STUDY EXPLORES THE IMPACT OF UBER ON THE TAXI INDUSTRY

Oxford Martin School's Carl Benedikt Frey burst onto the public stage back in 2013 with a paperhighlighting the risks various professions faced of automation in the comingyears.

He has returned this week with a new paperthat is no less contentious. It examines the impact Uber has had on the income of taxi drivers in a range of U.S. cities.

Despitewidespreadprotestsagainstthesharingeconomyplatform,theanalysisrevealedthattheimpact was muted. For instance, while it typically resulted in a fall in income of around 10% among salaried drivers, it resulted in a 50% rise in the number of self-employed drivers in acity.

The authors believe their study represents the first serious look at the impact of sharing economy platforms such as Uber on jobs.

"Uberistheflagshipofthesharingeconomy,"Freysays."Butwhatourstudyshowsisthateveninoneof the sharing economy's most exposed industries, traditional jobs have not beendisplaced."

"The effects are complex; while some have seen a loss in income, Uber has created more jobs than it has destroyed, demonstrated by the staggering expansion of self-employment following its introduction," he also added.

What'smoreisthatemploymentrosenotjustinself-employeddrivers,butalsointraditionaltaxiservices.

Rising Incomes

It's also noticeable that Uber drivers were found to earn more than those in traditional taxi services. This is largely due to the fact that the Uber software allows drivers to better optimize their time and services.

"Thehigherhourlyearningsamongself-employeddriverssuggestthatcapacityutilization,intermsofthe timespentinthecarwithapassenger,hasincreasedwithUber,asitsplatformallowsforbettermatching between drivers and passengers. But for traditional taxi drivers, the effect has been the opposite, with a decline in the amount of time they have a passenger in their vehicle," Freysays.

Ofcourse,fascinatingthoughthedatais,itdoessimplifymatterssomewhatasitlooksattheissuethrough the relatively confined prism of employment. It doesn't, for instance, examine the total number of journeys undertaken across both licensed taxis and sharing economyplatforms.

In much of the discourse around this issue, the suggestion seems to be that the market is of a fixed size, and therefore, Uber drivers are taking income from licensed drivers. However, Frey suspects that the reality is that Uber has significantly increased the size of the market, especially in off-peak times where dissatisfaction with licensed drivers is at its peak.

Given the Choice

If we're in a world whereby the total number of journeys in the "rented driver" market has gone up considerably, then we get into the Public School of Choice field in economics that underpins so much of the apparent rent seeking by the taxi industry. This assumes that the gains from restricting practice are highly concentrated, whilst the benefits of not doing so are dispersed.

As such, it was never viable to get customers to organize themselves politically to change matters, whereasitcertainlywasforthetaxiindustry.Givecustomersaneasyalternativeviathemarket,however, and such mobilization becomes much morefeasible.

As Dr. Frey concludes, it is perhaps wise to examine the evidence available to us before we succumb to protestsandimposerestrictionsontheabilityofUberandtheirgrouptopracticeinourtownsandcities.

REFERENCE:

Gaskell, A. (2017, January 26). Study explores the impact of Uber on the taxi industry.Retrieved from Forbes Web Site: https://www.forbes.com/sites/adigaskell/2017/01/26/study-explores-the- impact-of-uber-on-the-taxi-industry/#4dfc0e4616b0.

Questions:

1. Based on the article, what are Uber's explicit and implicitcosts?
2. In the short run, is Uberprofitable?
3. In the long run, can Uber sustain itssuccess?