New York taxi drivers are suffering, and Uber and Lyft have taken the blame. But city government has also failed its drivers.

A line of taxis during rush hour in Times Square. Photo courtesy of Felix Morgner.

It is difficult to picture Manhattan without taxis. The city’s yellow cabs have become a symbol for everything urban—a glance down Broadway or around any Times Square gift shop reveals just how ingrained they are into the culture of New York City.

Yet, in recent years, the taxi industry has floundered. In 2018, taxis made up just 6 percent of the total business traveler ground transportation market, down from 37 percent in 2014. Most people point blame at ride-share companies like Uber and Lyft, which have undercut the market with lower prices and higher occupancy.

However, the woes of thousands of taxi drivers across the city aren’t the result of market competition alone. Decades-long policies such as a cap on taxi permits have contributed significantly to the decline of this iconic New York industry and massive debt of its drivers—and city government is refusing to take the blame.

MEDALLIONS, MORTGAGES, AND A MOUNTAIN OF DEBT

In order to own and operate a taxi, drivers need to purchase a medallion: a transferable permit from the Taxi and Limousine Commision, the agency that regulates both the medallion taxi and ride-sharing industries in the city. In 1937, The New York City government set a fixed number of these taxi medallions at 13,587, a figure that remained unchanged even as New York added millions to its population. Historically, the medallion was seen as a smart investment for working class families and a path towards the middle class.

But much has changed. At the height of the market in 2014, drivers would have to pay $1.3 million just to enter their occupation. By comparison, the average driver in New York makes just $34,000 a year. The city profited immensely from the height of the market, selling 350 medallions in 2014 and raking in $359 million. A subsequent drop in pricing in the past six years, coinciding with the rise of ride-share apps, left many drivers in hundreds of thousands of dollars in debt. Today, a medallion costs between $120,000 and $150,000. Yet, the average outstanding debt for cab drivers who invested in a medallion is almost $600,000.

Banks and loosely regulated private lenders were eager to write loans for hopeful medallion owners. While taxi drivers’ incomes remained stagnant through the medallion price fluctuations, the lenders became rich. The New York Times found that a handful of lenders artificially inflated medallion prices from 2002 to 2014. Some even overpaid for medallions themselves to drive up the price. By using business loans, which are subject to fewer regulations, lenders could gain hundreds of millions of dollars before the bubble burst.

These predatory loans are difficult to prosecute. While the Taxi and Limousine Commission has significant power over taxi regulations, it is unclear if the predatory lending methods were technically illegal.

Through all this, government agencies turned a blind eye towards poor returns on medallion purchases and ignored reports of an inevitable disaster. Former New York City Mayors Rudolph Guiliani and Michael Bloomberg, eager for more revenue, both instructed the Taxi and Limousine Commission to promote the general sale of medallions. The Commission enticed hopeful taxi drivers with misleading descriptions at public auctions, deeming medallions a “solid investment with steady growth” and driving up the price with bidding wars. At one point, the investment was touted as superior to the stock market. Government agencies simultaneously reduced oversight of the medallion market and exempted it from certain regulations. Current Mayor Bill de Blasio has largely upheld Guiliani and Bloomberg-era policies.

For Bhairavi Desai, the executive director of New York Taxi Workers Alliance, a union representing taxi and ride-share drivers, the predatory lending scheme solidified broader inequities between drivers and lenders.

“[T]the rich got richer and the city raked in profit while working-class immigrant drivers of color were swindled and pushed into financial despair,” Desai said in a NYTWA press release last May.

Although a federal court ruled unanimously against taxi driver bailouts in Chicago, some New York politicians argue that drastic measures to provide relief are a moral responsibility, considering the government’s role in the price inflation of medallions.

At a 2019 rally for a taxi driver bailout, City Councilman Mark Levine, a progressive representing Northern Manhattan, urged action in the form of immediate financial relief.

“We are directly responsible for the inflation of medallion mortgages … and therefore we have a moral responsibility to repair the damage that’s been inflicted on these drivers, and their families, and their communities,” He said. Councilman Levine went on to more directly blame city government: “The city itself is culpable. The city itself profited from this bubble. The city itself pumped up this bubble. The city itself was asleep as thousands of drivers entered into a world of financial hell which is ruining their lives and those of their families.”

But more broadly, the city has been slow to action. Mayor de Blasio does not support a taxi bailout.

Though legislators have been eager to single out ride-sharing companies for the harm they have done to taxi drivers employed by the city, they neglect the predatory lending that devastated drivers before these companies existed. In 2018, New York City Council introduced a cap on ride-sharing vehicles, a move which proponents claimed would alleviate the worst of the taxi industry’s woes. Yet, while the rise of Uber and Lyft is certainly a factor, owner-drivers’ crippling debt is even more closely tied to their medallion mortgages than to industry competition. The council has taken few efforts to alleviate crippling medallion debt since the 2018 vote. Despite the ride-share cap, taxi driver’s woes have only increased, suggesting the taxi industry cannot be saved by hindering competitors alone.

Taxi workers demonstrate in support of a bailout at the New York State Capitol. Photo courtesy of Mia Gindis.

THE PERSONAL COST FOR A WORKING CLASS IMMIGRANT COMMUNITY

Today, it is painfully apparent that the magnitude of debt held by taxi drivers is more than just an economic issue. A jump in driver suicides became front-page news in 2018, drawing new public attention to a longstanding issue. This statistic, however, was not shocking to drivers. It was a clear consequence of the crippling debt and a collective sense of abandonment by the city government.

In 1980, 38 percent of taxi drivers were immigrants. Today, that figure is over 90 percent. Out of the 4,000 people who bought medallions from 2002 to 2014, many were low-income immigrants who could not speak English fluently. The Taxi and Limousine Commission assured this vulnerable population of a medallion’s value. Lenders then coerced these optimistic drivers into signing complex contracts and exploitative, interest-only loans. For the drivers, the thousands of dollars it takes to obtain a medallion and pay off loans often comes in the form of life savings and contributions from family overseas.

Both the city and taxi industry have failed to adapt to this dramatic shift in demographics. Although an estimated one-third to half of NYC taxi drivers are Muslim, major holidays like Eid al-Adha are not recognized or accounted for by the taxi or ride-sharing industry. Without any coordination amongst drivers, both cab drivers and riders suffer. The city sees significantly fewer operating cabs, overwhelmed drivers, and New Yorkers experience surge pricing among ride-sharing apps.

Moreover, finding the space to perform five daily prayers is nearly impossible for Muslim taxi drivers and often results in parking tickets. Columbia’s own Manhattanville campus contributed to this problem when the University purchased and closed the McDonald’s on 125th and Broadway with plans for redevelopment of the lot. The fast food restaurant provided one of the only free parking lots in Uptown Manhattan where drivers could stop and pray. Its closure is not only a major inconvenience for Muslim taxi drivers— the loss translates to longer routes and fewer earnings when the nearest parking lot is farther from customers. City planners raised no objections to Columbia’s expansion.

The recently closed McDonald’s on 125th and Broadway. Photo courtesy of Joe Schumacher.

WHERE WE GO FROM HERE

Taxi workers’ unions have been advocating for progressive solutions to their members’ hardships. They have previously endorsed widespread debt forgiveness, retirement funds for elderly drivers, and capping mortgage payments on medallions at $900 a month to lessen the burden of debt on drivers. Unions have also advocated for regulation of fares for ride-sharing programs as well as taxi cars, which would counter Uber and Lyft's advantage of dynamic pricing.

Many look to the Taxi and Limousine Commision of New York for new leadership, despite the agency’s role in creating the crisis.

In January, Mayor Bill de Blasio nominated Aloysee Heredia Jarmoszuk for Chair of the Taxi and Limousine Commission. Later that month, a Taxi Medallion Task Force composed of City Council members, professors, attorneys, and taxi drivers formally delivered their recommendations to address the crisis. The group’s proposals included an investor-driven loan buyback and partial forgiveness program, as well as free legal and financial advice for drivers. The challenge left to Chairwoman Jarmoszuk is their implementation.

Jarmoszuk’s nomination may provide some hope for the drivers most affected. Unlike other nominees, she explicitly apologized for the Taxi and Limousine Commission's role in creating the medallion bubble. The new Chairwoman also committed to a support center for drivers by this summer, offering free workforce development, financial education, and mental health resources. Moreover, she promised comprehensive protections for drivers in addition to relief. The follow through on these promises, navigating the competing interests of politicians, drivers, unions, and lenders will be a daunting task ahead.

The COVID-19 pandemic presents yet another crisis for drivers in New York City, the current epicenter of the outbreak. Eerily empty streets and airports leave taxis idle for hours. The government considers taxi services to be essential and relies on cabs to transport COVID-19 patients, yet drivers have not been provided with protective gear. The industry is seeing its lowest profit to date.

Our harrowing new reality only exposes longstanding systemic problems; weeks or months without customers is not an option for drivers already crippled by debt. An effective solution cannot solely focus on stabilizing the medallion market or regulating lenders. Rather, New York must prioritize the quality of life for the thousands of drivers upholding the industry.

Chloe Lowell is a staff writer at CPR and first-year in Columbia College studying Political Science and Human Rights. She really misses everyone at Columbia Dining and JJ’s Place curly fries.

How New York City Has Failed Its Taxi Drivers