Late-Night Taxi War: Lift Supply-Curbing Regulations to End It

The difficulty of hailing a taxi has made the confusion during the evening commute severe. Citizens have to wait on the street for a long time to catch a taxi, and as a result, they inevitably get home even later. Since this situation is not one that can be easily resolved, fundamental measures are needed.

The solution proposed by the Ministry of Land, Infrastructure and Transport is taxi ride-sharing. For the first time in 40 years since it was regulated in 1982, ride-sharing has been allowed, but only for platform taxis. Consumers have reacted lukewarmly. This is an era in which service quality matters, so considering the expectations of taxi users, such a response is only natural. The limits of the stopgap measure put forward by the authorities are quite clear. The Ministry of Land, Infrastructure and Transport needs to reflect on its approach, given its lack of real determination to solve the problem.

The problem lies in government regulation and the rigid operation of the system. The taxi industry is a sector thoroughly controlled by the government. The government has controlled supply and regulated fares as well. How much these restrictions are eased will be key to resolving the taxi shortage. It is necessary to allow service providers to supply services in line with the diversity of taxi demand, and also to allow fares to be set in various ways. If the price mechanism is activated, the taxi shortage can be alleviated to some extent.

The fundamental solution is to make the system more flexible so that supply can respond elastically to changes in demand. When demand rises, supply should normally rise as well. Removing regulations that block an increase in supply is the essential solution.

The forms of taxi operators are relatively simple. Individual taxis and corporate taxis make up the bulk of the industry. As individual taxi operators have grown older, they are reluctant to work late-night hours, while corporate taxis have low operating rates because they cannot find enough drivers. People have long talked about an oversupply of taxis, but depending on the time of day, supply shortages are occurring. Unless the current supply structure is changed, the present shortage cannot be resolved.

There are many ways to address supply shortages by time of day. First, regulations can be improved in ways that raise the operating rates of both individual and corporate taxis during late-night hours. Beyond that, the system can be improved by allowing private cars to operate commercially during late-night hours.

The first priority is to adjust the method of allowing work shifts under the Ga-Na-Da group schedule so that late-night operations by individual taxis can increase. In the case of corporate taxis, incentives need to be provided so that their operating rates can rise during late-night hours. The Seoul Metropolitan Government once temporarily lifted the three-shift rotation system for individual taxis from 9 p.m. to 4 a.m. the next morning. However, this is unlikely to resolve the late-night taxi shortage. From the standpoint of individual operators, it may still be better to work only during daytime hours.

If adjusting the regulations imposed on taxi operators still cannot resolve the taxi shortage, then it is necessary to allow private cars to operate commercially at a level seen in advanced countries. In other countries, taxi shortages during rush hour or in situations such as heavy snow are appropriately eased through the commercial use of private cars.

The sharing-economy model of using privately owned passenger cars for taxi services is common in advanced countries. Through overseas travel, many people have experienced private-car taxi services through Uber. If this system were allowed during late-night hours, it could be expected to resolve a substantial portion of the taxi shortage.

The government previously took regulatory action to ban Tada’s operations. Because this ignored consumers’ demand for high-quality service, it prompted a great deal of resentment. Even now, many are calling for Tada to be allowed to operate again. However, that is a different demand from the shortage of taxis during late-night hours.

The government should overhaul the system in a direction that allows diversity so that high-quality taxi services can be provided, and at the same time improve taxi-related regulations so that taxi supply can increase during late-night hours. Policies for consumers are the right direction.

Sung-no Choi, President of the Center for Free Enterprise (CFE)

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Original title: 심야 택시전쟁, 공급막는 규제 풀어야 해소

Author: Sung-no Choi

Date: 2022-07-04

Source: https://www.cfe.org/bbs/bbsDetail.php?cid=press&idx=24836