Taxi drivers in New York crushed by exploitative loans

A Korean-American taxi driver, 58, killed himself in Queens, New York in November last year. People around him, including his fellow taxi drivers were shocked by the death of this taxi driver, who liked to treat coffee to them. The New York Times reported that he was the eighth taxi driver who took his own life in New York in the past year.

The late taxi driver had emigrated from South Korea and owned a yellow cab in 2017. When he purchased a medallion, a New York taxi license issued to only 13,000 drivers, for 578,000 U.S. dollars (approx. 688 million won) and owned his yellow cab, he thought he had achieved the “American Dream.” Then why would he decide to take his own life? One of his fellow taxi drivers told the Times that he had no other problems than financial plight.

The New York City and the City Council blamed ride-hailing services such as Uber and Lyft for the death of the taxi drivers. Their fast entry into the market has reduced taxi drivers’ income. The New York City Council last year introduced the package of bills that limit the number of rid-hail drivers. But it is not enough to explain a series of suicides by taxi drivers.

The Times on May 19 (local time) interviewed 450 people in the taxi industry in New York and found more fundamental problem. “Taxi revenue in New York has decreased about 10 percent since Uber and Lyft showed up but the price of medallion fell by 96 percent,” reported the Times pointing out the collapse of the value of New York taxi permit. The newspaper also revealed the holes in the taxi license system introduced in 1937 and exploitative loans made by the taxi industry and brokers.

After the newspaper ran the article, the New York County District Attorney’s Office and the New York City have launched an investigation into the exploitative practice in the taxi industry. The issue has become more complicated as the New York taxi industry refuted the New York Times report by saying, “Taxi revenue in New York has dropped by 36 percent, not 10 percent.”

The lives of taxi drivers could have been saved if there had been efforts to resolve fundamental problems in the taxi industry, such as government’s control of the number of taxis and fares, moral hazards in the taxi industry and of financial companies, and exploitative loans. The easiest way to turn a blind eye to the truth is to blame new technologies and competitors for all problems.