Uber and Lyft are the Best New Thing for Poor, Urban Communities

Around the country, consumers are greeting newly arrived rideshare and taxi alternative companies like Lyft and Uber with fanfare. Some people, though, aren’t so happy. Taxi companies, for example, are lobbying city and local governments to heavily regulate and outright ban these services from the streets — ostensibly for “safety” reasons. One group in Seattle has taken their opposition even further — going so far as to attempt to block Uber cars from delivering their passengers on Saturday.

The group of self-proclaimed anarchists calls itself “Counterforce,” and has a predictably laughable credo on its website. There’s no need to quote here, as the themes are common: Uber takes jobs from poor people and only caters to the wealthy. The solution is to use city and local governments to cap the number of Uber cars if not ban them outright.

The bitter irony of so-called “anarchists” calling upon governments to ban things notwithstanding, the claims of “Counterforce” actually do ring in many city halls across the country, and it is admirable to advocate for the interests of the poor.

The bitter truth, however, is that the very governments that people so often call upon to protect working class and local businesses are actually responsible for many of the transportation hardships of those same people. They also keep small, local business owners from providing alternatives for these people, and, in turn, make the pickings ripe for the types of large companies that people mistrust to come in and crush local competition.

Consider the current structure of individualized transportation services in most major metropolitan cities. Many large cities already do put a cap on the number of taxi-like cars which can be on the street. This creates a system in which companies must pay the government for permission to own a cab or cab business, usually through purchased “medallions.” The prices for these medallions are astronomically high. In New York, the price of a medallion is a cool $1 million. In Chicago, it is $360,000.

The number of medallions is fixed, so as the demand for cabs goes up, the price of the medallion goes up as well. These high prices completely shut out any individual or local business that may want to start up and provide services to low-income or under-serviced communities — which makes them ripe for the picking for larger companies like Uber, who have the capital to invest.

When the prohibitive cost of entry is not an issue, sometimes the government itself comes after independent driving services, often spurred by unions and large companies who want to push out competition. This should make anyone wary of governments like Seattle, Los Angeles or Chicago which seek to heavily regulate or ban rideshare services. The public’s interests are not served by them.

Taxi cab companies — the ones that are large enough to afford the a steep opening investment — rule the streets and can operate as they like. This is not good for customers, particularly low-income customers, as prices either hold steady or rise due to the lack of competition. And as for service to these communities? Taxi cabs are infamous for not picking up minority passengers or servicing low-income areas, while Uber claims that up to 40% of their business goes to underserviced areas.

And the drivers? Many are jumping ship to work for these rideshare services, which can pay upwards of $40 per hour with the added benefit of allowing drivers to set their own schedules. This benefits those who cannot jump ship too, for the increased competition in the labor market will create an incentive for cab companies to raise their drivers’ pay and benefits as well.

Ultimately, it is the protectionist policies of city and local governments that set the stage for large cab corporations and businesses like Uber and Lyft to “move in.” It is this lack of market competition that creates the current transportation climate for poor and underserviced communities, even as Uber and Lyft have the potential to fill that gap. Citizens seeking to ban or heavily regulate Uber or Lyft do so at their own peril — and the peril of the underserviced communities that they seek to help.

Citations to this article:

Free Markets & Capitalism?
Markets Not Capitalism
Organization Theory
Conscience of an Anarchist