THE CAMBRIDGE cab drivers who went on strike Monday are victims of government policies — just not the ones they are targeting with a public protest. The striking cab drivers directed their ire at city hall for failing to restrict car-sharing services like Uber and Lyft, which have filled a niche that cabs once largely had to themselves. Blocking traffic on Massachusetts Avenue, they demanded a crackdown on the upstarts they blame for stealing their business and destroying the value of taxi medallions.
But that’s an unreasonable demand. Regulation doesn’t exist to protect one sort of transportation service over another; it’s there to protect consumers. Once upon a time, automobile cab drivers “stole” business from horse-drawn carriages. The government didn’t try to hold back the tide of change then, and it shouldn’t now.
What has made the disruption caused by Uber and Lyft much more painful than necessary is the existence of the medallion system, a bad public policy that has boomeranged on the cab drivers that it once protected. The strike on Monday should be a message to policy makers to avoid creating such a cartel again, and to unwind those that exist now.
Medallions limit the number of vehicles that can pick up street hails in a municipality; they never expire, and can be sold. When cabs were the only practical choice for passengers, those medallions became a valuable commodity, and a huge barrier to competition. Anyone who wanted to enter the taxi business needed to either work for a medallion-holder, or save up money to buy a medallion themselves. Some cab drivers talk about their medallion as their nest egg — an asset they were expecting to sell when they retired.
Taxi drivers technically still have the privileges that come with a medallion — nobody else, including Uber, can pick up street hails. But smartphone apps have made that advantage almost irrelevant. Transportation is hardly the only sector that technology has upended. In a normal transition, taxi drivers could just become Uber or Lyft drivers. But that wouldn’t save the value of their medallion — the investment on which their future may depend.
The message to policy makers should be loud and clear. Employment shouldn’t be subject to arbitrary restrictions. The cap on medallions hurt consumers when cabs were the only game in town, limiting competition. Less obvious was how it put the medallion-owners themselves at risk too, making them uniquely vulnerable to change. The medallions also created a built-in political constituency against any change that might diminish their value, whether or not that change coincides with the public interest. When, and if, technological change puts the value of liquor licenses in jeopardy, will cities have to replay this drama all over again?
Smarter regulation in the future, though, would be cold comfort to the taxi drivers blocking traffic in Cambridge now. The plight of the immigrant cabbie who scrimped and saved for a single medallion, and has no other retirement savings, is real. One could just say those drivers made a bad bet on the permanence of the protected cab industry, and now have to live with the consequences. But the government set up the system that has caused financial ruin for some medallion owners. Some type of limited buyout provision for medallion holders might be fair; it would certainly be a far better policy response than stifling innovation.