Transport Econ 11: On Fare-Contracting Taxi Drivers

The campaign by the government (LTFRB, LTO, MMDA, LGUs, etc.) and some private citizens against "nangongontrata (fare contracting) or isnabero" taxi drivers this season is wrong. Airlines, shipping lines, hotels, resorts, can raise their price during the holiday season, why can't taxi drivers?

Bus lines' fares are also government regulated, they can not raise their fares, but buses can adjust by packing in more passengers than usual to maximize revenues. Taxis cannot do that.

One of my friends not only support "nangongontrata" taxi drivers, he initiates the contract. If he is in a hurry and faced with competition from many other passengers, he would wave two bills of P100 each. Taxi drivers snub other passengers and stop in front of my friend and asks, "Ser saan po sila?" (Sir, where are you going?) My friend's destination is worth only around P100-P120 using the usual taxi meter. My friend takes the cab easily. The others can only complain and text their friends, "mahirap kumuha ng taxi".

Taxi drivers and operators should be allowed to raise their fares, especially on holiday season. Like they can put a sign, "Flag down P75" instead of the government-controlled P40. Those who are not in a hurry can snub those expensive taxi and wait for the non-contracting drivers. Those who are in a hurry whose time is higher than the P35 difference in flag down will get that taxi.

A friend, Von Cruz, shared a good observation:

They got to review the system. most of these drivers are on 24-hr shifts. and most do these just to earn that "boundary". Going rate for the boundary is P2000 per day about 2 years ago. Im not sure what it is now. P1200 if you take the taxi out for 12hrs.

On top of this, the drivers also got to put up their own fuel. for 12 hrs driving that should be around P1000? for 24 hrs? I dont know.

So these are just the costs of driving out their units. what if you want to earn P1000 a day being a taxi driver? you probably got to earn around P5000 a day, gross, for that to happen.

But wait. if you earn 1000 a day, you can’t drive for 48hrs straight. you can do this by driving every other day. so drive 24hrs, 3x a week, you earn P3000 a week.

Aaaaand, they get penalized how much when this policy is violated?

This does not take into account that on some days, the drivers cannot even meet the boundary. so there are days, as a taxi driver, that they would work 24 hrs and not earn a single cent. how much is the penalty again?

Yesterday, I walked at Glorietta, then SM Makati, around 2pm. Long lines of people looking for a taxi. I think that was a signal. Some people demonize taxi drivers for demanding higher pay (employees have bonuses, employers have set aside funds for the season, taxi drivers are supposed to earn the usual months). So many taxi drivers avoid areas where there are plenty of spies and "reporters" to LTFRB. Do the passengers win or benefit from this situation? I doubt it. If I were the passenger standing for 20 minutes or more carrying grocery bags waiting for a taxi, I better pay higher so long as I don't stand and wait too long.

The Land Transportation Franchising and Regulatory Board (LTFRB) allows taxi fare deregulation but only for crony firms, like the two airport taxi, Bayan Ko taxi which charges flat rate by zone, and the yellow taxi which charges P70 flag down then P4 per 250 meters. The rest, must charge only P40 flag down then P3.50 every 250 meters.

 Airlines can adjust their fares depending on expected volume of passengers. Thus on rainy/typhoon season, they beg for passengers by charging low fares. On holidays, they charge high. Hotels and resorts do the same. Also boats for hire and horses in tourist areas. Differential pricing is beautiful, it is just and fair for all. This holiday season, even ordinary employees who normally skip or snub taxis take the taxi, they have bonuses, they have to attend many parties and reunions in nice dresses and carrying gifts. Or people hop from one party to another on the same day or night and they avoid driving due to heavy traffic, they have to rely on taxi. Taxi drivers should be allowed to earn high this season.

The economics of ordinary supply and demand for taxi is correct. Government fare regulation is wrong. Either the LTFRB should be abolished, or that agency must deregulate fares. For taxi, jeeps, buses.

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See also:
Transport Econ 6: More on Office Bus Carpooling, July 09, 2012 
Fat-Free Econ 14: Traffic, Car-pooling and LTFRB, June 21, 2012
Transport Econ 7: Encourage Branding, Deregulate Fares of Taxi, January 02, 2013 
Transport Econ 8: Removing MRT and LRT Fare Subsidy, March 08, 2013
Transport Econ 9: MMDA Bureaucratism, May 27, 2013 
Transport Econ 10: MMDA and Car Ban, July 18, 2013

Transport Econ 7: Encourage Branding, Deregulate Fares of Taxi

* This is my article last week in TL online magazine,

http://thelobbyist.biz/index.php/perspectives/less-government/item/141-taxi-and-corporate-branding
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 The Christmas holiday season is a time of very high demand for taxi relative to their supply. Different complaints by passengers would be heard while complaints by taxi drivers, justified or not, are often not heard. So proposals like rounding off and penalizing if not sending to prison all taxi drivers who choose their passengers. or choose their destinations, or demand higher fare beyond those indicated in their fare metrics, have been circulated.

There are two problems that I see. One, there is insufficient branding of taxi. Unlike airlines, shipping lines and bus lines, there are no clear taxi brands that people can easily find or recommend, except the yellow and “Bayan ko” white airport taxi whose routes are restricted to and from the airports.

Two, fares are uniform and government regulated, there is no leeway to adjust fares to reflect seasons of high and low demand for taxi service.

These problems are interrelated so the general solution is to have more brand competition and less government intervention. How?

One, allow corporate branding of taxis. In buses, Victory bus, Five Star bus, Ceres Liner, others, they have hundreds or even thousands of buses and only one corporate brand. If a bus driver misbehaves and got involved in a road accident, people and government authorities demonize the bus line not just the driver. So the bus companies really discipline and motivate their drivers as their action or misdemeanor directly reflects on the bus company’s brand and credibility.

Two, deregulate taxi fare. Let taxi firms put up expensive cars with expensive but courteous drivers charge expensive fares, especially on high passengers demand season. Airlines have deregulated fares, so at low passenger season, they offer lots of cheap fares promo, and on high passengers season, they jack up their fares to compensate for their low revenues or even loses on low passengers season.

Certain bus lines offer special buses on certain destinations – few and wide seats, long legroom, with toilet, only one stop for meals – and they charge higher fares. The same should apply for taxi companies. More market segmentation will solve many supply problems, and taxi drivers will be motivated to become courteous and efficient so they can be hired someday by these high end taxi companies. The single fare system kills innovation.

On another note, when I was in Hong Kong last November, I saw this cab driver.

 He has four small cell phones to his left, a Samsung galaxy to his right, all are open with five different cords attached to his ear phone. He switches from one cord to another to receive each phone call or make a call, without holding or touching any of those phones, without taking his eyes off the road. Below these four small phones is the sixth gadget, an iPad that he can open anytime.

Fantastic driver. He looks sharp. He talks fast, he switches the cords from one cell phone to another fast, without taking his eyes off the road. So he is able to communicate with his family, friends, or his taxi company anytime anywhere while doing his job. The iPad I think, he will open when he stops to eat or pee, and open his facebook or twitter. I just do not know how common this is among Hong Kong taxi drivers.

One possibility is that he is not an ordinary cab driver, he could be the dispatcher or even the owner of the taxi fleet. In some developed countries where labor is scarce, a taxi company pays any  driver who accepts to take calls and picks up passengers as instructed.

He could be the dispatcher or company owner as he does not appear like an ordinary taxi driver, more of an owner-driver.

In contrast, when we flew back to Manila and got out of NAIA/Manila airport and took the yellow airport taxi, as soon as we got out of the terminal building, the driver said his meter machine is not working and suggested that we will just negotiate the fare when we reach our house. I insisted that he put on the meter reader, he did and it indeed was shabby. When we got home, he produced a receipt from his meter reader, it said P298 for a 6.7 kms distance. His meter reader is tampered, I usually pay only P200 for that short distance on a yellow cab. He later agreed to a P200 fare.

A passenger that feels cheated by the driver of any of the two accredited taxis at the airport, the yellow and white taxi, can complain to NAIA later, but that is waiting for the NAIA authorities to act on the erring driver/s, assuming that they will act on a complaint. A more active, more public-friendly option is to allow passengers to boycott and blacklist a particular brand and go to another brand. In the current duopoly airport taxi system in the country, this is not possible. Passengers simply have to prepare extra cash in case they get cheated, although this does not happen all the time.

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See also:
Transport Econ 3: Brand Competition Among Jeepneys and Buses, August 20, 2010 
Transport Econ 4: Tricycles, November 15, 2010 
Transport Econ 5: Trisikad, June 22, 2011 
Transport Econ 6: More on Office Bus Carpooling, July 09, 2012 
Fat-Free Econ 14: Traffic, Car-pooling and LTFRB, June 21, 2012