Comments on: Labor vs capital datapoint of the day, NYC taxi edition http://blogs.reuters.com/felix-salmon/2011/01/22/labor-vs-capital-datapoint-of-the-day-nyc-taxi-edition/ A slice of lime in the soda Sun, 26 Oct 2014 19:05:02 +0000 hourly 1 http://wordpress.org/?v=4.2.5 By: sam234566 http://blogs.reuters.com/felix-salmon/2011/01/22/labor-vs-capital-datapoint-of-the-day-nyc-taxi-edition/comment-page-1/#comment-48084 Sun, 15 Sep 2013 19:37:47 +0000 http://blogs.reuters.com/felix-salmon/?p=7062#comment-48084 “I am a medallion owner, I own half of a corporation of two medallions. I bought it in 1977″

what did you pay for your medallion, 5k ? 10k ? 20k ?

I am surprised you did not sell it in the last year for a million or two and retire, ;)

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By: abienyc http://blogs.reuters.com/felix-salmon/2011/01/22/labor-vs-capital-datapoint-of-the-day-nyc-taxi-edition/comment-page-1/#comment-32214 Sat, 22 Oct 2011 10:47:05 +0000 http://blogs.reuters.com/felix-salmon/?p=7062#comment-32214 Excuse me, but I’d just like to point something out that you all may be missing:

I am a medallion owner, I own half of a corporation of two medallions. I bought it in 1977 and worked my ass off for 34 years to get where I am today. I deserve all that I’m getting now. I’m not wealthy but I can retire with some steady income. Is anything wrong with this? I don’t think so.

I think your all jealous. Just because the taxi business is in the public eye doesn’t make it public property. We are all private businesses that have done well. There are many other cases of businesses that have done well that are not in the public view. Perhaps you should pick on some of them!.

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By: xNYCMarc http://blogs.reuters.com/felix-salmon/2011/01/22/labor-vs-capital-datapoint-of-the-day-nyc-taxi-edition/comment-page-1/#comment-23774 Sun, 06 Feb 2011 08:21:30 +0000 http://blogs.reuters.com/felix-salmon/?p=7062#comment-23774 “Two shifts per day at $130 each translates to a bit over 90,000/year. If I can buy that income stream for $880,000 than that works out to roughly a 10% yield. Pretty nice in this market.”

Your numbers are a little off. The maximum amount a cab leased out to drivers can earn over a year is $82,524. This assumes that the cab had a driver every day and every night and that it never broke down. The day shift maximum charge is $105 not $130. The maximum night shift charge is $129 and that is only for Thursday-Saturday. Sunday-Tuesday is $115 and Wednesday is $120.

You’ve also left out of your calcultions the cost of the car. Let’s call it $27,000 and you are required by law to buy a new one every 3 years. If the owner drives the car 219 shifts per year, he need only replace the car every 5 years. You are also required to provide all maintenance, insurance, and workers comp.

I paid $614,000 for my medallion and $26,500 for the car. I drive Mon-Fri night shift and I lease out the other shifts to other drivers.

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By: TurtleBay http://blogs.reuters.com/felix-salmon/2011/01/22/labor-vs-capital-datapoint-of-the-day-nyc-taxi-edition/comment-page-1/#comment-23483 Tue, 25 Jan 2011 13:19:21 +0000 http://blogs.reuters.com/felix-salmon/?p=7062#comment-23483 If you think that the medallion system is bad (I agree it isn’t the best way to do things) then you need to find another way to ration taxi licenses. Medallions aren’t purely political graft, they are intended to prevent conjestion in lower Manhattan (just like the proposed conjestion charges). A previous poster pointed out that there are around the same amount of medallions as there were in the 30’s. This makes sense as the Manhattan road infrastructure hasn’t changed much since that time (capacity is about the same).

Without the medallion system the number of cab drivers would triple overnight and the bridge, tunnels and major avenues would be quickly clogged. Therefore you would need a random lottery or a first come first serve waiting list or some other form of rationing. Both of there are still rationing and people would still try to sell their rights to be a cab driver under any rationing system.

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By: sditulli http://blogs.reuters.com/felix-salmon/2011/01/22/labor-vs-capital-datapoint-of-the-day-nyc-taxi-edition/comment-page-1/#comment-23465 Mon, 24 Jan 2011 17:08:57 +0000 http://blogs.reuters.com/felix-salmon/?p=7062#comment-23465 I remember seeing Chicago cab driver income before. I think it was $13k/year and worked out to like $4/hour. But they probably don’t record a lot of their income which is also then tax free income.

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By: y2kurtus http://blogs.reuters.com/felix-salmon/2011/01/22/labor-vs-capital-datapoint-of-the-day-nyc-taxi-edition/comment-page-1/#comment-23461 Mon, 24 Jan 2011 15:19:41 +0000 http://blogs.reuters.com/felix-salmon/?p=7062#comment-23461 Two shifts per day at $130 each translates to a bit over 90,000/year. If I can buy that income stream for $880,000 than that works out to roughly a 10% yield. Pretty nice in this market.

Even if $5,000 in annual capital costs and $25,000 in fuel costs come out of my pocket I still get nearly a 7% yield. Unless there are substantial costs I’m missing medallions look pretty attractive in a low interest rate enviroment.

I don’t get to NYC very much but I know that Cab Drivers in Chichago do really well for themselves. I would be shocked if drivers there made less than $25/hour. “Keep the change” really adds up. They deserve every penny though… I’d have a heart attack in week if I had to deal with that constant stress!

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By: Equityval http://blogs.reuters.com/felix-salmon/2011/01/22/labor-vs-capital-datapoint-of-the-day-nyc-taxi-edition/comment-page-1/#comment-23448 Sun, 23 Jan 2011 22:01:01 +0000 http://blogs.reuters.com/felix-salmon/?p=7062#comment-23448 This is a great example of private profit from a public good. The issue here is that the supply of medallions, other than a tiny increase a few years ago, has been held basically flat since 1937 and is now a little over 13K.

Consider that prior to the Great Depression there were over 30K taxis in the city. The number of medallions was fixed in 1937 at 16,900 but fell to a little under 12,000 during the balance of the Depression as prospective licensees were unwilling to pay the $10 fee to transfer the Medallion. Since then, the demand for taxi services has increased accompanied by a substantial lobbying effort by medallion owners to oppose any increase in supply. The price increase depicted in your graph shows the rewards of cronyism in NYC government to the detriment of the riding public. The inadequacy of supply is also seen in the rise of the livery industry which is substantial in size.

An increase in the supply of medallions would drive down the lease rates and improve the income of drivers. This could be paired with a cut in fares to share some of the gains with the riding public. This would, of course, depress the price of medallions, but that is one of the risks of investing capital. Further, there is no evidence that the medallion system was set up with the intention of createing a capital asset for the medallion licensees. This is something that evolved over time as the supply of medallions fell with non renewal and then was not allowed to expand with demand as the medallion owners lobbied to keep the supply fixed.

The right way to distribute leases would be to create a bidding system, similiar to the way concessions are given to hot dog vendors in the park. Combined with an increase in supply, this would keep lease prices at a reasonable level and enable a reduction in fares to which have increased far in excess of inflation (from $6.85 in 2004 to $11.71 in 2010.

http://www.orthougm.com/vw.php?p=Taxi Fares In Nyc&d=http://www.schallerconsult.com/tax i/taxifb.pdf&s=629.38

http://online.wsj.com/article/APfbaa3c6f a9194a1da0e4be2f9dab202b.html

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By: Nick_Gogerty http://blogs.reuters.com/felix-salmon/2011/01/22/labor-vs-capital-datapoint-of-the-day-nyc-taxi-edition/comment-page-1/#comment-23437 Sun, 23 Jan 2011 15:37:12 +0000 http://blogs.reuters.com/felix-salmon/?p=7062#comment-23437 The “price” of a medallion, should be re-set, relative to feedback related to the licence. NYC cabs could then compete on service. so for example positive or negative feedback about driver experience would determine part of the cost of the medallion or a fee to the city. consumers are the ultimate losers in this game which means medallion owners squeeze as much revenue at the lowest possible unit cost of service and labor out of the medallion. A hybrid (cash and experience) ratings medallion bidding model would make this service $400k X 10k = $4billion asset perform at some real world level of service. As it is now cabs only appear clean and safe relative to the subway experience, with both horrific in absolute standards of service.

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By: ErnieD http://blogs.reuters.com/felix-salmon/2011/01/22/labor-vs-capital-datapoint-of-the-day-nyc-taxi-edition/comment-page-1/#comment-23429 Sat, 22 Jan 2011 22:38:07 +0000 http://blogs.reuters.com/felix-salmon/?p=7062#comment-23429 Please explain your data point of the shift income vs shift lease cost. It makes no sense that the drivers could survive more than a week if they bring in less income than the fixed lease cost. I assume that the income must be net income, not gross.

Probably one of the reasons that it is difficult to get a handle on driver incomes is because of the amount of cash business. There is probably much unreported income. Any equipment that makes it easier to use debit and credit cards is likely to shift more of the income from cash to plastic which now becomes recordable and taxable, especially tips. I suspect that at least some of the resistance to increased machines is to reduce the number and quality of transaction records.

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By: dWj http://blogs.reuters.com/felix-salmon/2011/01/22/labor-vs-capital-datapoint-of-the-day-nyc-taxi-edition/comment-page-1/#comment-23425 Sat, 22 Jan 2011 20:30:28 +0000 http://blogs.reuters.com/felix-salmon/?p=7062#comment-23425 Without the Marxist twaddle, one would say that since medallions (not cars or drivers) are the scarce resource here, it is the medallions (or their owners) that bear the burdens and gain the benefits of changes in the regulations (or, e.g., gas prices, or other costs).

Prices not being perfectly flexible, some changes that incide directly on the drivers do seem to affect them for a time; my brother, one of the most economically educated former taxi drivers in the country, thinks that a period of a year or two is a good estimate. A short term spike in gas prices comes out of drivers’ pockets; a sustained rise will reduce the values of the medallions.

Your chart of price gains of medallions would seem less directly relevant to me, incidentally, than a chart of the rental income. Some of the price rise is surely due to a reduction in the availability of other investments, viz. a drop in interest rates generally. How much might be due to changes in expectations of future rental rates is another confound.

Finally, in re your very first sentence, I’ve typically been struck by the taxi industry as exactly the opposite to the usual capital/labor arrangement from what is usually seen. If you look throughout economies at “firms” — units of economic production primarily independent of each other in terms of decision making, and are internally coordinated by more direct means than a price system, at least proximately and in the short run — then it is often easy to conflate “management” (or “firm owners”) with “capital”, insofar as firms typically own the capital but — since the thirteenth amendment in this country — do not own the labor. Economic profits thereby get conflated with “returns to capital”, when in principal they are different. Taxi drivers operate as independent firms (in a truer sense than many “independent contractors” do), but they own the labor and generally rent the capital. Residual profits will look more like labor income, and less like capital income; if one driver has a better system than another, that can’t be extracted from him by medallion or vehicle owners, and will appear (within the naive dichotomy) to be “wages” rather than “capital returns”.

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