Uber may be a net benefitMonday, June 21, 2021
The recent developments in the transportation industry concerning the fare increase and Uber's entry to the market have occurred in conjunction with my study of Adam Smith's book, Wealth of Nations, as he is credited with being the “father of economics/capitalism” as his economic theories hold true today.
I have reached Book 1, Chapter 10 of the Wealth of Nations, that is called 'Of The Wages and Profit In The Different Employment Of Labour And Stock', in which he addresses how income and profits are distributed.
One way, as he puts it, is by the nature of employment, such as the amount of trust for that position, such as lawyers and realtors, the skills required, such as scientists, etc, that would yield higher wages and profits. The other one, which he hated as much as I, was income distribution by policy or, in this case, government decree. He was against special interest groups such as corporate conglomerates, trade associations, and the like, which brings us to this fare increase.
It is no longer a secret that the taxi associations across Jamaica are in a fond relationship with the Government. They can easily take their request to raise fares by any percentage points to the respective ministry, even though it may not be accompanied by an increase in service or value-adding. Hence, the fare hike of 80 per cent being proposed, even in an economic downturn in the business cycle that has affected the people who have lower incomes a lot — which happens to be the main demography that would be affected by the fare increase as they may not have the ease of accessibility of private transport — can be lobbied for with some success.
Uber is not only a revolutionary service that could redefine public transport both industry-wise and legally, it could probably destroy the lunch ticket that could be the fare increase and possibly drop fare prices. Moreover, contrary to some critics, like AirBnB, which is just an intermediary that pairs property owners to short-term tenants for mainly tourism purposes for a fee, Uber links private vehicle owners to consumers, so it is not a foreign taxi company that hires international workers and “would take money out of the country”.
While some money would, no doubt, go to Uber overseas as subscription fees, the bulk of it would remain in the hands of private Jamaican drivers who would gain a greater share of the market of the transportation industry and would help to create a local gig economy of part-time freelancers who would have a job and a part-time 'hustle'. It would also cause quality and price to be the main focus on commute and would likely result in an increase in quality, but a drop in price.
While this may be a glittering picture, like all things in economics, there are trade-offs. The taximen may find it variable when it comes to competition. While there may be internal competition, they seem to be politically unified as a trade association that can lobby for a fare increase. They may not be familiar with competition against another economic agent that does not hail from the same faction, and may have it harder where they are forced to increase the quality and be more efficient to make a profit, thereby hurting them in the short term but allowing them to gain a benefit in the long run with healthy competition.
Overall, I think that Uber may be a net benefit, and legislation must be amended to also accommodate such transport types. However, with the political grip of the taxi associations over municipal and even central government, the political will may be lacking to do so, which would further protect the interests of the taxi associations and their fare increase, even though it may come at a cost to the consumer in terms of more expensive services without any revolutionary increase in quality and customer service.
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