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Reasons why Uber should be made legal throughout Australia
1. Uber offers advantages for the commuterUber claims to offer a number of advantages to its customers. One of these is relatively lower cost on most rides.
In 2015, Choice, the consumer lobby group, made 56 trips around Sydney - half UberX rides and half regular taxi rides - in pairs and at seven different times to capture surge pricing. On September 24, 2015, Choice reported its findings re prices. These were as follows:
'UberX was cheaper than a taxi around nine times out of 10. Taxis were 40% more expensive than UberX on average.
On the three occasions UberX was more expensive, it wasn't by much - and it was only when surge pricing was in place.
Of the 28 UberX rides, we encountered surge pricing four times.'
Choice concluded, 'Uber's pricing is cheaper than taxis... we found taxis to be more expensive than UberX 89% of the time. For example, in Sydney, UberX costs $0.40 per minute and $1.45 per kilometre, while the maximum taxi rate is $0.94 per minute and $2.19 per kilometre.'
One the occasions that Choice used Uber and standard taxis, they found that Uber's 'surge pricing' mechanism did not seem to have a significant impact on the cost of using an Uber car relative to a taxi. Choice found, 'What's surprising was how few times surge pricing was actually in place during our test. We encountered surge pricing four out of 28 times, and only to a maximum of 1.5 times the base rate. When surging at this level the UberX didn't turn out to be much more expensive (an average of 6%) than a taxi (and sometimes it was still cheaper); however, surge pricing can increase well beyond these levels at times of intense demand.'
Thus it appears that even given the potential for surge pricing to make Uber much more expensive on some occasions, overall a commuter is likely to get a cheaper ride from Uber.
Uber claims that their practice of contracting private drivers who use their own vehicles also has benefits for the customer. On their promotional Internet site, Uber stresses the advantages that come to commuters because drivers are likely to be local. The company claims, 'They know the area that they live in incredibly well, and because of that, they are able to get you where you need to go as quickly as they possibly can. On top of that, they're likely someone that lives in your community, so you may know them or you will feel safe because other people in the area know who they are.'
Uber also promotes the ease of use of their app technology, stressing that it is virtually fool-proof and gives the consumer a number of features conventional taxi companies do not offer, such as the capacity to track the driver as he or she approaches the pick-up point. This means that customers are never uncertain as to how long they will have to wait before the car arrives.
On their Internet site, Uber explains some of the features of their app. 'It's an application that is easy for you to sign up for, easy for you to use, and easy for you to understand. You don't have to worry about making mistakes because you have to confirm everything that you type in, and you will be able to keep track of exactly what is going on with the driver that you have hired for your job. The app is easy to use and gives you step by step instructions that you can follow so that you don't feel overwhelmed or intimidated by what you're working with.'
A further advantage Uber claims is better access to drivers in times of high demand. Uber argues that its surge pricing policy makes it more lucrative for drivers to work in periods of high demand and that this encourages drivers to be available at these times.
The Choice study comparing taxi service to Uber found Uber to be more reliable in terms of whether the booked vehicle would actually arrive. A spokesperson for the taxi industry explained this by stating 'If the closest driver doesn't accept it within seven seconds, it will get sent to the next closest driver, and so on. And if the job has been sitting there for 20 minutes or longer, cab drivers know the chances of the passenger still being there are low.'
Choice concluded, 'Part of the problem may be that taxi drivers are told the passenger's destination, which may make short trips less attractive. Uber drivers, on the other hand, aren't given your destination until they turn up.'
2. The Uber system is safe for the commuter
Uber claims that its drivers are thoroughly checked and that there is a range of systems and procedures in place to ensure that commuters are safe.
Uber spokesperson Katie Curran has stated, 'Uber drivers are people like me and you that go through very thorough screening processes. They have to be over 21, have criminal background checks from the police, an exemplary driving record; they have to have full insurance policies... so every trip is fully covered.
So once they've passed the background checks we on-board them and train them how to use the app, (and) train them how to do customer service.'
Regarding the cars which Uber has its contractors use, Ms Curran further states, 'The vehicles have to be no older than 2005, four-door.'
Ms Curran claims that Uber's systems and procedures supply many safeguards for the consumer. For example, users can see their driver's picture and rating as soon as he or she had accepted the job.
Ms Curran explained further, 'The rider rates the driver out of five stars, and the driver rates the rider... so everybody's on their best behaviour because the anonymity has been taken out (of the process). You're not sort of putting your hand out on the street for someone to have to come pick you up.'
Ms Curran added that the app also allowed users to share their location and ETA with loved ones by clicking a button within the Uber app. She stated, 'They can literally watch you turn-by-turn get home.' Uber has noted that this is a level of accountability that no conventional taxi company offers.
In 2015, Choice, the consumer lobby group, made 56 trips around Sydney - half UberX rides and half regular taxi rides - in pairs and at seven different times to capture surge pricing.
Choice spokesperson Tom Godfrey concluded from this survey of Uber reliability, 'When we looked at a comparison between UberX and the taxi industry on things like checks, record of trip, GPS tracking, rating system and insurance, UberX performed very well, as did the taxi industry.'
3. Compensation can be offered to taxi licence owners
It has been claimed that taxi plate owners, who have opposed the legalisation of Uber because they believe it offers unfair competition to their businesses, can be compensated.
When in December 2015 New South Wales legalised the operation of Uber in that state, the government put in place a compensation scheme for taxi plate owners.
In a facebook announcement made on December 16, 2015, the New South Wales Premier, Mike Baird, stated, 'The thing that has made the taxi/ride-share situation difficult to manage is that, unlike other businesses facing disruption (say, video stores facing disruption from Netflix) the government has sold and regulated taxi licence plates and has a responsibility to offer some protection for the mums and dads and investors who own these plates.'
The perpetual owners of taxi plates, about 5800 people, will receive a $20,000 payment for the plate. Multiple plate owners will receive a maximum of $40,000.
A further industry compensation fund of up to $142 million will be used to pay licensees who are facing "hardship" as a result of the changes, because they only bought plates recently. The total industry fund is budgeted at $250 million.
Taxi and Uber drivers will pay the government a $1 levy per trip for a maximum of five years to fund the compensation package. It will be possible for them to pass that charge on to the consumer.
The New South Wales government has also stated that its removal of many of the regulations affecting the taxi industry was also intended to reduce costs for the industry. The government has estimated that there will be a $30 million reduction in regulatory costs.
The New South Wales Minister for Transport and Infrastructure, Andrew Constance, has stated, 'By taking regulatory and cost pressure off the industry and unlocking more point-to-point services, we expect to create hundreds of new jobs over the next few years.'
Mr Constance has also stated with regard to compensation to taxi licence plate owners, 'It's important that we don't forget those who have poured their savings into taxi licences over the past decades and ensure they get equitable assistance as this industry adjusts to changes in our economy.'
4. Uber offers advantages for the car-owner-driver
It has been claimed that Uber drivers enjoy a number of significant job advantages, especially in comparison to conventional taxi drivers. The Uber drivers' forum lists a number of these advantages.
These include: 'An Uber driver can work as much or as little as they want. The phone/application can be turned on at any time to work and turned off just as easily. Thus the driver creates their own schedule on the fly.'
It has also been noted that in addition to flexibility, the Uber driver enjoys relative independence and freedom from oversight. The drivers' forum states, 'Although there is a manager for the drivers and sometimes they do give suggestions or pass on critique, for the most part there is no boss saying what to do and when. A driver is on their own prerogative to go where they please when they please. A driver's boss at times can be more the passengers. A driver has to maintain a 4.5 or above rating to not be cut from driving. While riders can get bossy at times, the good thing is it's not long before they are dropped off. The driver rates the passengers as well.'
The drivers' forum also notes that drivers have access to greater earning capacity through 'surge pricing'. At times of high demand, for example public holidays, Uber charges a significantly increased fare - sometimes up to seven or nine times the usual rate. Uber justifies this as a way of ensuring that there are Uber cars available at times of high demand. Uber also claims that surge pricing gives drivers an opportunity to increase their incomes.
The Uber driver forum states, 'Although getting a surge ride (an exponentially increased fare) can be elusive, it can also be lucrative. Especially for big events and holidays; Surge can make the riders fare relatively expensive and the drivers shift a lot more productive for the paycheck. Drivers get 80% of the fare, regardless of the price.'
It has also been argued that companies like Uber make it possible for a driver to enter the taxi industry without the expense of purchasing a taxi licence.
Referring to the situation that exists in the United States, Professor Austan Goolsbee from the University of Chicago has stated, 'You have to pay hundreds of thousands of dollars for a [taxi] medallion - it's a protected monopoly.' The medallion that Professor Goolsbee refers to is the equivalent of a taxi licence plate in Australia, which, in New South Wales, for example, can cost approximately $400,000. Many owners of taxi licence plates then employ others to drive for them; however, supporters of Uber argue that Uber drivers are better off than these secondary drivers for the reasons already given - flexibility, independence and earning capacity.
5. The conventional mode of taxi ownership and operation is inefficient and exploitative
It has been claimed that the conventional mode of taxi operation in Australia is both exploitative and inefficient.
In September 2012 the results of a sixteen-month inquiry into taxi operation in Victoria were released. One of the conclusions of the enquiry was that taxi licence plate holders were more interested in maintaining their virtual monopoly, retaining the re-sale value of licences and the profitability of the industry than they were in improving service.
In terms of the faults within the current taxi industry, the report noted, 'There was widespread agreement that taxi services need to improve. Almost all submissions and responses to the inquiry from outside the industry continued to express significant concerns about service, including poor driver quality, unsatisfactory performance by taxi booking services, problems with taxi availability during peak times or in particular locations, and issues with accessibility and services provided to people with a disability.'
The head of the inquiry, Professor Allan Fels stated, 'Key elements within the industry have focused largely on maintaining high licence values and assignment fees, shielding anti-competitive forces within the industry and shoring up the position of licence holders, large fleet operators, taxi networks and other protected stakeholders.'
Professor Fels also stated, 'Victoria's taxi industry has operated for many years as a "closed shop", with a small number of licence holders protected from the effects of competition at the direct expense of consumers, taxi operators and taxi drivers (who continue to experience low levels of remuneration, poor working conditions and a highly risky work environment).'
The consumer lobby group Choice, when comparing the operation of conventional taxis and Uber vehicles noted, 'Despite taxis being significantly more expensive most of the time, taxi drivers certainly aren't raking it in. Uber says its drivers earn around $30 per hour on average, while a survey of taxi drivers in NSW last year found taxi drivers earn $10-$14 per hour depending on the time of day - well below the minimum wage of $17.29 per hour.' The conclusion critics have drawn from this is that the current mode of taxi operation has resulted in the exploitation of many drivers, who work for a very low hourly rate. This does not encourage job satisfaction or the retention of a skilled workforce.
Professor Fels was critical of a system which restricted the number of taxi licences available thus boosting the cost of the licences and encouraging licence holders to maximise their profit by employing drivers to drive at low rates over a twenty-four hour period.
The taxi inquiry made a number of recommendations; one of which was 'The removal of impediments to the introduction of group hire services, such as taxi shuttles and share rides with flat fees.' 'Share rides' is another term used to describe the type of service Uber supplies.
The inquiry believed that a better service would result from the taxi industry being exposed to greater competition and one of the means of achieving this is to legalise operations such as Uber's.