Twice as fast, half as expensive

The debate about how to regulate ridesharing services such as Uber and Lyft – even whether to ban them entirely – has suffered from a surfeit of passionate assertion and a deficit of systematic data collection.

Ridesharing has been alternately criticized for its supposed mistreatment of ethnic minorities, people with disabilities, and the poor, and praised for providing those communities with an alternative to the inferior service they get from the regulated taxi industry.

A research team at BOTEC Analysis, with funding from Uber, set about to gather actual evidence about the relative performance of taxis and UberX in a sample of low-income neighborhoods in Los Angeles. (I’m on the author list, but only for editorial help: Rosanna Smart and Angela Hawken did the design and number-crunching, while Brad Rowe ran the data collection.)

The design could hardly have been simpler; we sent pairs of riders to call for taxi service or use an app to summon UberX for travel along pre-planned routes. The riders recorded how long it took – starting from the moment of picking up the phone or opening the app – before they were actually in a car and on their way, and also how much the ride cost, including a standard 15% tip for the taxi drivers and any premium charged under the Uber “surge pricing” system.

After each ride, the riders switched off; whoever took a taxi last time took an Uber next time. Our riders didn’t know that Uber had paid for the study.

The answer was clear-cut, and consistent across neighborhoods and days: summoning an UberX took less than half as long as calling for a taxi, and the trip cost less than half as much. UberX was also more reliable, with no very long wait times.

Even though Uber had no control over our data analysis or interpretation, the fact that Uber paid for the study makes some skepticism about our results natural and proper. We will happily share our data and methods with other research teams for re-analysis and replication.

It was not possible for a single study in a single city to answer all the relevant questions about ridesharing. Would the same relationship hold in other cities? Would it hold in the small number of very-high-crime neighborhoods we excluded in order to protect our riders? Would it hold after dark?

This study didn’t address questions about service for minority groups; though the neighborhoods we selected tended to have high concentrations of Latinos and African-Americans, we didn’t systematically vary the ethnicity of our riders. Nor could our study address the question of how taxis and ridesharing compare in handling riders with disabilities. And people who lack either a smartphone or a credit or debit card cannot use ridesharing at all, though they can use taxis. It would be helpful to know how often people lacking one or the other use taxis.

So this study ought to be the beginning of the scientific effort rather than the end.

But for now, anyone who asserts that ridesharing services disadvantage poor people or poor neighborhoods is making a claim that is not merely unsupported but actually contrary to the findings of the one systematic study of that question. The evidence in hand strongly suggests that UberX outperforms conventional taxis in serving low-income neighborhoods, at least in Los Angeles.

Full report here.

Author: Mark Kleiman

Professor of Public Policy at the NYU Marron Institute for Urban Management and editor of the Journal of Drug Policy Analysis. Teaches about the methods of policy analysis about drug abuse control and crime control policy, working out the implications of two principles: that swift and certain sanctions don't have to be severe to be effective, and that well-designed threats usually don't have to be carried out. Books: Drugs and Drug Policy: What Everyone Needs to Know (with Jonathan Caulkins and Angela Hawken) When Brute Force Fails: How to Have Less Crime and Less Punishment (Princeton, 2009; named one of the "books of the year" by The Economist Against Excess: Drug Policy for Results (Basic, 1993) Marijuana: Costs of Abuse, Costs of Control (Greenwood, 1989) UCLA Homepage Curriculum Vitae Contact: Markarkleiman-at-gmail.com

34 thoughts on “Twice as fast, half as expensive”

  1. anyone who asserts that ridesharing services disadvantage poor people or poor neighborhoods is making a claim that is not merely unsupported but actually contrary to the findings of the one systematic study of that question.

    I find this result unsurprising. The more important consideration, at least to me, is that Uber and other such services severely disadvantage taxi drivers. Of course lightly- or un-regulated services will win in a competition with highly, tightly regulated services. How could anyone doubt it?

  2. Yes, The Hersch, that's one of the key ingredient to objections to Uber. Uber wouldn't be so popular UNLESS it was cheaper and faster, so the study had its conclusion already written. And we all know how hard it is for a black man to catch an cab going uptown in Manhattan, or for any black person in Georgetown or Adams Morgan to summon a cab after dark (I've had to pretend to be the rider several times, in both cities, flagging down the cab, only to have black friends emerge from the shadows once it stops and I've opened the door.

    So the objections to Uber are closer to the objections to picket-line crossing or scab workers. It would be unaccebtable at any higher socieoeconomic level — let's say Alabama stopped requiring its Ob/Gyns to carry insurance, and so all the hospitals started offering $750 vaginal births, $1250 for a Caesarean, and luring out of state women with enormous savings. That would last for how long? Three days? Before various boards de-certified any physician participating in the plan, and the federal government passed the Safe Childbirth Act? Something tells me that lawyers wouldn't look kindly upon facing para-legals across the bench, who only charge their clients $75 per hour.

    It's just a dog-bites-man story.

    Also, of course, when you take a local cab,100 percent of the money stays in the city. With Uber, all the vig goes overseas, and so it's de facto outsourcing.

    1. Do you know how many cabbies are subcontractors for the cab company that owns the medallion? Most rent the cab/medallion for a fee and collect fares. The premise of the argument that most money stays local (money saved stays local and so does the amount paid to the driver) assumes or implies that most cabs are owner operated, which is simply dead wrong, very few can/could afford the medallion. So after you get past that "fact", what's left? And why does local matter?

    2. I think that in any medallion-rental system, the medallion rent is very likely not to stay in the city.

    3. Uber carries insurance for riders, and if states want it to carry insurance for its drivers it should certainly do so. But that wouldn't drive up the costs nearly enough to be close to taxi levels.

    4. Even if it wasn't for the issues that others pointed out, the money doesn't "stay in the city" – it goes into banks that invest it outwards, stores that spend it to import products from outside the city, etc.

  3. What’s the evidence that not having to pay rent for a taxi to a medallion-holder disadvantages taxi drivers?

    1. The medallions are key here. Cities limit the number of taxis to a greater or lesser extent, so medallions become valuable. One could imagine a free-market taxi system in which the number of medallions is unlimited, and anybody who passes a street knowledge test – they can be very demanding, as in London – can offer taxi service. It would be good to separate the cartel issue from the operating model.

      1. I'm not sure it is good to separate the cartel issue from the operating model. One of the reasons why taxis are so horrible is because of the cartel model. I don't really understand the regulation you are trying to capture in the street knowledge test (which so far as I can tell is a London feature not duplicated in most other cities). Do you have something against GPS that is sufficient enough problem to require more than 2 years barrier to entry?

        Similarly I'm not sure why a wholly captured taxi regulatory scheme is considered a great place to start with ride sharing. The regulatory/safety concerns are radically different when your phone tracks the exact driver and the exact path throughout the trip.

        An under-appreciated point is also that the whole thing is safer for the driver. The chances of delivering a long trip without getting paid vanish almost to zero, and the safety level of having the trip tied to a particular rider's cell phone is also immensely helpful. (Yes someone could steal a cell phone and use it to call an uber ride to facilitate robbing the driver, but compared to the ease of just calling a taxi for the same purpose it is a whole 'nuther world.)

        1. You are probably right that GPS has made The Knowledge obsolete. Still. there is a certain pleasure to be got from hailing a London black taxi with the assurance that the driver will know how to get you where you want to go.

        2. I've had Uber drivers who were former cab drivers tell me the feature they like best is not having to carry cash. That makes them, obviously, much less likely to get robbed.

          I think Uber is successful partly because of the regulatory issues surrounding cabs, and partly simply because it actually uses not-very-exotic technology in a way that cabs don't. Sorting out how much is one vs. the other is not easy.

      2. I agree with this. The medallion system is silly and destructive. The city's legitimate concerns – safety, insurance, gouging, and so on can be addressed without limiting the number of taxis.

        Does LA use medallions? If so, it would be worth replicating the study in a city that doesn't.

        1. I'm entirely with you on this.Has anyone compared the volume of knowledge to be acquired by London cabbies with that needed to earn a degree in medicine or pharmacy? The robots are coming for you too.James

    2. What sort of taxi licensing system does LA have? New York has a limited number of medallions that can be rented out, but I thought that was an atypical model.

      To my mind, the big advantage for the Uber operating model is that the driver can be somewhat assured of payment and reasonable behavior, even where stereotyping would suggest greater risk. This should ( in any behavioral econ model I know) reduce the impact of stereotypes of riders and neighborhoods on driver behavior.

    3. What's the evidence that not having to pay rent for a taxi to a medallion-holder disadvantages taxi drivers?

      That question addresses a straw man.

      Nobody has claimed that paying rent to a taxi medallion holder is an advantage to the payors. The claim is that the law enforces superior working conditions for taxi drivers compared to Uber drivers.

      Is that claim valid? Let's put it this way: I'm guessing that Uber won't be funding any studies on that subject any time soon.

      1. It doesn't, at least not in Chicago and New York City. In fact, it tends to make conditions exploitative for drivers – here's an interesting (if slightly polemical) piece about how a medallion-style system worked in Toronto.

        Which makes sense. In an "open medallion" system where anyone who passes a licensing test and meets the requirements can drive a cab, a driver can get in and out of the market more easily, and leave an abusive employer. But in a medallion system, he or she can't – if they leave the medallion holder's company, they lose their right to drive a cab unless they find someone else with a medallion willing to employ them.

        You usually see people argue that this matters because it somehow insures that drivers earn a minimum income. But aside from the fact that it doesn't do a good job of that in practice, it's a rather perverse way of going about it. Imagine if you capped the number of restaurants or stores that could be operated in a city in the interest of ensuring that anyone who opened a restaurant would be hypothetically guaranteed a minimum amount of customers because said customers would have little choice.

        1. In NYC at least, the number of unrented cabs at the medallion holder's garage is kept to a minimum by renting to anyone who shows up with legal ability to drive. Switching is common and there is a lot of concern about medallion holders colluding to keep wages (Payments) low.

      2. "The claim is that the law enforces superior working conditions for taxi drivers compared to Uber drivers."

        Not much of a claim. Here in Boston there is a medallion system. The Globe not long ago had a series on the conditions drivers work under. Whatever the purpose of the medallion law, it seems to do the drivers more harm than good.

    4. I'm at a loss as to what point you're trying to make. Very few cities have medallion systems, but in cities that do, the advantage an Uber driver has (in not needing a medallion) over taxi operators (who must pay for a medallion one way or another) seems obvious. It's just another factor in Uber being able to undersell taxis. Or are you suggesting that if taxi drivers would just become Uber drivers they would no longer be disadvantaged? Or that the existence of Uber will drive the cost of a medallion to zero?

  4. "Of course lightly- or un-regulated services will win in a competition with highly, tightly regulated services." Hmm. If so, shouldn't the burden of proof be strongly against the high regulation? It will lose in a competition, you agree, so there'd better be an awfully good reason for doing it that way.

    1. You are of course free to make this Libertarian argument that denies validity to fairness concerns. The laboring people who have been following, for decades-long careers, the long-standing regulatory regime of the taxicab industry–so what if they're ground under by competition from new actors who don't need to bother with those pesky rules and regulations? Let them adapt or perish, eh? Along with their children, right?

      1. ….so what if they're ground under by competition from new actors who don't need to bother with those pesky rules and regulations? Let them adapt or perish, eh?

        Actually that is exactly what is going to happen to Uber drivers. Uber is one of many huge companies working seriously on driverless cars. In the not to distant future the car you summon from your phone will arrive sans a driver. And getting about will be cheaper yet.

        Today's Uber drivers are today's Cabbies are tomorrow's buggy whip makers.
        And as far as I know, there is no fourth law of robotics stating that:

        4) No human being shall lose their livelihood to a robot.

  5. Systematically varying the ethnicity of the riders won't matter unless that information is somehow available to the driver or dispatcher (perhaps by accent or speech pattern on calls?) For Uber, at least in the current early-adopter phase, there's also a pretty strong demographic pre-qualifification effect that makes it extremely unlikely that the driver will be stiffed or otherwise victimized.

  6. First, I was in NYC last weekend.

    My wife and I took Uber from our home to the RR station in Baltimore and back. Great service. But Baltimore has lousy (and fairly expensive) taxi service. In NYC, we took Uber from the RR station to the hotel and then one more time to a restaurant. Found the service slow (i.e., too long to wait for service) and somewhat expensive. Thereafter we took cabs everywhere. NYC, especially in Manhattan, has great taxi service.

    Second, however, my objections to Uber are a little different. My law practice often deals with questions of worker classification. Uber's success depends on its "workers" being classified as independent contractors. Thus, my sense of Uber is that, to some degree, its business plan is predicated on having its employees (i) not being covered by worker's comp. (thus "externalizing" the costs of worker injuries) and (ii) simply not paying or underpaying their taxes, essentially defeating the withholding tax system, including the part that requires the the employer to pay one-half of the employees' FICA. If all workers were "economically rational," the amounts that they make from Uber would grossed up to take into account the costs they would incur by covering themselves with worker's comp. insurance and paying all of their taxes including SECA/FICA. If you believe that fairy tale, I have some valuable real estate to sell you.

    1. "Thus, my sense of Uber is that, to some degree, its business plan is predicated on having its employees (i) not being covered by worker's comp. (thus "externalizing" the costs of worker injuries) and (ii) simply not paying or underpaying their taxes, essentially defeating the withholding tax system, including the part that requires the the employer to pay one-half of the employees' FICA."

      Your sense is wrong. A huge percentage of taxis play the same contractor game by forcing them to rent either the medallion (in places like NYC) or the car (everywhere else)–they aren't paying worker's comp or any of the taxes. So that isn't a distinguishing feature between Uber and taxis. Uber pay is all reported to the IRS because it is 100% electronic payments, unlike taxis. So in terms of the IRS actually getting paid in the medium run, I would almost certainly bet on them doing better with uber.

      Taxi drivers in most cities get paid very close to minimum wage. Uber drivers even netting out costs (often which end up being paid by taxi drivers anyway, see renting the car and/or medallion) make well over minimum wage.

      The reason Uber is a huge threat to taxis is because they are cheaper for the consumer, better for the consumer, AND better paying for most drivers.

      1. The 1099 is hardly a replacement for withholding and a W-2. You may be correct that Uber's business plan is not different from that of ordinary taxi services w/respect to workers' comp. and taxes. But that only means that both business plans rest on the same economic premises. And, there are significant differences in liability coverage between taxis and Uber vehicles when they are not carrying passengers. See here: http://onforb.es/1JeAAGM

        Unless one flunked math in like the 8th grade, there is no way that one could conclude that Uber and Lyft "are cheaper for the consumer, better for the consumer, AND better paying for most drivers." Rather, there is a hidden cost or societal benefit (e.g., tax non-compliance, limited liability protection, etc.) that is ignored and thus omitted from the equation.

        1. One actually could conclude that, if one counted the non-productive payments taxi drivers make to medallion owners.

          Clearly, if the cab driver and the Uber driver face the same operating costs, but the cab driver has to rent the medallion, the Uber driver has an inherent advantage. Notice that these are not the same as the Uber cut of the fares, because Uber provides an actual service to its drivers, while cab drivers must still bear the expense of dispatchers.

          Still, my few conversations with ex-cabbie Uberites suggest that they, at least, prefer Uber not because it provides much more income, but for other reasons – flexibility and safety being mentioned several times.

    2. When I'm in Manhattan, I take the subway or walk. I very occasionally use a bus. I only use Uber or cabs where public transit is poor or nonexistent, or when I'm in too much of a hurry and don't have my car, which is rare. From my house, a cab to the airport runs around $25 with a reasonable tip. Uber is half that much, and that was before they lowered the fares by 15% in my area. But the bus is still $2 each way, which is less than the extra calories I would require if I walked (very impractical as it's nearly five miles along a very busy road in an area that often lacks sidewalks).

  7. And people who lack either a smartphone or a credit or debit card cannot use ridesharing at all, though they can use taxis.

    I wonder how big of an issue this is. People too poor to have a smartphone or credit card might be too poor to regularly take taxis versus public transportation.

    1. Probably you should visit NY, especially Bed-Stuy and Harlem. Many kids take taxis to get across gang territories, and it represents a significant portion of the costs of living poor. Rarely do the people who need to do this have credit or debit cards, due to bank regulations.

  8. Uber and Lyft are not ridesharing, they are car services. In ridesharing, the driver is going a certain way for his/her own reasons and is willing to take riders in exchange for a share of expenses. With taxis, Uber, or Lyft, the driver is taking you where YOU want to go for a fee and has no interest in going there him/herself.

  9. My name is Ana I took Uber from our home to the RR station in Baltimore and back. Incredible administration. Be that as it may, Baltimore has lousy (and genuinely costly) taxi administration. In NYC, we took Uber from the RR station to the lodging and afterward once again to an eatery. Found the administration moderate (i.e., too long to sit tight for administration) and to some degree costly. From that point we took taxis all over the place. NYC, particularly in Manhattan, has extraordinary taxi administration. Visit: http://lyftubernewsletter.com/uberx-part-time-job… now for know about part time job. Thanks!

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