The Illinois State Legislature has recently passed HB 4075 in the name of “Consumer Protection” which is currently awaiting the Governor’s signature. The bill is specifically targeted at ridesharing services like Uber, Lyft & Sidecar.
For those who may be unaware, Uber is a popular app in metro areas which started out as a way to call a taxi from their smart-phone app, as long as the driver was signed up with the service. They’ve since expanded to “uberX” which allows regular people with regular personal vehicles to be certified by Uber and drive people around if they choose the uberX option. Consumers can choose to use uberX, use Uber to call a cab or take their chances getting a cab the old fashioned way.
Personally, I’ve used uberX at least 20 times and I’ve never had a problem. The vehicles are all cleaner than any cab, the drivers are friendlier and I feel safer than I would riding in a cab. Not to mention I’m always surprised at how cheap it is.
What Is The Likely Effect Of The New Law?
The effect, and likely desired goal, of the law would be to greatly reduce or eliminate the number of uberX drivers, A.K.A. the taxi industries competition. This will mean one less choice for Chicago consumers and higher costs for getting where you want to go. Other states will likely follow Illinois lead, so this is not just an Illinois or Chicago issue. The unfortunate thing about this bill is that the only group complaining about ridesharing companies is the taxi industry. Customers love the service. As is often the case, special interests lobby the government for preferential treatment for their constituents at the expense of everyone else. We’ll see if they succeed this time.
While the media loves to highlight stories of negative incidents involving ridesharing services while calling for more regulation, they conveniently don’t report on the thousands of satisfied customers, jobs created and money saved. Governments pass laws under the guise of protecting consumers, yet bad things still happen, even with existing government regulation. The only answer seems to be more regulation. Maybe with enough regulations, nothing bad will ever happen.
What’s In The News Lately?
At first glance, getting into a strangers car seems very dangerous. There have even been instances of Uber drivers involved in fatal accidents. Cabs must be safer, right? They’re regulated. Unfortunately, people in Chicago have recently been killed while riding in a taxi or by a taxi. Sadly, regulation didn’t save these people. There have also been several notable instances of Chicago cab drivers drastically over-charging customers, in spite of the fact that they are licensed by the government. You can read more about those two cases here and here. Given how all ridesharing services (and not the drivers) automatically charge a credit card on file, this isn’t even a possibility with these services.
Some will argue that regulations also protect pedestrians and other motorists who are not uberX passengers. I fail to see how these drivers are any different from any other drivers with regard to safety of others. They must still have a drivers license, must still follow traffic laws and are still responsible in the event that they harm a passenger or pedestrian, whether intentionally or unintentionally.
So how will HB 4075 protect consumers?
Here are the key provisions:
- Drivers must have a Chauffeur’s license (2 week class, i.e. 2 weeks with no income — not worth it to drive people around in my spare time as many drivers do)
- Driver must have commercial Insurance (Uber already covers up to $1,000,000 if the drivers’ insurance does not)
- Limits the rate charged to the maximum rate of a cab (better for those who can get a ride at peak times, but fewer will be able to do so)
- Limits a shift to 10 hours (compared to 12 hours for cabs)
- Must have special license plates (I feel safer already)
- Vehicle must be less than 4 years from the date of manufacture (since when are vehicles over 4 years unsafe?)
- No airport or convention center pickups (let’s get as much as we can from the tourists)
- At least 5% of vehicles must be wheelchair accessible (if there is a market for this, let people choose to serve it – don’t force them)
- Holds ridesharing drivers to a higher standard than taxi drivers while limiting income (via hours and rate caps) while limiting the market they can serve (airports etc.)
- Adds compliance costs for companies like UBER and drivers (creating zero value for society)
While some (definitely not me) would argue that there are additional consumer benefits from this law, what are the certain costs and unintended consequences?
For Or Against?
Ultimately, this kills jobs. Uber won’t be as successful and won’t need to fill as many white-collar jobs in the city. (Other markets will likely follow Illinois’ lead.) Fewer people will be able to make a living or supplement their income by providing a service people value. (Remember that taxi’s must have a medallion and the number of those is strictly limited, thus the number of available jobs is strictly limited even if there is excess demand.)
Some would-be uberX customers will stay home, either because the additional cost of the cab (which could easily be an extra $20 or $30 for a round trip) will be more than they care to spend on an evening or because it’s harder for them to actually find a cab even if they are willing to pay the additional cost. If more people are staying home, this has an obvious detrimental impact on the local economy beyond just the lost income to uberX drivers.
Without an adequate supply of rides home late at night when bars and clubs close, expect to see more drunk people walking the streets where they have an opportunity to be a nuisance to others or be victimized themselves. (Remember there’s only so many cabs to go around.)
A lack of uberX could mean more crowded streets rather than less crowded. Pretty much the only justification for limiting taxis is to prevent overcrowding on streets. The same logic would extend to ridesharing drivers. But in the long-run, more transportation options would mean fewer residents choosing to own a vehicle of their own, opting to instead take low cost and plentiful ridesharing options.
For example, I currently live in Chicago and have a car. If I did not need to drive to work, I would strongly consider not having a car as long as ridesharing services are an option. If I have to take my chances getting a cab when I want to go out, I’ll have to instead drive and pay an arm-and-a-leg to park anywhere, which means I have a car which sits there taking up space, most of the time. Not to mention I’d save a lot of money, which could be spent locally.
If you are a fan of personal choice, feel free to sign Uber’s online petition urging the Governor of Illinois not to sign the new Bill into Law. (Even if you’re not from Illinois.)