrote but was not published.  It was  submitted to SFMTA Taxi Services Division.  Here's an edited, published version... 

INTRODUCTION:

Taxis play a major role in San Francisco’s transportation and local business economy.  Tourism, conventions, hotels, restaurants, bars, clubs, sporting and concert events all benefit from the industry’s services.

For some, taxis are one of the few viable options of getting around, such as senior citizens and the disabled using the Paratransit program.  And for many others, taxis can provide casual and safe alternatives to the risks of drunk driving (Anecdotally, in major cities, cab drivers may prevent more fatalities and injuries resulting from drunk driving each weekend than any other profession in the country or the world). 

Unfortunately, despite the importance taxis play in most major cities and in the lives of many, taxi drivers themselves have bleak hope for being able to secure a financial future.  Why is this?  Are cab drivers lazy?  Are negative ‘cabbie’ stereotypes true?  This essay is an attempt to analyze the concern from an ordinary cab driver’s perspective.  I hope readers will read it through (though lengthy) and hopefully gain some insights, and maybe help in ways to improve it.

Analysis of San Francisco’s Taxi Industry:

Hardships From Low Income:

Key to understanding the taxi industry overall is the ability to recognize and acknowledge the economic difficulties of the many taxi drivers themselves, who are the overwhelming majority of the industry.  It is estimated that there at least 5500 non-medallion A-card permitted taxi drivers at any given time in San Francisco, and just over 30 licensed color schemes (cab companies) that manage them.  According to a 2006 report by the Richard & Rhonda Goldman School of Public Policy University of California, Berkeley, entitled, “The San Francisco Taxicab Industry: An Equity Analysis”, San Francisco cab drivers rank near the bottom in local, economic status.

“Nearly all observers of the industry agree that taxicab drivers, especially non-medallion holders, have a low standard of living. While income estimates vary widely, it is reasonable to assume that the average full time non-medallion holder earns approximately $24,000 per year. 

With an additional $22,000 in leasing income, a medallion holder earns $46,000.

In addition, because all drivers are independent contractors, they do not have traditional employee benefits and have no legal right to bargain for benefits through a union. According to one survey, 46.1 percent of drivers do not have health insurance.  Considering their low income, it can be assumed that few are able to save for retirement aside from Social Security.” (Bold italics mine)

To be clear, the intent of this essay is not to exhaust the independent contractor vs. employee proper classification argument, nor to push for the employee status for all.  Instead, this is an attempt to examine why taxi drivers, who are said to be self-employed business owners, seemed so relinquished to hard, long hours but with low-incomes, and seem so destitute of benefits such as healthcare and pensions.

Statistics from the Goldman report continue to acknowledge hardships from their low incomes.

“According to a survey of taxicab drivers conducted in 2004, most drivers work full time or close to full time but earn small salaries. While over 62 percent of respondents reported driving a taxicab for 30 or more hours per week, only 2.3 percent reported earning $35,000 per year or more in taxi related income.  72 percent of drivers reported earning less than $25,000 per year.”

“More than half of the respondents to the survey referenced above reported having no health insurance whatsoever. The vast majority of these individuals stated that they do not have insurance because they cannot afford it. Moreover, of the 39 percent who reported having health insurance, 20 percent have either Medi-Cal or Medicare. Although city policymakers have no inherent obligation to provide taxicab drivers with health insurance, they certainly have an interest in monitoring the effect of this lack of coverage on the public health system. Nearly 60 percent of respondents reported seeking medical care in the 12 months preceding the survey (excluding “not specified”), and 25 percent of these drivers received care at public health clinics or San Francisco General Hospital.”

“Because of their low incomes, it is unlikely that most taxicab drivers have the ability to save for retirement in order to supplement their social security checks. In addition, they have no access to a pension or 401(k) plan and no ability to collectively bargain for these benefits because of their independent contractor status. Moreover, they pay both the employer and employee share of Social Security taxes.  Medallion holders arguably have more retirement security, since they can save some of the income they earn from leasing their medallion for retirement.”  (Excerpts from the Goldman School of Public Policy University of California, Berkeley 2006, entitled, “The San Francisco Taxicab Industry: An Equity Analysis”.  Appendix A, Bold italics mine)

Note, that the anxiety that can result from economic struggle has little, if anything to do with traffic related stress, or rude customers.  More than those two specific and valid issues, things associated with poor economic status is perhaps the hardest challenge that taxi drivers face, (e.g., unfair traffic tickets, double back-booking, excessive or unwarranted charge backs for credit cards or damaged property, tipping.)

THE ISSUE OF SELF EMPLOYMENT:

What does being self-employed truly mean?

As confirmed by the Goldman report, independent contractor status leaves most taxi drivers, if not all, ineligible for company pension or 401(k) plan, company health insurance, paid sick days, paid vacations, minimum wage guarantees, overtime pay, harassment/discrimination/retaliation protection, union organizing (if desired), and in addition, requires that they pay double in social security taxes than workers in other industries. 

And to make up for the loss of all these benefits, what do most of the taxi drivers get in return from the ‘freedoms’ they get from their independent contractor status? – Lack of supervision. 

That’s right!  And that’s it. 

The company won’t tell you to wear a uniform, when to take a meal break, where to cruise for fares, etc.  And I guess that’s a good thing.  After all, you can get hit on by your passengers of the opposite sex, or the same sex… whichever you prefer.  Then you can park the cab, and go on a date with them instead of drive out the rest of your shift.  And you don’t have to ask a boss.  That’s freedom!  Right?

And you don’t have to respond to a radio call if you don’t want to. Remember – dispatch service, we are told, is just an, ‘informational referral service’, (this is due to complications that have arisen from independent contractor status).  I guess what that means is that dispatch service doesn’t legally entitle any public passenger in any way to a taxicab that they’ve just ordered by phone.  They can call, but they're not guaranteed to get one.  It only guarantees that their information will be dispatched to us drivers so that their request will be made known to us.   

You can service radio orders if you’d like.  I do, I like them.  But I guess you could also just as well take one and then leave the passenger hanging on the phone for fun as a prank, so long as you see another fare on the street that could be better anyway, (I don’t actually do this, but I suppose in theory I could.  I'm making a point). 

Devil’s advocate here… after all, “dispatch service”, we are told, is a service that companies provide to taxi drivers, not to passengers.  Right?  We’re the ones who pay for it through our gate fees.  In that case, to hell with the phone order!  If I buy movie tickets, do I have to go to the movie?  What about opera tickets, or concerts?  Does paying for them mean that I have to go to them?  Dispatch service to the passenger is not their privilege.  I’ll take the call and then not go to it if I want.  I paid for it.  It is mine! 

And I guess you cant' rightfully make me have to RESEND the call, anymore than someone can make me have to resell concert tickets if I buy them and then choose not to go.  

If the managers get pissed, they may or may not fire you for it.  They may or may not call you up into the office and discipline you.  But if they do, they have to be careful and keep their cards in check, because too much of that could aggravate the government, and cab companies could get pegged for controlling you like an employee but not paying taxes for it.  Companies could get BACK-TAXED!  And sometimes they do... for millions. 

So, now that we have all this power and freedom, and can do anything we want, let’s refocus back to why we are poor.  Uuhh, hmmm… let’s see.

Despite all the lack of supervision, cab companies however, (and medallion holders) still control the most important element of power that dictates for thousands of drivers their financial success or failure – they dictate the shifts, and are empowered to decide who gets to drive the good ones and who doesn’t.  In other words, they retain all necessary control to perform their leasing operations. 

Obviously, that is because they own and control the vehicles, and are licensed by the City to manage the medallions.  This is where ‘independent contractor’ status takes a major downhill turn for ordinary taxi drivers.  When’s the last time you heard of someone who really owns their own business, but has to have someone else tell them whether or not they can go to work?  When’s the last time you heard of someone who really owns their own business but has to have someone else tell them when they can go to work?  Wow… only in the cab business!  Strippers are the only other ones in SF that I can think of off the top of my head that are in that similar situation.  We’re like strippers… only they’re better looking than us and make more money. 

Take restaurant owners for example.  They may open early in the morning to service the breakfast and lunch crowds, and then close temporarily in the afternoon around 3pm when the business dies down, but reopen in the evening for a busy dinner crowd.  A fair amount of restaurants do this.  For special occasions, the owner may stay open late into the evening way beyond regular business hours… or not.  It all depends on what the owner wants to do.  And that decision will be based primarily upon customer demand.  It’s profit driven, because that is how you make money when you’re in business for yourself.  You have to be open for business when there’s business to be had. 

Non-medallion taxi drivers on the other hand, so-called “business owners”, must ask humbly for permission from company management to have a specific shift that they want to work, or to be taken off from one that they don’t want to work… kind of like a... ahem... employee. 

And just like in an employer/employee relationship, the company management, or the boss, has the absolute say.  But, there’s absolutely no employee rights or benefits. 

And if the company says no, then those drivers’ incomes suffer, but not the management's. 

While all San Francisco taxi drivers may be considered independent contractors (including gate and gas drivers who are the vast majority), only medallion holders, (who are the vast minority), and primary lessees in long-term leases, may legally purchase and own their own vehicles and set their own best hours to work, a power inherent and critical to owning a business, one would think. 

Any taxi industry insider knows that financial success in the City’s taxi industry heavily depends upon specific times of the days and evenings, and is highlighted by particular evenings and seasons throughout the year, i.e., Friday nights are more lucrative than Tuesday nights, summers are busier than winters.  The ability to own equipment and freely select shifts and business hours, based upon public demand, (not the companies’ needs to lease vehicles), will strongly influence financial success or failure, no doubt.  But taxi drivers have been, and are being denied this one most critical power… the one that it would seem should be most inherent to them by the mere definition of their independent contractor status.

WHAT IF EVERYONE OWNED THEIR OWN TAXI?

Anecdotally, the consensus is that it would be a nightmare… most likely.  This is where the taxi industry takes yet another harrowing turn.  The natural assumption is the streets would be flooded with cabs on Friday and Saturday nights, and no one would service the people on Tuesday mornings.  This is one of the City’s concerns.  And, it would be an issue amongst many taxi drivers.  

Also, cab companies already have the important and costly infrastructure, e.g., the taxis, dispatch equipment, repair facilities, insurance, etc.  Cab drivers are too broke to buy all that, and the City doesn’t want the liability of owning it. 

And generally speaking, thousands of independently owned cabs would be considered too hard to regulate.  So making thousands of “independent contractors”, or non-medallion taxi drivers work for 30 or so licensed companies, and rent their cabs that already exist, is thought to be manageable. 

Okay.  I guess I have no problem with that.  I mean, off hand, it doesn’t seem like the perfect solution, but given the facts and the realities, I guess that makes sense.  Right?  I mean, thousands of taxi drivers having thousands of their own cabs would be weird… lots of congestion and air pollution. 

So where’s the problem?  We can all drive for companies.  Isn't it solved?  Why are cab drivers always complaining about this or that?  Is it just inherently in our nature as cab drivers to complain… our persona and profile?  That would be one of our negative stereotypes.

CAB COMPANIES:

Seeing how we have to work for companies, I'm not saying that cab companies, (especially the large ones) are evil, or that cab company management is bad, bad, and evil.  I'm saying they are o.k.  They fill an important role and provide jobs.  But there should be vast improvements in how they operate.  

In the cab companies’ view, cab companies provide services to medallion holders and taxi drivers, not passengers, as their primary customers.  It is alleged to be an industry that is separate, but related to actual public taxi transportation services.

“Taxi firms are not in the business of carrying passengers. They are in the vehicle leasing business. Firms derive their revenue from leasing vehicles and permits to drivers. They derive no direct financial benefit from carrying more passengers, and compete with each other for permit holders and to a lesser extent drivers, not passengers.”  (SPUR ‘Making Taxi Service Work in San Francisco’ Final Report, November 2001)

Unfortunately, the public is by and large totally unaware of this.  My experience causes me to think that the public passenger believes that they, the passengers, are still a taxi company’s primary customers.  But that is a myth.  They are not.  

Meanwhile, taxi companies have been guaranteed, and are being guaranteed a relatively unlimited supply of their  ‘customer base’, (specifically the non-medallion taxi drivers) in that there is no cap on A-cards. 

I don’t pretend to know what it’s like to be a company president or manager and have to stress about filling enough shifts. But from a driver’s point of view, unlimited A-cards devalues the worth of every driver that’s out there, (except for medallion holders, whose numbers are capped).

And so here's yet another harrowing turn before we arrive at our final destination.  A turn wherein lies a key problem. 

Since non-medallion drivers are not licensed to legally branch out independently on their own, or possibly form their own co-ops or small businesses like medallion holders can, their livelihoods have been, and still are totally dependent upon company management and its decisions.  Yet for purposes relevant to employee status, they are considered equal in status as medallion holders…  as independent contractors.  This is where it is strikingly unfair because there are no rights as employees, and no employee benefits.

Companies are under no threat that if the working conditions they provide for their drivers are abusive or unfair, (such as not honoring lease agreements and causing drivers to wait for hours for a taxicab), that a driver or a group of drivers could thus sever their contracts with their companies, and being empowered by their independent contractor status could form their own companies or small business, and thus become competitors. 

No such threat exists.  What does exist could therefore possibly be considered a monopoly.  And so cab company management has the livelihoods of thousands of drivers in its discretion.  

Since cab companies are guaranteed their ‘clientele’ by means of the City’s regulations, and are being left relatively unregulated by San Francisco authorities, they have little reason to feel compelled to provide equitable and fair working conditions, thus further silencing and disempowering the thousands of taxi workers.  

My opinion is strongly that if cab drivers do indeed complain a lot, it would be more because of the undercurrent of unjust and disproportionate balance of powers they are subjected to and with no viable recourse.

  

It is because the industry is unjust, not traffic (unless you mean unfair traffic tickets issued by DPT)

WHAT ABOUT SFMTA?

There appears to be no state law that requires local governments to protect the taxi drivers that they are to regulate within their jurisdictions.  In other words, although SFMTA has power and could protect the rights of its taxi drivers if it wants to, there's no higher state or federal law that says that it has to.  SFMTA, the new regulator, may regulate as it wishes. 

It, like past administrators, makes most of its taxi drivers to work under a licensed cab company management, rather than licensing them to operate as fully independent entities, as their “independent contractor” tax/labor status suggests they should.  Though this may be a necessary regulatory approach to ensure safety, nevertheless, it prolongs the disproportionate balance of power strongly favoring the cab companies, thus hurting the poorer, working class taxi drivers.  

Because this is the case, SFMTA should pass local laws protecting taxi drivers as 'workers' conceivably working for companies, similar in principal as federal and state labor laws protect employees.  But again, there’s no higher state or federal law that says SFMTA must do this.   And because no such higher laws exist, neither this agency, nor regulatory bodies in the past, have made significant strides to protect taxi drivers.  There have been some protections, such as gate caps, but nothing that would elevate the working conditions of non-medallion taxi drivers to resemble something similar in status as their counterpart medallion holders, or company management.   But for all tax and labor purposes, they are considered equal to medallion holders and company management. 

If only navigating ourselves out of this mess could be as simple as a GPS navigator, or a  map, we could wave a wand, or turn a page and this would be cleared up.  But this is where we are in the road.  And it feels like it's a long way to our destination.  

Note:  California law seems to require local governments to “protect the public health, safety, and welfare”, when regulating their local taxi industries.  But beyond drug testing, there’s no meaningful mention of the taxi drivers themselves.  (Ca. Gov. Code Section 53075.5. Read the Full Text).