Ride Sharing Services: Economic and Financial Considerations
This week’s blog will include economic and financial considerations brought about by the Ride-Sharing Services (RSS). I will be unpacking the impacts of ICT to productivity growth and how the transport businesses model has changed since RSS was introduced in the market.
Should we as a society care about RSS?
Is RSS bringing more job opportunities to more people, or does it take away traditionally secure jobs like taxi services? This is a controversial topic that is being discussed in online forums and is constantly featured in the news and media.
In my last blog, I have given an overview of the RSS business. It creates a connection for transport service providers (driver-partners) and riders seeking them online. It benefits both major cities as well as regional communities with underdeveloped transport infrastructure. It improves transport access in local communities without additional government-funded infrastructure.
Technology-driven transport business models can help societies like New Zealand to be safe, better connected and vibrant. Let’s take the Uber company as an example, more than 100,000 Kiwis use Uber as a transport option across the country. There are approximately 1500 registered Uber drivers in the major cities of New Zealand. In the United States of America (USA), there are over 8 million users and 160,000 active drivers. These numbers will continue to increase as it provides not only convenience to passengers but also good income opportunities for driver-partners. According to “Business of Apps” statistics , the top two reasons why drivers chose RSS jobs:
- Work flexibility
- 91% higher income than a regular taxi service
Riders prefer RSS over normal taxis, and this shift in behavior is seen around the globe. There has been a constant increase in RSS demand than taxi or car rental services.
As a society, we value safety and convenience as a major consideration when commuting. It so happens that these two are the benefits of using RSS (that is why there has been an increase in the RSS demand globally including here in NZ).
Options to commuters
RSS provides a cheaper fare option for riders with the same (in some cases better) service as public transport (i.e. bus, taxi, shuttles). RSS offers options to ride with a group of people (i.e. Uberpool) and split the cost. It can reduce daily transport expense compared to using public transport and driving a private vehicle (as there are no parking and petrol costs to consider).
However, I reckon RSS companies must also consider providing services for commuters who does not have credit card or no access to the Internet. Other payment channels must be explored to reach out to wider customer base.
The topic on other RSS payment systems will be covered in my next blog as this requires more detailed discussion on implications and impacts of introducing a new RSS payment system.
Time and Productivity
Traffic congestion as a result of the high volume of cars on the roads can cause delays, road rage, high probability of accidents, pollution, and high fuel consumption. With RSS, people are given the option to leave their cars at home and travel conveniently at a considerable cost with less hassle and stress.
If more and more people use RSS, it could lessen the car utilization during peak hours. Fewer cars on the roads mean less traffic congestion.
From my point of view, less traffic congestion means people have more time to spend with family or work. There will be an opportunity to do productive activities like spending more time with family (i.e. with kids or loved ones) or spending more time with work (and get overtime pay). However, it is important to note that having more time does not necessarily mean you are already productive. What you do with the extra time you have is what defines productivity.
Social equality and Unemployment
Statistics New Zealand (2016) said that New Zealand’s unemployment rate is 5.7% as of March 2016. RSS has the potential to provide job opportunities for people who are struggling to find work. RSS may give an economic opportunity for the underemployed and unemployed in NZ. Anyone who has the skill of driving and having passed all the necessary screening and requirements (regardless of sex, religion, and social status) may apply as driver partners to RSS companies. This gives people an option to earn a living. The earnings from being a driver-partner is competitive that is why even full-time workers opted to be an RSS driver-partner to earn extra income in their free time.
RSS driver-partners can be the parents, caregivers, students, veterans and retirees locked out of traditional office work by force of circumstance. RSS offers an opportunity to use their vehicles and existing skills to earn additional income around their existing work responsibilities.
There has been a debate on whether RSS provides more job opportunities to NZ or does it removes job to traditional transport drivers. It is true that traditional taxi drivers are at risk of losing their jobs as more and more commuters prefer to use RSS (for practical reasons). However, there are also opportunities opening up in the RSS industry. It is a domino effect. You may be losing jobs in the traditional transport service due to a decrease in customers, but there will be a need to increase RSS resources. At the end of the day, someone still needs to drive the passengers to their destinations.
Though RSS may help decrease the unemployment rate, the RSS companies must consider strict compliance measures in accrediting driver-partners. It is important that the drivers have the right qualifications as mandated by the local government. We have seen many issues around licensing requirements and fees being unfair between RSS driver partners and traditional taxi drivers.
As an example, TVNZ has published news recently about Christchurch taxi drivers protesting RSS company Uber for not complying with the right driver’s license requirement as mandated by the New Zealand Transport Agency (NZTA). This issue has been controversial and has been ongoing since the RSS company started its operations to NZ. It is interesting to see how far will these protests go and how the government will respond to the issues.
Regulations
Is the NZTA ready to adopt the changes brought about by RSS disruption to the transport industry? The nature of jobs in the transportation service is starting to evolve. Labor standards and policies need to be adapted and revised to accommodate the inevitable change brought about by business innovation and ICT advancement.
I reckon transport policies and regulations need to be reviewed to ensure that the welfare of the drivers and the safety of passengers are not compromised. Regulations on RSS business operations’ safety, tax compliance, license requirements and labor are the major areas NZ government needs to review.
The topic on RSS legal, political and compliance considerations is a whole new subject that needs to be examined in more detail. Issues and controversies about RSS (in NZ and abroad) have to be analysed to understand the legal components (around the current problems) in the RSS industry, and how it affects local and global commerce. These topics will be discussed in more detail in my next blogs. Watch this space!
References
Ceccobelli, M., Gitto, S., & Mancuso, P. (2012). ICT capital and labour productivity growth: A non-parametric analysis of 14 OECD countries. Telecommunications Policy, 36(4), 282–292. Retrieved from http://www.sciencedirect.com.helicon.vuw.ac.nz/science/article/pii/S0308596111002436
Freier, A. (2015). Uber usage statistics. Retrieved form http://www.businessofapps.com/uber-usage-statistics-and-revenue/
Jorgenson, D. W., & Vu, K. M. (2016). The ICT revolution, world economic growth, and policy issues. Telecommunications Policy, 40(5), 383–397.Retrieved from http://www.sciencedirect.com.helicon.vuw.ac.nz/science/article/pii/S0308596116000033
Land Transport Rule (2007). Ridesharing is the future of mobility. Retrieved from https://www.parliament.nz/resource/en-nz/51SCTIR_EVI_00DBSCH_INQ_68267_1_A505754/5da7671b9c11ca45beb490e252f3873a6bebd8cd
Miao, M., & Jayakar, K. (2016). Mobile payments in Japan, South Korea and China: Crossborder convergence or divergence of business models? Telecommunications Policy. 40 (2016) 182–196. Retrieved from http://www.sciencedirect.com.helicon.vuw.ac.nz/science/article/pii/S0308596115001986
Morgan, L. (2016). Effects of traffic congestion. Retrieved from http://traveltips.usatoday.com/effects-traffic-congestion-61043.html
Radio New Zealand (2016). Chch taxi drivers claim massive income drop. Retrieved from http://www.radionz.co.nz/news/national/307889/chch-taxi-drivers-claim-massive-income-drop
Statistics New Zealand (2016). Unemployment rises as the labour force grows. Retrieved from http://www.stats.govt.nz/browse_for_stats/income-and-work/employment_and_unemployment/LabourMarketStatistics_MRMar16qtr.aspx
Stein, J. (2015). Baby you can drive my car. Retrieved from http://web.b.ebscohost.com.helicon.vuw.ac.nz/ehost/pdfviewer/pdfviewer?sid=c173651a-ea38-4597-9307-baa7e6056281%40sessionmgr120&vid=0&hid=125
TVNZ (2016). Angry Christchurch drivers stage protest against rival Uber. https://www.tvnz.co.nz/one-news/new-zealand/angry-christchurch-taxi-drivers-stage-protest-against-rival-uber
