To drive a taxicab in New York City, a driver must own or lease a medallion, which shows the taxi is licensed to pick up passengers hailing cabs. With a fixed number of medallions issued, the city’s seen high demand for them since the system was introduced in 1937; in 2013, a medallion went for more than $1 million.
It took fewer than five years for ride-booking services like Uber to disrupt the taxi industry. When New York taxicabs lost the business of riders who chose to get around through ride-booking rather than flagging down cabs, they also lost drivers, whose expected fare revenue decreased with the loss of business. Many drivers left the medallion system in favor of Uber, which offered flexibility and the ability to use personal vehicles that weren’t subject to the same numerous regulations the New York City Taxi and Limousine Commission imposed on medallion taxis.
The new organization came with its own challenges; for instance, Uber would sometimes cut fares suddenly, but many drivers adapted, focusing on working during the times of highest customer demand, when fare prices rose.
App-accessed ride-booking services brought convenience to the user and massive change to the automobile transportation industry. Uber and similar companies have not just redefined how people get from Point A to Point B, they’ve redefined the company-employee relationship. Time will tell if the drivers fare better financially.
The preceding is adapted from Darden Professor Peter L. Rodriguez and Research Assistant Randy Johnson’s article “Ride-Booking Redefined the ‘Rider’ and ‘Driver,’” which appeared in the 13 December 2015 issue of The Washington Post as part of the Darden School of Business/Washington Post “Case in Point” series.