Toronto’s new taxi rules: a fix or a ‘disaster’?

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Asad Mahmood knows precisely how little he makes driving a Toronto taxi. He's an accountant, just one course shy of his qualification.

Including tips, he earns about $9 an hour, he says, significantly lower than Ontario's $10.25 minimum hourly wage. The only consolation? He's allowed to work up to 84 hours a week, which means forgoing any semblance of a normal family life. "The charm of the work is you can work more if you want: up to 12 hours a day, seven days a week," he says, a wry smile on his face.

Mr. Mahmood, an immigrant like 80 per cent of this city's cab drivers, learned to drive on the roads of Rawalpindi, Pakistan, where risk is a constant companion. In Toronto, the risk is financial. He worries every week that it will cost more to rent his taxi than he'll earn in fares. He dreams of the day he'll work at something more suitable. Until then, he tallies up the fares and the long hours it takes to make a living wage.

"This business is very bad for the drivers," he says.

Last month, Toronto city council gathered to consider a radical transformation of the taxi business. The public gallery was packed, the crowd divided into camps for and against. The yes side donned green t-shirts, their opponents arrayed themselves in orange. After a tense vote, the green side erupted in celebration. They called it a victory for the little guy. Councillors swept in a suite of rules aimed at improving conditions for drivers such as Mr. Mahmood.

(For an explanation of the changes, click here.)

But the result devastated those in orange. Many had small fortunes invested in taxi licences, never anticipating that they would see the value slashed at the stroke of a pen.

The city's aim is to protect drivers from being exploited, according to Councillor Mary Margaret McMahon, who lobbied hard to pass the changes. She says a system where most cab drivers own their own cabs is better for customers, because drivers will take more pride in the condition of their vehicles and the service they provide.

Ms. McMahon says if each side has reasons to be unhappy the city must have done something right. Many owners disagree.

Some industry stalwarts say the changes won't improve service, arguing the reforms will raise costs, reduce the supply of cabs on the street and hurt some drivers financially.

"We didn't make the rules, we just played by them," said Joel Barr, a 34-year veteran of the business who owns and drives a cab. He earns a modest living behind the wheel and was counting on selling his plate to fund his retirement. "Financially, this is a disaster. It's devastating."

The city has historically placed a limit on the supply of taxi cab licences, also known as plates.

By far the largest group (3,451) are standard licences. Until last week, standard licences could be bought and sold by nearly anyone for prices as high as $300,000. Many were owned by investors – people completely removed from the taxi business – who then rent their licence out to shift drivers, in some cases earning more than $25,000 a year.

The next biggest group (1,313) are called ambassador licences, which were given to owner-operators but could not be sold, leading ambassador drivers to complain that they were the industry's second-class citizens. The solution, council decided, was to create a single Toronto Taxi Licence. The new rules give ambassador owners the right to sell their licences, but they'll also require all taxis to be owner-operated within a decade, limiting the resale market for those valuable licences.

The day before the vote, licences were being offered at the online classified site Kijiji for $350,000. Shortly after, valuations fluctuated wildly, with the low figures ranging from $99,000 to $150,000. This week, sellers were seeking bids in the $350,000 range but finding no takers.

Mohammad Reza Hosseinioun, 59, came to Canada as a refugee from Iran in 1989. He has a PhD in economics, but work was hard to find. Driving a taxi was not attractive, but at least it offered autonomy. He found that behind the simplicity of the driver-customer transaction is a complex system of rents and money-shaving middlemen – licence owners, agents and fleet operators – who extract profits before the driver can get his share. Many drivers say the agents and fleet operators have grown wealthy on this system. Mr. Hosseinioun started fighting back 20 years ago.

"I could feel how these people were sucking my blood. I couldn't stand it. I raised my voice that this is unfair. The response I got was: 'Get out of this business. We control it.' "

Mr. Hosseinioun is now an owner-operator and an organizer with the iTaxiworkers alliance, a group backed by the United Steelworkers union, which has been agitating for change for years. He said he celebrated at a party with other drivers after the vote. Some wept tears of joy, he said.

"The owner-operator model is the solution," he said. "If you put all that money in the pocket of the drivers they will live better lives."

But Hamid Babie, who manages the AB garage, has a different perspective. For one, all cabs will have to be handicap-accessible by 2025, meaning owners will have to acquire bigger vehicles, possibly vans, in order to comply. They'll be more expensive to buy and more expensive to run, he says. "The meter will have to be double the current price, and who will pay? I've been in this business 25 years and I will get out in the next few months if I can find somebody stupid enough to buy my business."

Kristine Hubbard is the general manager of Beck Taxi, the largest of 29 brokerages in the city. Beck does not own the cabs under its flag, it markets itself to the public and then dispatches those calls for a monthly fee, getting a monthly fee of $500 from the cabs that subscribe. Ms. Hubbard said she doesn't believe anyone will benefit from the new rules. The owner-operator model is flawed, she said, because owner-operators have every incentive to take the most lucrative shifts for themselves and may not be willing to pay the insurance to place a second driver in their car. The result could be reduced service, a loss of jobs for shift drivers and a massive drop in licence values. Look at Calgary, she said, where some are proposing the city's owner-operated cabs should be required to work at night to remedy patchy service.

"You're not helping drivers with the Toronto Taxi Licence," Ms. Hubbard says. "I think it's going to mean a huge downward spiral for service, for job opportunities, for us to function as an industry."

Vijay Gill, director of policy research at the Conference Board of Canada, says it's not clear that the changes voted in by council will actually solve the problem of driver income. "The biggest impact will be on the value of the plate and the people who own them."

Around the world taxi licence values fluctuate with supply. In some cities, the licence is worth more than a million dollars. Driver wages, however, always tend to be relatively low.

"In the short run, drivers will do better, but in the long run if there's anything more lucrative it will accrue to the plate owner," said Mr. Gill.

Al Moore, a plate owner who still drives occasionally, has done extensive research on Toronto's taxi industry. He argues the problem of driver wages is an issue of supply. There are just too many taxis on the road, he said. The ratio of taxis per population is currently 1:513 – that is one cab for every 513 residents. The last time drivers were able to earn a living wage, in his view, was when the ratio was 1:850 in the 1980s. That measure only gets worse under the new rules, he said, which will see 290 handicap-accessible cabs added in time for the 2015 Pan Am games, and allow ambassador cabs to add an additional driver.

"They know guys aren't making minimum wage but they're adding 2,000 shifts. It's a complete disaster," Mr. Moore says.