A spur of taxi driver suicides in New York City drew people to look at what was happening inside the industry. Crippling debt taken out by the drivers to afford taxi medallions—which are required to drive a taxi and of which there are only 13,000—was found to be the culprit.
The Democratic-led city government inadvertently inflated the prices with misguided policy to the tune of $1.3 million per medallion before the artificial price bubble popped. Even after the bubble popped, the price fell to only $250,000. This exorbitant price forced taxi owners to take out loans to afford the medallions and so into dire financial situations.
In response, congresswoman Alexandria Ocasio-Cortez (AOC) called for a bailout, saying taxi drivers are in “manufactured financial indentured servitude.” One taxi union executive claimed taxi driver advocates “aren’t seeking a bailout, but city-funded debt forgiveness,” according to the New York Post. Regardless of what it is called, it involved taking money from one group to give to another.
Ultimately, the medallion system is a form of occupational licensing intended to protect the industry, its workers, and its consumers. However, this is all done at the cost of “consumers and workers [outside the cartel].”
Normally, an individual or business has to earn a consumer’s trust to earn money and maintain a good track record to stay afloat. Businesses that don’t suffer as a consequence. In theory, government licensing tries to guarantee a certain level of quality and expertise; if a person is licensed, they are at least competent—or so runs the argument.
In reality, it takes away opportunity from some people to offer their service. By requiring people to navigate and comply with red-tape, the government prevents or makes it harder for people to freely pursue the career they want. Concurrently, consumer choice is limited in its capacity to determine the best product, as licensure provides faux credibility in place of a quality product and good business practices.
Licensing affects more than just NYC cab drivers. “More than one-quarter of U.S. workers now require a license to do their jobs,” according to a study by the Council of Economic Advisors. The report also found that government licensing costs the nation millions of jobs and raises consumer expenses by billions of dollars.
Another profession that was (and to some extent remains) particularly burdened by licensing was African-style hair braiding. Despite being a safe practice, one needs a beautician license in certain jurisdictions. As economist Walter Williams wrote, in some states, this meant thousands in tuition and up to 2,000 hours in cosmetology school. All that just to earn money braiding hair.
Abolish the Medallion, not the Debt
While the taxi unions and AOC are making it seem like a bailout is necessary to help owner-drivers, only 18-percent of medallion owners drive the cabs themselves. Most are owned by large fleets. As noted on the Foundation for Economic Freedom’s website, “the vast majority of those who find themselves underwater financially because of the burst of the taxi medallion bubble are the people who created that bubble in the first place.”
The New York Times reported that when the medallion prices crashed lenders called on the medallion owners’ debts, sometimes filing lawsuits. Bailouts remove the risk involved with taking out loans to purchase medallions.
The system is broken, but AOC making you foot the bill isn’t the solution. Abolishing the medallion system is the best way to ensure this doesn’t happen again. The system has benefited the city government along with taxi cartels and unions while making it nearly impossible to be successful in the ride industry for others. Without government regulation, no one would have had to pay $1.3 million to drive a cab.
The views expressed in this article are the opinion of the author and do not necessarily reflect those of Lone Conservative staff.