Free the market and most aspects of living will fall into order naturally. The more they engaged professionals to overcome systemic and structural problems, the more vicious and complex the latters become. It is clearly a case of too many cooks spoil the broth.

There's probably a misunderstanding over the reason for the surcharge. Reason is simple: the surcharge allows taxi drivers to earn more.

As you say, the demand for taxis is not constant. Peak hour is as the name suggests the time where the demand exceeds supply. This means that you can charge more and people will still pay. Therefore charge more loh.

Removing the surcharge will do little more than reduce the income of the taxi drivers.

Perhaps you may wish to explain why taxi drivers are not currently competing fairly with the surcharges?

The taxi drivers have beaten the system. So, this is what they do during peak hours. They leave their green light on or deliberately put on their on hire, where the cab is totally empty. Then, they wait for the people to give a call (and some of them are hiding somewhere, particularly the blue cabs) such that they earn another $4, and it totals to $6. So, in the end, in the peak hours, a lot of people have difficulty in getting cabs.

In obvious terms, the surcharge does not reward the good taxi drivers, who just pick anyone and go. Most Silver Cabs and SMRT cabs do just that because some don't have the call system installed. That's why removing the entire surcharges will force the bad cab drivers for not being rewarded.

Beside the customers (us) as the stakeholder, we need to consider the incentives of the taxi drivers and the cab operators.

I believe the key reason for taxi drivers "bad" behaviors is because the supply of cabs is constrained in Singapore due to the lack of supply of taxi drivers at the current wage level.

These cab drivers can therefore pick and choose who to pick up during peak hours in central areas where demand is highest. For example, if you want to take a cab at 10am or 3pm, you will have little problem getting a cab anywhere because supply is way more than demand. Better get a customer to Tuas than to cruise around empty.

Why doesn't the supply of cabs increases then if customers are unhappy with the situation during peak hours

There could be a few interrelated reasons:

1) Dominant player in Singapore - Comfort. There is no incentive for Comfort to increase the number of cabs to bring down the wages of their taxi drivers because there are other job opportunities for the marginal taxi drivers who are choosing to enter or exit the taxi industry. Comfort being a public listed company want to maximize shareholder returns and will not compromise its own margins (cab rental cost, cab insurance etc) to increase the wages of taxi drivers. It want to set the wages of the taxi drivers low enough to maximize its own profit but not so low that it cannot find taxi drivers to drive its cab.

2) I am not sure if the government constraint the supply of cabs of the other competitors - if so, then this policy may need a rethink. Maybe the constraint by the government (if true) is to protect the wages of the cab drivers due to a dominant player in the cab industry. This may be unnecessarily due to free market forces, because Comfort cannot flood the cab market (increase its revenue from cab rentals etc) because of the constraint in supply of taxi drivers due to lowering wages because customer volume per cab driver will drop.

3) Competitors to Comfort cannot increase number of cabs given the constraint of supply of taxi drivers at the current wage level which is implicitly set by Comfort. Therefore, even if the competing taxi operators want to grow, it is hard to increase the number of cabs because Comfort is the price setter (monopolistic behavior). Assuming that there is some economies of scale (i.e. booking system, overhead etc) for being a large operator, Comfort is setting the wages of the taxi driver through the fare pricing and surcharges at a level that prevent their own taxi drivers from leaving for other opportunities or the competitors. The competitors can only provide a better wage to compete for taxi drivers from Comfort or increase the pool of supply of taxi drivers (there will be more taxi drivers for sure if one can earn $5000 in the same hours - my guess is around $2000-$2500 for their long hours (>10 hours a day and around 6 days a week) by cutting their own margin, but it may not be feasible for these competitors to compete in this fashion with Comfort in the long run. Comfort has other businesses to cross-subsidy if necessary in a price war. Unless the competitors have a huge government subsidy or employ radical technology (super efficient hybrid car that doesn't use much fuel) which Comfort does not have, it will not be able to increase the supply of their cabs if the supply of taxi drivers in Singapore is constraint at the CURRENT wages of taxi driver.

4. The other constraint why we cannot double the wage of taxi drivers (and increase the supply of taxi drivers) now by doubling the basic fare and surcharges is because of other competition such as MRT, buses, and cars. Because of the heavily networked public transportation system in Singapore, cabs do fare real competition from MRT and buses. I am 100% sure the number of customers taking cabs will drop in a noticeable manner if the starting fare is $5 regardless of the time, and booking surcharge is $6 anytime. The much lower volume of customers will force cab drivers who are initially attracted to the higher wages to exit because there are now fewer customers.

Back to the article:

BL, I have to disagree with you and Tabitha recommendation to remove the surcharge - this is not addressing the fundamental problem of supply constraint. There are also other adverse implications for removing the surcharge, harming the customers who we think will benefit.

Situation: During peak hours, the supply of taxi is lower than the demand in central areas.Customers have to call and pay $3 surcharge to avoid waiting for a long time for a cab. The booking system during the peak hour is a form of price discrimination. There are two types of customers. Type 1 value their waiting time more than the $3. Type 2 value the $3 more than the waiting time. Therefore, the booking system allows customers to reveal their willingness to pay for a cab during peak hours.

Complication: Therefore, taxi drivers have the incentive to wait for a call by stopping their cabs on the side of a quiet road or put on hire light when the cab is empty since there will be sufficient calls because many people do not want to wait for too long. Customers who call value their waiting time of 20-60 minutes as compared to $3.

Recommended Solution by BL and Tabitha: Take away the surcharges during peak hours and force the taxi drivers to compete fairly. (I assume the surcharge is the booking fees)

Problem:

A. Type 1 customers will suffer at the expense of Type 2 customers. If someone really need to go somewhere urgently during peak hours (like Tabitha), and it is really hard to get cabs because of the fact that demand is more than supply, then Type 1 customer has no option. If booking fee is removed, everyone with a cell phone will call for a cab, which is the same as everyone trying to flag a cab without booking function. What can Type 1 customer do now? Assume supply of cab is constraint by supply of taxi drivers at current wage level.

BL - Your thoughts?

B. In order to ensure the supply of taxi drivers in this strong economy, the taxi drivers have to be made whole or else other opportunities may be more attractive. One way is to increase the base fare during any hours . Therefore, customers taking cabs during off-peak hours are "subsidizing" customers during peak hours.

BL - Your thoughts?

My recommendation to address Tabhita issue of not getting a cab quickly by calling is as follow given the current situation we are in.

A. Actually have an additional premium calling line where customers can pay $5 booking fee during peak hours and guarantee reaching an operator in 5 minutes (or the booking fee falls to $3). This further form of price discrimination allows individuals who place higher value of their time to obtain a cab.

The next recommendation B is effective but I will not recommend it because it relies on government intervention to address a supply constraint issue, but will definitely be effective:
B. Heavily fine taxi drivers who do not stop or refused a ride by having mystery shoppers calling and stopping cabs. Mystery shoppers will have to be paid and given authority by the government to provide an objective evaluation With the current dominant cab operator situation in Singapore, there is little incentive for the operators to all come together to sponsor this mystery shoppers program. This will further reduce the effective wages of a taxi driver because of their inability to pick and choose, and supply of taxi drivers will be reduced, and may result in an increase in base fare and surcharge to attract more taxi drivers.

I am basing my argument that the supply of cabs is constraint by the supply of cab drivers at the current wage level, which is my hypothesis based on the ads ran by Comfort to recruit cab drivers in recent months in this strong economy. Why will comfort run an ad for taxi drivers if they find it hard to attract them? I don't see such ads during 2002-2004 during the downturn and SARS.

Final thoughts:

Comfort can actually address pet peeves of customers in peak hours by INCREASING the wages of taxi driver through fare increase to increase the supply of cab drivers (and cabs)assuming two things:

A. Other competitors will follow the fare increase, which I think will happen. Only incentive for the competitors not to follow is that they believe their cab drivers will take home more money due to increase in volume (because they are cheaper now) MORE than the lost in the potential fare increase. However, the increase in volume may be minimal (unless the fare difference is significant) because customers tend not to pick and choose which cabs to take especially when they need to go somewhere fast (which people tend to do so if they want to take a cab).

B. Take home wage must increase because the increase in fare will overcome the decrease in volume of customers. Volume of customers decreases when fare increase because of MRT, bus and car competition. No point increasing the fare to an extent that the customer volume drop and the cab drivers take home the same wage. I think the term to be used here is price elasticity of demand.

I'm skipping all reading with any allusions to economic theory, as they say, talk is cheap. BL is right on this account. I have witnessed groups of taxi drivers literally waiting around in a secluded corner in the city area waiting for a call (this happens in the night even after midnight).

Sights of drivers choosing their passengers are increasingly common. Interesting to see how many of them tend to whip out their preferred destination signage at the last minute.

You need examples of how drivers of Premier services like the white Mercedes cab behave like a driver in third world countries? Hang around the MacDonald in Boat Quay in the evenings and you can feast your eyes on their pandering/touting to all the Ang Mohs who walk past. Do they get extra tips? I don't know.

I believe that the cause of the problem and the solution lies in economics, rather than micro-managing incentives. I'm not sure that I agree with the attitude that having cabs available at a reasonable cost (for some definition of reasonable, which not all parties may agree with) is possible.

Unlike most other forms of wages, the income for cabbies is rather sticky and can't really respond to changes in costs or economic cycles. This is due to socio-political reasons rather than pure economics. Hence, strong supply or demand imbalances are likely to occur. We have to find a way to manage that outside of the traditional taxi industry, which are not so tightly bound by similar socio-political reasons.

Demand changes during different times of the day while supply is roughly constant. Surcharges attempt to depress demand by increasing price but my (unsubstantiated) guess is that demand during peak periods is quite inelastic. Real attempts to equalise this problem through price action alone will lead to socially unacceptable surcharges.

I don't think there is an easy answer but my suggestion would be for car service providers (ie chaffeurered town cars) to provide phone booking car service rather than cabs. In NYC, for example, only yellow "medallion" cabs can pick up passengers on a street hail but other for-hire car services pick up the slack by being the providers of "phone-booking" car services. These companies have more flexible price structures and as new entrants, would be less bound by existing socio-political constraints. They can also be cheaper than cabs in certain situations (at least in NY they can be).

I don't think taxicabs are enough of a social need that we should have websites publicising errant cabbies or pass laws regulating their behaviour.

Siu Tar,

You state, " Unlike most other forms of wages, the income for cabbies is rather sticky and can't really respond to changes in costs or economic cycles. This is due to socio-political reasons rather than pure economics."

Care to elaborate what are the socio-political reasons? Thanks.

Sze Meng:

Costs for cabbies, especially fuel costs, are highly volatile. However, I've noticed that changes in the fee schedule for taxis usually change only once every 2 years or so. Prices also don't ever come down.

Part of it may be because cab fares, while not regulated by the PTC officially, are still subject to either ComfortDelGRo's market dominance or unofficial price intervention. There is also public pressure not to let cab prices change too rapidly.

Lastly, and perhaps most persuasively, the mere fact that articles are being written over this and it is viewed as a matter of public policy indicates that there is some socio-political element to taxis and that they are viewed as public transportation instead of being a pure commercial transaction.

Siu Tar -

I interpret your "public pressure" not to change (or increase since it never goes down as you pointed out)cab fare is due to the market forces of competing transportation such as MRT and buses. Therefore, isn't this stickiness of cab fares due to market forces (people will take other forms of transportation) rather than socio-political reasons.

Soico-political reason is more like the PTC overseeing the bus and mrt fares increases, unless you tell me some other bodies beside the consumers and cab operators are influencing the cab fare. Maybe you are right that PTC affects the cab fares by indirectly capping the increase of bus and MRT fares - second order effect.

My hypothesis is that comfort will want to increase cab fare as high as they can without compromising the take home wage of the drivers due to loss in volume of customers caused by fare increases, because the supply of drivers are constraint at any given wage level.

Soon Sze Meng -

I think you may be slightly off on Comfort's motives. From what I understand, Comfort's revenue is derived from two main sources: (1) taxi rentals (drivers renting taxis from Comfort pay a daily fee); and (2) taxi bookings (Comfort gets a cut of the booking fee for each taxi booking). Hence Comfort does not have a direct stake in increasing the take home wage of its drivers. If there is sufficient demand such that most Comfort taxis are being rented, Comfort has no incentive to try and increase its drivers' take home wage.

NL,

You said, "If there is sufficient demand such that most Comfort taxis are being rented, Comfort has no incentive to try and increase its drivers' take home wage."

I agree fully given the current fleet size, unless Comfort wants to INCREASE the number of taxis being rented (i.e. purchase more taxi to rent out), and in order to actually have more taxi drivers renting these extra taxis, it may have to increase the take home wage for all taxi drivers to attract the marginal taxi driver to sign up to rent a cab (or give rebates for new taxi drivers). i.e. increase demand for MORE comfort taxis being rented

More taxis being rental = (1) More taxi rental revenue.

However, not sure if Comfort is constraint by market forces and/or govt regulation to INCREASE the number of taxi being rented.

Heh, perhaps its not about removing surcharges or more cabs, it is just a taxi driver service problem. They don't want to provide a service that they are supposed to, like hanging out until the witching hour cometh instead, as they want a better deal, like wait for bookings.

Cab companies like Comfort must be willing to look into complaints by the public of such play punk cab drivers. The public must be on the ball to complain, Comfort and SMRT etc must be on the ball enough to publicly take action against cab drivers who are recalcitrant ("3 strikes you are out" sounds fair enough) in waiting out for a good deal.

TVD,
What incentives do Comfort and SMRT to REALLY punish its cab drivers if people still take cabs and cab drivers continue to pay for the rental of the cabs? Comfort can say all they want about "punishing" the errant cab drivers, but the situation clearly show otherwise.

Unless there is a mass boycott of cabs or drastic reduction of the number of people taking cabs - I doubt Comfort will really want to tekan its customers who are really the cab drivers who pay for the rental of the cabs.

Such is the situation of pure market forces at work, unless the government intervene, which I think LTA is doing something about it (evaluation of cab services?)

Hi SMS

LOL Damn, got cornered! Yup. There is no incentive for cab companies unless their profit margins are hammered. They already smugly pocketed the rental money from cab drivers. Hmmm But your point about the govt's hand in the market is interesting - fining cab companies for cab drivers with verified and recalcitrant bad service as part of the solution?

TVD - The question is whether we want govt to be involved? Is there a market failure?

aiyoh, what is it about people that they think that they have a right to maximize their own wages but other people should hold down their wages ?

Why should taxi drivers be denied the chance to earn a booking fee ? You might as well say that private GPs should be compelled to charge polyclinic rates and take the overflow of patients when there are long queues at polyclinics.

Of course taxi drivers will wait for bookings, and take a break before midnight. What else would you expect them to do ? If you were a hawker, would you go for a break from 12-2 then re-open your stall between 2 and 5, or the other way around ?

haveahacks (you referring to that Hacks sweet?):

Because a booking fee is a premium charge, it is a market clearing 'device' meant to separate those who are willing to pay more for a booking fee in order to get a cab, and from those who are willing to spend the time by the taxi stand or roadside flagging for one.

Thus, all things standing, as a consumer, taxi drivers whose actions indicate that they are only interested in this premium section of the market makes some of us fume especially when we see taxis with "on call" signs taking up space in taxi stands. And one reason is many of us are used to seeing taxis as a form of public transport, that is no different from a premium service offered by Bus companies (Busplus etc).

Char kway teow example is abit, hmmm, incomparable, since we do have a larger variety of alternative choices for our dietary needs whereas there is a much lesser variety of public transport choices.

Oops, sorry, not Char Kway Teow example, but the Hawker example.

Haveahacks

Even comparing the perennial favourite of LTA and taxi management companies of HK and Taiwan, it is cheaper both converting to S$ or using the PPP to take taxis there.

Noticeably, if the peak surcharge was interchangeable with the phone booking call charges.

Further, the LTA should ensure that the phone booking charge is not higher than the peak surcharge so as not incentivise the drivers to only wait for phone booking charges which is the time period is getting wider.

I do not believe it is cheaper to take taxis in HK, based on my (admittedly few) trips there.

There may be a few reasons to criticise Singapore cabs, but by any measure, it is relatively inexpensive.

Siu Taur

Even with currency exchange to SGD, it is cheaper in HK or Taiwan. Further if you were to compare either the median or mean income levels to the average taxi trips, you would find that it is cheaper in those places on PPP basis

Regards

May be this will work! Increase normal Taxi fare but decrease on call and surcharges...

I think you guys out there are talking too much theory but no practical reasoning.My suggestion is that you put yourself in the taxi drivers shoes (or even better ,drive a taxi yourself) and you will understand the taxi situation in singapore.I am a taxi driver myself for 9 years and I am qualified to access the current situtation.Everyday when I am on the road,my ultimate goal is to make a better if not a decent living for myself and my family.I think this goes for every taxi drivers on the road.Everyday is so uncertain.There are good day ,there are bad day.So I have come to a conclusion that I need to have a proper plan in order to achive my targets and not plying aimlessly on the road.Time is my greatest enemy (not my fellow taxi drivers) as I have limited time plying on the road.I can't be working more than 12 hours a day everyday or I'll land myself in hospital.All of us in this industry want to make a decent income for our family and drive as long as we possible can till we are old.I join comfort 4 years ago after I have driven for companies like smrt,citycab,smartcab.I can only said with comfort my income is more stable than the others.Why?The call system.I attend to more calls even in ulu areas.In the city I do not need to hide.Entering into orchard from Yishun,AMK thru the CTE,I will get calls easily in less than 3 minutes even I have to bypass all the flaggers on the road.This is $4 extra.Will you do it if you have a choice like me?(Don't answer too quickly).You see, all drivers if they are given this choice will want to earn more money and hopefully retired early for the day.For the other taxi operatos' drivers,there do not have a better choice than comfort drivers.Their call rate are lower so they have to pick as many passengers as they can.To solve this taxi problems in the city we have to beat the call system.Have you ever wonder why comfort delgro spent millions of dollars upgrading their statellite system to perfection?Well,this is the only way that they can be the market leader and stay ahead.This is the only way they can monopolised the industry and do whatever they want.If the call system collapsed,I think comfort will not have a leading edge.Drivers will not drive for them as they have the worst benefits and welfares currently in the market for their drivers.Recommendation:All taxis will charge a surcharge of $4 for pick up in the city.This is to counter the booking surcharge levy by comfort.Taxis from all operators will compete fairly for any passengers in the city including comfort drivers.No call booking is required unless deem very necessarily.Will taxi wait for calls anymore?I don't think so.Is there incentive for taxi drivers to rush into the city?Yes.Will drivers pick up anyone as soon as possible? Yes.If this is the case the demands of taxi in the city will be met at least to the max. possible.Will taxi need to hide anymore? NO.What is the time frame set for this surcharge.From 5 pm to 11.00pm.(Mon to Fri.) This is what comfort set for the call booking surcharge.Of course all other surcharges still apply like peak hours,ERP and CBD.What is the purpose of this recommendation?To beat comfort call system.Comfort drivers need not wait for calls anymore once they are in the city ,just pick any passengers that come along.Same goes to the other operators.More cabs will rush into the city as taxi demand is high and there is extra surcharge.Who should imposed this recommedations? LTA (LTA should try this recommendation for 3 to 6 months and see the results.

Wong - thanks for your input. It is very important to look at any recommendation on cabs from the perspective of those who are affected the most - the drivers themselves. Incentives drive actions! Agree also with the pilot test.

Also good point the call system for Comfort is a competitive advantage over other cab companies because of the network effect (like auction at ebay ). The more cabs you have, the more call you received because the customers know there is a higher chance of calling a cab, and the higher chance a cab willl receive a call near its location.

But if LTA imposed this, Comfort will protest becausr it takes away their competitive advantage in the city....

My dad used to be a taxi driver. As he is illiterate so he couldn't the call system at all. Result? His income was very bad. Let's just say that he barely covered his expenses, eg diesel oil, rental and all the erp charges at the end of the month, sometimes he even had to incur losses! Luckily he's just a retiree killing his time.

Now I truly emphathise with the taxi drivers, especially those with young family to support in the face of rising cost eg fuel prices. I think the government should remove the ERP charges for them, so that there's incentive for them to cruise within the city from non-city area. Incurring ERP charges without any passenger is the main reason people like us don't get a cab during peak hours. I think this point was highlighted for a very long time but the government just simply ignores and came up with, instead, letting passenger pay for the ERP charges.

What we need to do is to create incentive for taxis from outside the city to drive into it to meet the demand. It's not that we have limited supply of cabs, it's just that govt is discouraging them to reach out to where the demand is.

On a personal level, I'm really frustrated with not being able to get a cab - even after calling all taxi companies from 9pm onwards, this situation is getting really bad. I hope the government will review it soon.

Kuching - actually it is a good idea to consider for cabs to be exempt from ERP to come into the city - for example, you don't pay extra in ERP to come into the city on mrt and buses during peak hours.

If national policy is to encourage public transportation which cab is part of it, then this should be considered.

The clampdown on cabs in the city now may actually deter an incremental number of cabs from being in the city....every action has a reaction...

Think most ppl here doing the talking do not have the experiences driving a cab. I bet if you were to be a taxi driver, you probably would do exactly the same thing to maximize income unless you drive for the sake of charity, do not mind at all how much you would bring home for the day, even $6 nett per hour earning is good enough and be happy right? Being a nice driver you just have to pay for it, which means getting a lower income. By practicing "smart" driving is the only way to generate more income, and the reason for I drive is that I need money! I would not want to drive if I am not desperate for money as a matter of fact, and it''s not an easy job to drive. There are a lot more to study before an effective and just system would be achieved eventually. But one thing I know for sure, the problem does not lie within driver that much, it has to do with the management of the operations, the whole sytem is unjustifiable. A simple example, if one worker in a company behave in an unfavourable way or breaking the rule could be classified as a special case which is his problem, but if a prominence numbers of workers behave the same way then the problem is the maganement's problem.

who doesnt want more money? ur solution is not practical.
its all making a living. why such words "bad behavior" ?