Demise of full-time jobs

or tweak

taxi.jpg

Almost everyone has a Perspective on the latest recommendations from city staff on ride share service, here is mine.

Toronto city staff have released a report that outlines proposals on how to level the playing field for the taxi industry. Some highlights from TV and news media are:

  1. Taxis would have to pay reduced license fee of $290 to get a license and pay $290 every year to maintain it. This apparently nets the city $8 million each year. The equivalent for Uber is a flat one-time fee $20,000 for existing drivers and $10 per driver per year going forward along with 20 Cents per trip.
  2. Taxi drivers will have to get their Car through two city run mechanical inspections per year while Uber driver has to get it done once from any licensed mechanic. This will be a bit light on the Uber driver while still assuring that taxi customers are safe.
  3. Training for taxi drivers has been dropped. This is kind of equalizing the playing field because Uber drivers don’t go for 17 day trainings. This way it saves costs for the taxi drivers and prevents Uber for having to invest in training.
  4. Also it is a big expense to change snow tires every winter and back to all season. So to make it economical for both taxi and Uber, this requirement is now removed.
  5. The requirement to be able to speak English is no longer mandatory. This makes it easy for a new immigrant to become a Taxi driver and likewise for Uber drivers that do not speak English.
  6. The Taxi industry still has to provide for special needs transport. Not sure if there is similar obligation on Uber. Given that Uber is likely to be the future.
  7. Taxis cannot do surge pricing while Uber is allowed surge pricing.

How will this benefit the customer?

The license fee changes do not impact the customer one way or another.

  1. The mechanical inspections ensure that Taxi mechanical safety standards are maintained. Overall, the impact of this is not likely to be significant.
  2. Given that mostly immigrants drive taxicabs and they need not to be fluent in English can be a benefit to new entrants with poor English. However, for the English speaking local and international clients, it could prove to be progressively a challenge as current taxi drivers move out of the business due to diminishing returns and new ones enter with lesser financial incentive. This is likely to dilute the taxi experience for customers.
  3. Dropping the training requirements would progressively produce unpredictable quality of service across taxi industry. As time progresses, immigrant taxi drivers from different countries will bring their own practices into the market place in order to best serve their customers. It will be interesting to see how this impacts the customer.
  4. Dropping the requirement for snow tires seems to fly counter to the campaigns done so far to promote use of snow tires in winter. Not sure how this will impact Insurance premiums for the industry and private car users in general. It is logical to expect this to compromise customer safety in the winter months.
  5. People with special needs can fortunately still depend on Taxis. Some enterprising Uber driver will surely try to provide equivalent rides to carve a niche. So in this area, there will probably be no adverse impact.
  6. Once we live through a few years of surge pricing, we will get a better idea of the convenience at peak Vs. cost of convenience. In this area probably the Taxi experience will stay the same because they are not allowed surge pricing. However, this provides people with good cash flow, the convenience of a ride; a choice that they don’t have currently. This is similar to the concept of a two tier medical system that allows people who can afford to pay more and get a procedure done quickly instead of waiting in queue. Surely a convenience and choice for the customer.

How could this impact employment?

In Toronto, as per media reports, there seem to be around 5000 cabbies. The success of Uber will mean trading the fulltime livelihood of a good portion of these 5000 families for the part-time pocket money (and some full time income) of the Uber drivers. As a society, we need to make this choice. There is anecdotal evidence of how new immigrants had worked as cab drivers to educate their children and establish a new generation of educated tax paying Canadians. Clearly, this is one avenue that is now going to be closed for the Syrian refugees and potential new immigrants in future.

The Uber system is surely a new avenue for young underpaid office workers to supplement their income by driving part time. The money can come handy to pay their mortgage or student loan. The average Uber driver earned $3125 in the first year of operation as per the data released by Uber on its first anniversary. This opportunity did not exist earlier. So this is a sure plus point for the working poor who need to supplement their income. Update: As per a news item published in CBC, a typical Uber driver will net around $55 from every $100 fare collected after paying taxes and HST where applicable.

Success of Uber model will prove to be a vote in favor of this kind of arrangement. It will probably be inspirational for other areas of the economy. For example, If there were a Uber like app that can provide temporary workers, employers would surely be happy and can deliver greater profitability and productivity. They would be able to see the temp worker assigned to them and get them to work at the exact time they need. Surge wages would come in handy during Christmas and other holidays to motivate workers. Likewise, our medical system could benefit if we use a similar concept to provide doctors and nurses to hospitals that need them.

Conclusion:

Agreed technology will continue to progress. The commoditization of skill and sale to the lowest bidder will continue. This process will continue to transfer wealth from the 99% to the 1%. It is this process that now makes it essential for people to have more than one job to pay their bills. The government needs to come up with a policy framework to handle this. Governments should be aware that population growth is not going down and every year there will be more people looking for employment and retiring boomers looking for pension and health spends. The direction technology is moving is to increase productivity and reduce the need of labor. This will ultimately hit the government deficits unless the government finds a way to tax the 99% to recover funds and put it back into the economy or study the demographics and focus on family planning or tweak immigration policy.

The taxi industry also has a responsibility to use the latest technology and compete. I do not know any reason why the taxi industry cannot come up with similar application as Uber or re-organize themselves in the model of Uber and take the competition head on.

Similar struggle is going to develop between the Fintech companies and established banks. What we need is to pause and think about how we can continue with technological progress without causing mass unemployment and underpaid work force. The world population continues to increase while industries are aggressively pursuing greater productivity per capita. It stands to reason that if we blindly continue on this path, we will have a lot of hungry mouths to feed and social problems arising out of mass un-employment. We will revisit this struggle when driverless cars become mainstream and current Uber drivers cry foul.

We still have not seen the complete report. We have to wait and see how this plays out at city hall. I am optimistic that what comes out will be as balanced and forward looking as possible. Toronto as a world class city will not sell itself short.

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