September 4, 2015 Print

One of the most common effects of occupational regulations is to protect established industries from competition, by making it more difficult — or, sometimes, impossible — for new entrants to enter the market and serve customers more efficiently, at lower prices. That has long been the case in the taxicab industry throughout the United States, until new decentralized transportation models like Uber and Lyft began to disrupt the entrenched advantage that taxis used to enjoy. This has led to an expansion of transportation options for low-income riders in New York City, reports Jared Meyer, fellow with Atlas Network partner the Manhattan Institute for Policy Research, in a new issue brief.

New York City has long mandated a cap on its issuance of medallions, the permits required to legally operate a taxi in the city. This kind of artificial scarcity has many detrimental economic effects, one of which is the difficulty of hailing cabs in lower-income areas of New York boroughs further from Manhattan. Meyer explains that UberX, the lowest-cost service provided by smartphone-based ride-sharing firm Uber, has grown rapidly in these low-income areas.

“UberX growing fast in low-income neighborhoods,” Meyer writes. “Of UberX rides in noncore Manhattan and non-airport zip codes in December, 60 percent were in zip codes with median household income below the noncore Manhattan median—up from 54 percent in January.”

Meyer also notes that the service has provided new options to predominantly nonwhite neighborhoods that have traditionally been underserved by taxicabs.

“In the 29 noncore Manhattan and non-airport zip codes with one or more UberX pickups per household, black households constituted 29 percent of all households, while the average for all 146 noncore Manhattan zip codes was 27 percent,” Meyer writes. “The aforementioned 29 zip codes included neighborhoods ranging from Greenpoint and Park Slope—where less than 5 percent of households are black—to Crown Heights and Harlem, where more than 75 percent of households are black.”