Dublin's taxi service is a small part of Dublin's public transport system, which in turn constitutes less than half of the total transport system of the capital. The basic problem lies not with the city's taxi service but with its entire transport system. The latter is functioning very badly due to a combination of poor planning, under-investment and rapid economic growth.
The very poor transport system imposes a large burden on the taxi service because one of its roles is as a residual provider of transport, as we show later. Inevitably the taxi service shows many strains under this burden, whether caused by the poor bus service or traffic congestion.
It is a useless approach to address the strains in the taxi service purely within the context of the taxi service. One must start with the bus service and also consider the city's roads and street network. It is only within a coherent planned approach to the city's transport system that one ought to consider whether additional taxi licences are appropriate.
The population and the economy of Dublin have suffered grievously from an absence of planning and an ad-hoc approach to solving problems. Ad hoc policy prescriptions that are conceived without reference to an overall urban planning context have frequently caused bigger problems in other sectors and often worsened the perceived problems that they were intended to solve. It is quite likely that the proposal to deregulate Dublin taxis could fall into this trap.
Belatedly, the DTI report and recommendations have given us a proper planning context for Dublin's transport. It would be worse than useless to ignore that report and attempt to implement an ill-considered economics experiment with the Dublin taxi service. Dublin's transport system and its taxi service are both too important for that.
This report examines the role of the taxi service in Dublin's transport system. It then makes proposals for Dublin transport, including the taxi service within the context of the DTI report and its recommendations. These proposals are both realistic and yet readily achievable. They would enhance the economic and social functioning of our city.
The approach in this report is contrasted with the alternative proposal of partial deregulation for the taxi service with no consideration of the wider transport issues. Previous experience in Dublin suggests that the outcome would not be satisfactory. It could also result in damage to the economy of Dublin mainly because of the unfavourable impression on visiting business- people and tourists. Both previous experiences in Dublin and economic theory would suggest that the taxi service that would greet them would be chaotic, unsavoury and would very likely overcharge them. These impressions would adversely affect Dublin's economic competitiveness compared to other western European competitor cities.
Within a year, the following measures ought to be implemented as well;
These proposals would bring about a much-improved public transport service in Dublin with a major reduction in transport bottlenecks. At the same time, they would ensure the continuation of a professional, full-time, first class taxi-service in the city that is an important feature of the drive to make Dublin a major trading and services city in the European economy.
A city's taxi service is a very small part of a city's transport system, whose main components are roads and an (usually) integrated public transport network of buses, trains and trams. Visitors and locals give rise to two very different types of demand for taxi services that result in a dual service role for taxis.
Locals use taxis as residual transport when a car is not suitable or public transport is not available. Therefore there is a high demand for taxis among young people and relatively poor people that do not own cars.
Another source of local demand for taxis is the demand for a door to door service whether from local disabled people or other locals in the centre of the city.
Taxi-drivers play an important promotional role for a city -- without charge Visitors to a city are very dependent on public transport, as it is difficult to drive a hired car in an unfamiliar city. A visitor's demand for taxi services is partly dependent on his or her financial situation and partly dependent on the city's public transport network and its user-friendliness.
A city's taxi service has a visibility impact on visitors out of all proportion to its significance in the public transport system. The service to visitors has a multi-dimensional aspect, which performs an incalculable marketing benefit for a city. For visitors, particularly businesspersons, a full-time taxi-driver fulfils an important role as the main alternative contact with Dublin outside of the direct business contacts of the visiting businessperson. The Dublin taxi- driver becomes an instant tour guide as an additional free service. It is easy to take this service for granted and under-estimate its value to the city's economy.
Two key features of a city's taxi service;
Therefore, it is meaningless to attempt a stand-alone analysis of a city's taxi service without a full consideration of the city's public transport network. The Oscar Faber report falls down in this regard. Furthermore, it is essential for sustaining the Celtic tiger and Dublin's economic success that the city's taxi drivers remain professional, full-time, reliable, and knowledgeable of the city's geography, culture and society.
Dublin is clearly prospering economically at present. In recent years, the growth rate of the Dublin region has exceeded even the very high national average rate. But it is also showing evidence of serious congestion after just a few short years of growth, particularly in traffic and house prices. This is regrettable and could have been avoided. By European standards, Dublin is a medium-sized city (smaller than Birmingham, Manchester, Glasgow, Lyon, Lisbon, Brussels, Vienna, and Hamburg). Policy-makers need to implement a range of actions, which will both ensure the sustainability of that success and improve the quality of life for Dublin's citizens.
The traffic congestion is caused by poor public transport and sometimes by an inadequate road infrastructure. With rising affluence, citizens will only use a public transport network if it is significantly more efficient and convenient than car travel. The housing issues are surprising given our relatively low density of population. It is clear that Dublin' past development plans are inappropriate for the modern-day economy.
There is considerable circumstantial evidence that "greater Dublin City"" has suffered from inadequate land use planning and poor planning guidelines, where those existed.
Dublin compares unfavourably with Cork. It adopted the LUTS (Land Use and Transportation Study) proposals in 1979. By and large, the LUTS has provided a consistent structure to Cork's development plans since then and for all urban transport developments. Dublin has no equivalent. Dublin has had only two attempts at an integrated approach to physical planning in modern times. There were broad land use approaches established in the Dublin Advisory Plan and Regional Report that was agreed in 1967. This has never been updated. The strategy that was prepared by the Eastern Regional Development Organisation was never adopted by the Government or the local authorities.
The report and recommendations of the Dublin Transport Initiative are a very welcome development in the planning vacuum of Dublin. Therefore, it is all the more important that all transport proposals are prepared within the context of this report and are fulfilling its recommendations. The Oscar Faber report does not mention the DTI or its recommendations.
The low density planning guidelines that have been in existence since the second world war have not served the city well in recent times. Higher densities would have been more appropriate, particularly closer to the city centre (where it would be easier to provide high capacity and high frequency public transport). The overall planning concept was to welcome car ownership and make way for it in suburban estates without sufficient foresight as to the ultimate requirements for trunk road infrastructure or the implications for bus transport.
Various trends in land use in Dublin need to be urgently reviewed, preferably within an integrated overall framework. Many patterns of development have put undue and unnecessary strains on the city's transport system.
One notable trend has been to locate large concentrations of council/corporation housing in relatively remote suburban locations. Since the 1970s, it has not been possible to locate sufficient industrial employment near these concentrations of housing in a manner that would make large numbers of industrial jobs genuinely available to unemployed people living on council/corporation estates. The dispersed location of public housing makes it all the more necessary for good public transport to these suburbs, even though it also makes it very uneconomic to provide them with good quality public transport.
In the 1980s and 1990s, newer industry and particularly high technology industries have shown a strong preference to locate in relatively attractive neighbourhoods, very often, far removed from disadvantaged areas. In Dublin, there has been an increasing tendency for these factories to locate in greenfield locations beyond the built-up area. The IDA and the county planning authorities do not seem to have sufficient regard for the demands, which these locations will put on an already inadequate Dublin, transport system.
Another unsatisfactory trend has been a drift in business districts and the establishment of satellite business districts. Quite often, their locations are not optimal either from the point of view of the transport infrastructure of the city nor the prospects of offering employment to the long-term unemployed. Public agencies have often followed and sometimes played a leading role in these trends. Examples of these trends are the drift in the main business district in Dublin towards the Grand Canal. The establishment of major satellite commercial and office locations in Stillorgan and Blackrock in the affiuent Southeast of the city are very sub-optimal in the context of the city's transport infrastructure. The Grand Canal area is a very unsuitable location for public transport from all suburbs of the city except the south-east. Stillorgan and Blackrock are two of the most unsuitable locations for office development, particularly in the absence of the Southern Cross motorway.
A city is a single economic entity. If it is working efficiently, then there are many and varied economic opportunities available to the entire city population. This greatly enhances economic growth in the city and indirectly in the whole country. For instance, the unemployed ought to be able to commute to a job anywhere in a city. The economic boom has resulted in considerable numbers of job vacancies of all types and skill levels in Dublin. But these job opportunities are often just not available to many people in the city for social, and particularly transport reasons. Dublin is seriously malfunctioning as an economic entity.
The biggest obstacle to Dublin working efficiently as a city is that the public transport network is very poor and fares are too high. Public transport is partly a problem in itself but it is also due to the low-density sprawl of housing in the suburbs, which makes it particularly difficult to operate high frequency and convenient public transport. Existing suburbs cannot be rebuilt or relocated. And it is important to recognise that in housing terms, they were a major improvement on what preceded them. Therefore, the main solution, particularly in the short term, is better city transport and especially public transport.
Demand for transport has grown rapidly in Dublin City due to;
Other demographic trends are also a factor because of the bulge of young adults.
Tourism has grown rapidly in the 1990s but this is true of many cities.
The problem is simple. The transport infrastructure and public transport network has not been improved to keep pace with this growth. Worse still, it was very inadequate to start with.
The road infrastructure is inadequate. The improvements that have been planned are five years behind schedule while car ownership and traffic levels are almost five years ahead of the levels that were forecast in the DTI reports. The consequent congestion has a major negative impact on taxi services.
The public transport network was bad a generation ago. Now it is one of the most inadequate of any similar-sized city in Europe. It is under-funded and inadequately managed. The population and economic growth of the city has led to increased demand for public transport in terms of the level and breadth of the service, for instance late night. Irish trade has more than doubled in the 1990s and this brings many more visiting business-people to Dublin who would be inclined to use fast and user-friendly public transport in the cities that they visit regularly. However, they will not use a slow and irregular bus service.
The LUAS story has become a farce. It exemplifies the worst aspects of the inadequacies of public transport planning in Ireland.
The real issue is that demand for taxi services is inextricably linked with the quality and extent of the city's public transport network particularly as regards demand from local residents. A growing and increasingly prosperous city will exert huge residual demand for public transport on the taxi service when the public transport network has such poor coverage and quality of service. The Oscar Faber report itself shows that Dublin's taxi ar;d private hire fleet is relatively larger than comparable cities when compared with population. However, the report fails to elucidate the reasons for this.
The DTI report summarised its objectives as follows;
Support economic regeneration and development throughout the Dublin area, help maintain and reinforce the city centre as the country's prime commercial, retail and cultural centre, give a better deal to public transport, emphasise the movement of people and goods, not just vehicles, bring greater equity to the transport system, improving accessibility for all and taking account of the real needs of disadvantaged people, address the access requirements of the ports and airport for both freight and passengers, give the car its rightful place in the transport system but not let it dominate, bring about environmental improvements, provide an integrated approach to transport and land use.
The DTI strategy is an integrated plan for Dublin's transport, which emphasises the importance of a greatly improved public transport network, while making certain necessary improvements to the road network. The DTI strategy could not work without this.
This core fact of Dublin's transport strategy was not adequately reflected in the Oscar Faber report. With Celtic tiger growth rates, nothing will work properly in Dublin transport unless the core issue of the improvement of the public transport network is addressed.
The city's taxi service can only play a minor role in the overall transport strategy for Dublin. By implication, an ad-hoc approach that is exclusively focused on the taxi service is expecting that taxis can fill the large gaps left by the inadequate public transport network. This cannot work.
Earlier we have outlined the three core functions of a taxi service in any city. All are necessary functions in any city. In addition, the service to visitors has a multi-dimensional aspect, which performs an incalculable marketing benefit for a city. If the taxi deregulation proposal was implemented, there is a very large probability that the core functions of the taxi service would not be fulfilled adequately, particularly the multi-dimensional service to visitors.
Some proposals in the DTI will take many years to implement, for instance, building LUAS and major road projects like the northern motorway and the south-eastern motorway. However, a number of measures could be implemented very quickly, particularly an improvement to the bus service.
Despite the central role that the DTI intends for the bus service in Dublin's transport strategy, the bus service has actually deteriorated in the last 30 years. So actual supply of public transport has contracted while potential demand has greatly increased due to the growth in the population and the very high economic growth rates in the 1990s. The net result is huge pressure on the taxi fleet. The measures that caused an actual reduction in the bus service were the abolition of the subsidy and of conductors. The latter has caused slower journey times as drivers collect fares and issue tickets at every bus stop. "Bunching" of buses has worsened with driver-only buses.
Major new investment is required in city bus services. The re-introduction of annual subsidies for the city bus services is essential. Bus lanes and/or quality bus corridors are urgently required. Permanent Park and ride schemes are long overdue. Cork had a successful experience of park and ride last Christmas.
There are major requirements for additional cross-suburb routes. The termination of many north side routes at Parnell Square or Marlborough St is very unsatisfactory because most of the business districts are south of the river and often close to the Grand Canal.
There is a need for a major expansion of the night service in terms of routes. The demand for nighttime transport in Dublin has greatly increased and it is incumbent on Dublin Bus, as the state-owned monopoly, to provide an acceptable service.
In contrast to the bus service, the taxi fleet (apart from the sizeable increase in recent years) has seen a big increase in efficiency and utilisation rates from the taxi fleet due to;
However, taxis have been seriously affected by one major external factor, traffic congestion. The peak hours have got worse and all-day congestion is appearing in some parts of the city.
In addition, there appears to have been some alterations to traffic signal sequencing in some key city centre streets in recent years, like O'Connell St. These are also causing slower journey times for taxis.
The deregulation proposal for taxis is inconsistent even within the logic of deregulation for two reasons. Firstly, there is no economic justification for recommending that entry be deregulated and not fares. If the choice is to let the market dictate, then there is a very strong argument to allow price deregulation as well, in order that supply and demand will balance. Secondly, if deregulation or market liberalisation is to be chosen for Dublin transport, it makes no sense to introduce a half-baked deregulation for the taxi service on its own when it is the bus service that is totally regulated and state controlled. Given the residual nature of demand for taxi services, the first active intervention must necessarily be with the bus service, whether to add more capacity or to allow some competition.
In any service business, deregulation implies liberalising entry and fares while retaining regulations for safety and standards. If one is attempting to impose a free market prescription, prices must be liberalised otherwise supply may not be sufficient to achieve market clearing at all times. This is precisely what is likely to happen in Dublin during certain periods if the deregulation proposal in the Oscar Faber report is implemented.
Where deregulation has been introduced in a transport sector in Europe or the US for (say) airlines or road haulage, market entry and fares are always deregulated together. Partial deregulation is the worst possible proposal for a transport sector. It cannot work.
The Inter-departmental report on Taxis and Hackneys, 1992 In this report we recommend against deregulation of the taxi service. There has been mixed experiences with all forms of transport deregulation and particularly taxi services.
The arguments for and against full deregulation of the Dublin taxi service were very well summarised in the above-named report in paragraphs 5.20 to 5.27. The most compelling argument against deregulation is the avoidance of a return to the unsatisfactory service that obtained in Dublin prior to 1978. Controls on entry into the taxi trade were introduced, precisely to improve the taxi service. It is unfortunate that the Oscar Faber report does not refer to this. The Oscar Faber report merely states; "However there was concern that the unrestricted increase in the number of taxis was leading to instability in the market, and following a review of the market, restrictions on entry were put in place in 1978." In fact, that review culminated in the Inter- departmental report. That report says in par 5.21,
"The desirability of the total removal of controls on numbers must, however, be viewed in the light of the experience of the system, which operated prior to 1978. The quality of the taxi service, prior to the introduction of controls, was generally regarded as sub-standard with poor quality vehicles and widespread abuses, particularly overcharging, being the norm. Account must also be taken of international experience generally. "
The type of taxi service that existed prior to 1978 is exactly what a theoretical analysis would suggest; poor quality of service including illegalities and an unstable provision of service.
Paragraph 5.25 of the Inter-departmental report summarises the arguments against deregulation as follows;
"In theory, an approach based on free entry to the taxi market is attractive. Most advocates of a deregulated taxi market suggest that free entry with price competition, subject to strict quality control is the most efficient strategy for regulating the trade. There is, however, no firm evidence to confirm that deregulation of taxi markets actually achieves the desired aims. The experience in Ireland before 1978 and more recently in a number of UK cities would suggest that, while open entry solves immediate problems of supply, it can result in a poor quality unstable market. In any event, once taxi fares are controlled, and given the nature of the service this is considered essential, the normal concept of a free market is no longer applicable. For these reasons, the free entry approach is not seen as a viable option at this time."
Many commentators assume that the existence of transfer values on taxi plate licences is automatic economic proof that there is an insufficient number of taxi licences in existence. This type of economic analysis is excessively simplistic and ignores the real economy, which has many complexities. Simple perfect markets do not exist. Furthermore, there are frictional, transactional, information and set-up costs involved in all businesses. This explains why there is normally a transfer price (commonly called "key money") for a lease even where a market-related rent is being charged. An economics student might say that this cannot be. In fact, the real economic world is more complex than the first chapter in an economics textbook. Not only do transfer prices exist for leases with market rents, these prices tend to fluctuate considerably with the economic cycle and are very high at present. In an economic slowdown, they can easily go to zero.
This analysis does not suggest that a continuously rising transfer price for taxi plates is desirable. It is not. The latest evidence is that it has stabilised and may be falling slightly. In the next economic slowdown, transfer prices could easily fall sharply.
It is important to examine the labour market aspect of any economic activity. Dramatic change is taking place in the Irish labour market at the present time. The co-incidence of unprecedented economic growth with a much lower birth rate is causing a very rapid shift in Ireland away from a structural excess supply of labour. The economy is already experiencing cyclical shortages of labour in many subsectors. In ten years time, when the proposed taxi deregulation would be complete, it could be facing into a long-term structural shortage of labour. This would have major implications for the taxi service if deregulation of entry were to be introduced.
There appears to be an implicit assumption in the Oscar Faber report that there is an unlimited supply of people who want to be full-time taxi-drivers in Dublin irrespective of probable earnings and the uncertainty of earnings in a deregulated entry situation. This assumption is wrong, even before the disappearance of the structural labour surplus. There are alternative jobs and there is also the social welfare system.
One must assume that no active taxi-driver would be allowed to claim social welfare. However it is open to any person to obtain both a PSV licence and a taxi-plate for their family car. (Cars of the Toyota Corolla or Volkswagen Golf class are big enough to be acceptable for a taxi-plate.) Many people with other jobs or some type of other employment will feel inclined to avail of the opportunity of occasional taxi work. Naturally, their main job would take precedence. They would take their car out onto the street in their spare time if they were badly in need of some additional money
By 2008, very few Irish people will be willing to work full-time as taxi-drivers in a deregulated entry environment, except the really desperate. Contrary to the implicit assumption of the Oscar Faber report, the vast majority of Irish people will probably be able to pick and choose between jobs. Working the streets of Dublin late at night for marginal and uncertain earnings in constant fear of attack will probably be bottom of the list in terms of preferred employment options.
The taxi business in Ireland is peculiarly unsuited to free market deregulation because of its extreme ease of entry in the short term as well as the long term.
In microeconomic theory, a clear distinction is made between the potential to vary supply of a product or service in the short term and the long term. In almost all businesses, there are some inputs that are fixed in the short term, e.g. factory, machinery, a shop, shop-fittings, buses, etc. Therefore there are limits to the extent that a producer of goods or services can vary supply in the short term. While theory assumes that he can vary inputs, like labour or energy, it assumes that the fixed inputs cannot be changed in the "short term". In contrast, standard theory assumes that all fixed inputs are variable in the "long-term".
The consequences of fixed inputs in the short term is that in almost all businesses, entry to a business sector or capacity expansion involves time lags and a financial commitment. This process allows existing producers to make "normal" profits. Short-term fluctuations in demand about a level trend do not attract many new entrants to the business thus facilitating normal and stable market conditions and normal profitability (in theory). Supply of the service can be increased somewhat to meet higher demand by an increase in variable inputs, particularly labour, e.g. overtime. In contrast, if an increase in demand became apparent which resulted in a sustained increase in profitability, this would be expected to attract new entrants or increases in capacity and consequently a permanent increase in the supply of the product.
The problem with the taxi service in Ireland is that there are effectively no fixed inputs in a deregulated market situation. The reason for this is that a taxi licence would be obtainable on most types of family cars. Therefore once an owner had a PSV licence and a taxi-plate, he would be in a position to take it out on the street regularly or even just occasionally.
When there are no fixed inputs in the short term, no producer of goods or services can expect to make normal profits. Consequently, it would be irrational for any taxi-driver to work full time as a taxi-driver, if they had the opportunity of full-time employment. Apart from worthwhile employment opportunities, almost any other small business would be more attractive than driving a taxi. The only situation where full-time taxi-drivers would continue to exist is where there was chronic oversupply of labour and very high levels of long-term unemployment. This has occurred in Ireland in the past in the 1950s and for a time in the 1980s. However it is patently not the case today. Furthermore labour market projections show that the very opposite situation of labour shortages will characterise the Irish labour market in the next decade.
Deregulating entry to the taxi market without deregulating fares will probably ensure that no one will be able to earn a decent living as a full time taxi driver. One must expect that thousands of people will attempt to take up part-time taxi driving. Economic theory would strongly suggest that it would become impossible for anyone to earn a useful income as a full-time taxi- driver without working unacceptably long hours, because of the ease of entry of part-time drivers.
The taxi service would be likely to fluctuate substantially on a year to year basis. When taxi driving is perceived to have become profitable or in recessions when unemployment rises, many new entrants would be attracted to the trade. In turn, this would greatly depress average earnings and earnings per hour worked, which would in turn cause many of the better skilled people to leave the trade for other work. The overall taxi service would deteriorate as would the average skill level of taxi-drivers.
The major presence of part-time drivers that have other jobs would lead to a very erratic service, with unpredictable shortages of taxis occurring frequently. For instance, one could imagine that many part-timers would be interested in working in October and November to make some extra money for Christmas. However, in the weeks coming up to Christmas, many of the same part-timers would be less inclined to work despite the heavy demand for taxis during this period because of their own work or family commitments or simply because they are less interested in using their leisure time to drive a taxi.
By 2008, we can expect many more immigrants to have arrived in Ireland. A recent economic conference held by the Irish Economic Association illustrated that this would be a predictable and indeed necessary development in the Irish economy by then. In addition, there are likely to be six new member states in the EU (Poland, Hungary, Czech Republic, Slovenia, Estonia and Cyprus) that will lead to an increase in the EU population from 375m to 480m. The wage levels in these states are much lower than in Ireland and this is likely to lead to a large influx of legal immigrants to Ireland. In this labour market scenario, it is very likely that taxi-driving in Dublin would be one of the first occupational categories to record a high representation of immigrant workers if entry were deregulated and the earnings became unattractive to younger Irish workers. This has occurred in many cities in the developed world and there is no reason why it would not happen in Dublin if deregulation was introduced. There would be three negative effects of this trend. Firstly, many taxi drivers would be unfamiliar with the geography of Dublin. Secondly many drivers might not have good English and some passengers, including possibly some women passengers, would be uncomfortable with this situation. Thirdly, it would eliminate the invaluable marketing role that Dublin taxi-drivers do for the city. Frankly, the "Dublin experience" for visiting business people and tourists would not be the same with a Romanian or Estonian taxi-driver.
One final risk of deregulating entry is that it would make it easier for a criminal element to get involved in the taxi trade. Again, this has occurred in many other cities in the world and there is no guarantee that it could not happen in Dublin if honest and respectable Irish people are driven out of the business by low and uncertain earnings.
It is very easy to take for granted that an individual visiting businessperson, male or female, can expect to hire a taxi at the airport and be driven in safety and with good humour to their destination. An engaging commentary on Dublin and Ireland will be included. There are many cities in the world where this can not be assured and visiting business people are advised to arrange to be met at the airport by a contact person.
A sensibly regulated taxi service is in the best interests of the future prosperity of the city.
Review of Taxi and Hackney Carriage Service in the Dublin Area, Oscar Faber in association with Goodbody Economic Consultants and Irish Marketing Surveys, June 1998.
The Inter-departmental report on Taxis and Hackneys, Government of Ireland, 1992
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