Manchester cabs: Our stupid Soviet system
In Manchester, most industries compete on price, service and quality - except the taxi cab industry. That is for one simple and little-known reason. The city sets all cab fares by ordinance. Every cab in the city must charge exactly the same price, set a dozen years ago. In 2008, aldermen allowed for a temporary fare hike after gasoline hit $4 a gallon. But in 2009, when the average price of gas dropped to $1.83 a gallon, the hike was rescinded, and cab companies were forced to return to the rates set in 2001.
Looking back, the point at which aldermen lowered fares in 2009 happened to be near the five-year low for gas prices in New Hampshire. Prices now average $3.59 a gallon. But city taxi companies are barred by ordinance from covering that expense by raising their rates.
If you owned a cab company and you were put in that same position, what would you do? You can't pay your drivers less than the minimum wage. You cannot raise prices - or lower them to generate more business. Any fare discounts must be approved by the city, and if they are not approved the company must wait six months before trying again. One of your only options would be to defer maintenance on your vehicles.
So the news this week that every city cab was pulled off the road for inspection violations comes as no surprise. City policy virtually guarantees that cab companies will invest as little as possible in their cabs.
If aldermen want better and safer cab service in their city, they will have to free the cab companies to compete with each other. If we keep these Soviet-style price decrees, we will continue to get Soviet-style cab service.