Trucking industry accelerates, taxicabs stuck in low gear

Taxicab service remains tightly-controlled even at times of high demand, such as the holiday season

Link to publication: http://www.conferenceboard.ca/e-library/abstract.aspx?did=5897
News release 14-58

OTTAWA, Dec. 17, 2013 /CNW/ - The trucking and taxicab industries have travelled two different roads in recent decades, reveals a Conference Board of Canada study, We Have Been Here Before: Supply Management in Transportation.

Deregulated in the 1980s, for-hire trucking has since become larger and substantially more productive. The taxicab industry, meanwhile, remains stuck in a restrictive and inefficient system.

"There have been winners and losers in the Canadian for-hire trucking industry since deregulation. But the sheer magnitude of the productivity gains, which have contributed to lower prices for shippers, suggests that there have been more winners than losers," said Vijay Gill, Director, Policy Research.

"In contrast to the influence of shippers who use trucking services, consumers' voices are relatively weak when it comes to taxicab services," added Gill. "Politics favour the status quo — regulation is fragmented across many local jurisdictions and many customers are merely visitors who have no stake in local politics. As a result, the inefficiencies built into the taxicab market lead to higher prices, more travel when cabs are empty, and increased congestion and environmental costs."

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HIGHLIGHTS

• A substantial portion of the savings from productivity gains in trucking were passed on to customers in the form of lower prices.
  
• The taxicab sector is largely a "supply management" system.
  
• High taxicab licence values increase costs of taxicab trips and encourage the creation of a black market for taxi service.

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The taxicab sector is largely a "supply management" system. The production/licencing quotas, price controls and trade or jurisdictional barriers in the taxicab industry are similar to those that govern the production of milk, chicken, turkey, eggs and hatching eggs.

The values of taxicab licences in Canada are heavily influenced by the supply of new licences granted by the local municipality. The City of Winnipeg has not issued new taxicab licences in decades and has one of the highest license values in the country. The highest license values are found in the City of Vancouver, which proportionately (to population) has far fewer licences in circulation than any other municipality. In Vancouver, it is difficult to find a taxicab in the downtown core on Friday and Saturday nights partly because of the very low number of licences in circulation.

The Toronto experience provides an example of an attempt to liberalize taxicab licences. In 1999, the city created an Ambassador plate, which, unlike a Standard plate, cannot be bought and sold in the open market or leased to other drivers. A Standard plate was valued at $80,000 when the Ambassador plate was introduced. Between 1999 and 2005, annual Standard plate values never exceeded $100,000.

Since 2006, no new Ambassador plates have been issued. Standard plate prices more than doubled to $210,000 in 2011. In June 2013, the City of Toronto proposed a package of reforms to its taxicab industry.

In the Canadian for-hire trucking industry, the launch of new carriers and increased levels of competition brought some instability following deregulation. Ultimately, helped by productivity gains that averaged 1.7 per cent per year, the industry grew substantially. Meanwhile, shippers benefited, as prices dropped in real dollar terms.

This publication is part of the Conference Board's research for the Centre for Food in Canada on reform options for Canada's supply-managed agricultural commodities. The report, Reforming Dairy Supply Management: The Case for Growth, will be published in January 2014. The Conference Board will host the 3rd Canadian Food Summit: From Strategy to Action in March 2014 in Toronto, where it will unveil the Canadian Food Strategy.

SOURCE: Conference Board of Canada

Yvonne Squires, Media Relations, Tel.: [phone] ext. 221
E-mail: [email protected]