The Case for Taxi Deregulation

Executive Summary

• Recent media reports in Calgary, Saskatoon, Winnipeg and Halifax pointed to dissatisfaction with the taxi services in those cities.

• Regulated entry into the taxi market has kept taxi numbers lower than might be expected. If taxi numbers had grown in proportion to the rest of the workforce for the last 20 years, there would now be 2,495 taxis in Calgary instead of 1,411; 222 in Saskatoon instead of 160; and 496 (standard licences) instead of 410 in Winnipeg.

• Areas that removed regulations found their taxi markets grew much faster than other parts of the economy.

• The cost of taxi licences has risen dramatically due to artificial scarcity. The average price of a licence in Saskatoon in 2008 was $79,565, which gave a total value of almost $13-million. Assuming these licences give equal or better returns when compared with other investments (the 30-year average return for the Toronto Stock Exchange is 10%), licence holders in Saskatoon extract over $1-million per year in monopoly rents. In Winnipeg, this number is approximately $92-million aggregate value for $9-million per annum monopoly rents.

• Empirical evidence from economists suggests that allowing operators who meet basic safety and competence requirements to operate in the taxi market and set their own prices would lead to better service, cheaper fares, shorter waiting times and more employment for would-be drivers who currently cannot afford a licence.

View Full Study in PDF Format (26 pages)

Canada’s Taxi Markets: Market Failure or Regulatory Failure? (Charticle)

Something Rotten in the State of Winnipeg Taxi Market (Policy Note)

Author's Picture David Seymour directs the Centre’s Saskatchewan office. He holds degrees in Electrical Engineering and Philosophy from the University of Auckland, where he also taught Economics. After working as an engineer in New Zealand, he is applying his passion for sound policy analysis to policy issues on the Prairies. In his first two years working for the Frontier Centre, David has carried out extensive media work, presenting policy analysis through local and national television, newspapers, and radio. His policy columns have been published in newspapers in every province as well as the Globe and Mail and the National Post. David has produced policy research papers on telecommunications privatization, education, environmental policy, fiscal policy, poverty, and taxi deregulation. However, his major project with the Frontier Centre is the annual Local Government Performance Index (LGPI). The inaugural LGPI was released in November 2007 and comes at a time when municipal accounting standards in Canada must improve if the municipal government sector is to reach its potential as an economic growth engine for Canada.

Feedback:

RE: The Case for Taxi Deregulation — February 24, 2009
This article is dead-on. Taxi “medallions” are now trading at $100,000 in Edmonton. Original purchasers feel it is their “right” to have a $100,000 retirement fund. No one talks about the purchaser (who mortgages everything to pay the $100,00) and his “right” to a retirement fund. The entire mess is the result of legislators - who are ignorant of the most fundamental laws of economics – and who have little ability to think logically. Thank you. -- E-mail from Edmonton
RE: The Case for Taxi Deregulation — February 24, 2009
I wonder if Jim Marlor of Hamilton knows that Calgary cab drivers work for less than minimum wage because they pay the plate holders thousands of dollars per year to rent the plates. If we eliminated (or re-regulated) the plate system, there would be a lot more money staying in the average taxi driver's pocket. Marlor talks about a contract between the city and the plate holders. There is no such thing. The current situation allows for a few plate holders to get rich off the backs of the vast majority of hard-working cab drivers. He suggests there would be fewer taxis when the bars close in a re-regulated world. The reality is there aren't enough cabs when the bars close, which causes people to drive home drunk. As far as the quality of cars in a re-regulated system, the city and province already have the responsibility to ensure taxis (and all vehicles) on the road are safe. In the Herald reader comments last week, there were numerous complaints about cab availability. This is Calgary, not Hamilton, so why not let the market decide how many cabs we need? City council should seriously consider re-regulating the taxi system as David Seymour described. -- Letter to the Editor of The Calgary Herald