Taxicabs

Industry Snapshot

The majority of the 7,650 establishments operating in the taxicab industry in 2010 were small; not only did 94 percent employ fewer than 25 people, but more than half employed only two to four people. The majority of the drivers were either independent contractors licensed through and renting their vehicles from taxi companies or owner-operators affiliated with a taxi company or association.

In the 2000s, the industry continued to face competition from limousine services, executive sedans, and airport/hotel shuttle services. To compete, taxi services offered online bookings and vehicles with extra features such as televisions. Total industry revenues in 2009 reached $1.7 billion, with Las Vegas, Nevada, and New York City accounting for the highest percentage of revenues (12 percent and nine percent, respectively).

Organization and Structure

Most taxi companies follow a similar organizational pattern. Managers--sometimes the company owners--run the business, hire drivers, and perform other administrative duties. Dispatchers take calls and assign cabs to passenger locations. In large companies, some dispatchers work in two-person teams, one taking incoming calls and the other dispatching taxis. The position of dispatcher once represented a promotion awarded to experienced cab drivers, whose familiarity with the city best qualified them for the job. However, the increase in computer-based dispatching in the early 1990s prompted cab companies to favor computer skills over specialized knowledge of local geography when filling the dispatcher position.

Regulation of the U.S. taxi industry varies from city to city. While almost all cities have some form of licensing requirements, larger urban areas have the strictest regulations. In New York, for example, the number of licenses or "medallions" allotted the industry remained at 11,787 from 1937 until 1996. In 1996, 133 additional medallions were auctioned at prices between $172,000 and $221,000. In 2005, medallion prices reached record-high levels of $336,000 (individual) and $379,000 (corporate). By the late 2000s, 12,779 yellow medallion taxis were in New York City. In addition, applicants for a taxi driver's license in New York are required to complete a 40- to 80-hour training course and pass an English exam as well as a final exam. Boston and Chicago were two other cities that used the medallion system, and in 2010, San Francisco was considering selling medallions in order to balance the city budget.

In most cities, regulations focus on fares charged to customers, with rates assigned to designated zones of the city. Seattle and Phoenix experimented with deregulating their cab industry in 1979 and 1982, respectively. Fare limits were imposed only on trips to and from airports, to protect tourists from unscrupulous drivers. After some initial price wars, cab fares eventually stabilized in Phoenix, but Seattle reregulated its industry in 1996, following years of declining service quality. The new regulations called for dress codes, standard per-mile fees, mandatory geography and language testing for drivers, and age limits on vehicles.

Government incentives for alternative fuels in the latter 1990s provided ample opportunity for city and county governments to convert their vehicles to energy-efficient fleets. In 1998, Ford Motor Company began offering $5,000 incentives to taxi operators who bought Ford's compressed-natural-gas Crown Victoria taxi vehicles. The biggest market was New York City, where more than 105 vehicles were sold.

With the trend toward energy efficiency, new products began to emerge. A joint venture between British, Belgian, and American companies built electric-powered taxis starting in 2000 for use in New York City. London's Zevco (Zero Emissions Vehicle Company) was the world's first company to launch the first fuel-cell powered taxi. By 2002, Honda was in on the act, with natural gas-powered Civics joining fleets in Connecticut after a two-year ban. In 2003, compressed natural gas was the clear winner in terms of passenger satisfaction, causing problems for cab companies that did not offer this option.

San Francisco was one of the first U.S. cities to use hybrid taxis, which combined traditional gas engines with electric power to increase mileage and reduce emissions. In 2005, the city introduced 15 Ford Escape Hybrids into its fleet. In 2007, it initiated the Clean Air Taxi Grant Program, which offered a $2,000 per-vehicle incentive for taxi companies to use alternative fuel vehicles. New York followed suit, and by the late 2000s, it had replaced many of its traditional taxis with hybrid and clean fuel vehicles. Other cities, including Chicago, Illinois; Boston, Massachusetts; and Arlington, Virginia, were moving toward using hybrids as the first century of the twenty-first century drew to a close.

Current Conditions

The trend toward more environmentally friendly vehicles in the taxicab industry continued in 2009 and 2010. By March 2009, for example, 57 percent of San Francisco's taxis were hybrids or compressed natural gas vehicles. At the same time, of the 13,237 taxicabs operating in New York City, 2,019 were hybrids and 12 were clean diesel vehicles, according to The New York Times.

Another trend was that, in an effort to compete with the rising popularity of other forms of transportation, taxi services in large markets were equipping their vehicles with high-tech and comfort-enhancing features. For example, televisions were installed in some taxis. Far more than providing entertainment for the passenger, these in-car TVs offered opportunities for advertising to an audience that could not change the channel. In 2010, the New York taxi industry was playing with other ideas, such as cloth- instead of vinyl-covered seats, swiveling seats, safer partitions between driver and passengers, and doors that flashed LED lights when open (to warn passing bicyclists).

In the United States in 2010, the taxicab industry was very fragmented, with no one company dominating. One of the larger companies, however, was Louisville Transportation Co., which operated as Yellow Cab, Checker Cab, and Cardinal Cab.

Workforce

About 7,650 taxi service establishments employed 54,900 workers, according to Dun & Bradstreet's 2010 Industry Reports. Until the mid-1970s, drivers were usually employees of cab companies, with salaried jobs and standard benefits. However, in the late 1970s, most companies began hiring drivers as independent contractors. Under this arrangement, drivers paid a flat per-day fee to the company and paid for all expenses out of their take from fares but did not receive employee benefits such as insurance. In another, similar arrangement, some drivers earned a percentage of total fares, plus tips, which averaged 15 percent of a fare. Work hours varied, with full-time drivers often working as many as 12 hours a day, six days a week.

Taxi driving is one of the most dangerous occupations in the United States. Studies performed by the National Institute for Occupational Safety and Health in the 1990s indicated that in the U.S. workforce, cab drivers were at the greatest risk of being killed on the job. These studies reported that from 1990 to 1992, 22.7 out of every 100,000 cabbies were murdered while performing work-related duties. In 1998, 82 taxi drivers lost their lives on the job, roughly 60 percent from assault and violence and 40 percent from transportation accidents. Another study by Taxi Library showed that between 1980 and 2007, the average number of taxi drivers who were murdered was 38.

Research and Technology

In addition to the efforts to incorporate more alternative-fuel vehicles into taxi fleets, several other innovations were changing the way businesses operated. By the late 2000s, for instance, many taxicabs were equipped with GPS systems--although the initial introduction of these in New York City cabs caused a strike among drivers who claimed it was an invasion of privacy. These satellite dispatching systems--in which a satellite identified a cab's position to within 10 feet and sent computerized dispatch instructions to a terminal on the cab's dashboard--allowed more efficient assignment of cabs to passengers and offered customer service features such as a customer "call out" system, in which a computer calls the customer and gives an estimated time of arrival and a computerized rate quotation. In 2010, the New York City Taxi and Limousine Commission utilized the GPS systems in the city's taxis in a different way; by checking the electronic trip data, the Commission determined that more than 36,000 taxi drivers had overcharged passengers a total of more than $8.3 million over a two-year period by manipulating the fares.

By the late 2000s and early 2010s, many taxis were also equipped with machines that accepted debit and credit cards, and some offered touch-screen video monitors that displayed local news and information.