24 October 2016
Taxi license holders, not the drivers, reap most of the benefit from fare hikes. Photo: HKEJ
Taxi license holders, not the drivers, reap most of the benefit from fare hikes. Photo: HKEJ

Why taxi drivers are not excited about fare increases

Hong Kong’s taxi unions are seeking government approval for another increase in fares.

Intriguingly, the latest application got only lukewarm support from taxi drivers, and some are even against the idea.

The reason taxi drivers aren’t excited about a rise in fares is that the increase in revenue goes straight to the pockets of taxi license holders, not theirs.

Back in the 1970s and ’80s, when the government still issued taxi licenses regularly, many taxi drivers were themselves license holders.

Most of them would mortgage their licenses and paid back the money by installments.

As long as interest rates remained stable, a taxi driver would benefit from the ownership of his license.

However, when the government ceased issuing taxi licenses in the early ’90s, they suddenly became a hotly sought after commodity, and their prices began to skyrocket.

Many taxi drivers were more than happy to sell their licenses to investors at a premium.

As a result, most taxi licenses on the open market have gone into the hands of a few cash-flush investors and speculators.

And most taxi drivers have literally become employees, as they rent their vehicles from license owners so as to make a living.

The changing ownership of taxi licenses has completely altered the operating environment for taxi drivers, who are now at the mercy of the oligarchs who call the shots in the taxi industry.

The only concern of these oligarchs is how to maximize their profits and boost the value of their licenses — hence the relentless fare hikes and soaring rents for taxis over the past decade.

As far as taxi drivers are concerned, increasing fares might work against them, because it puts off customers.

This is not a good time for a fare hike, either, as the city’s economy is slowing down and there is no sign of demand for taxi service outstripping supply.

Worse still, license owners will often use a fare rise as an excuse to increase the rent for the taxis.

The reason I am opposed to further taxi fare increases is simple and clear: it will only benefit those blood-sucking investors and speculators who own the licenses, while taxi drivers and passengers are the losers.

I believe that if the administration really wants to improve the livelihood of taxi drivers, it should consider imposing a fuel surcharge on passengers, because fuel expenses constitute a major portion of taxi drivers’ operating costs.

For example, once fuel prices exceed a certain level, then the surcharge will automatically be triggered.

The amount of surcharge passengers will have to pay should vary with the distance they travel in the taxi.

This article appeared in the Hong Kong Economic Journal on May 19.

Translation by Alan Lee

[Chinese version 中文版]

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