Four coffins outside City Hall: That is the image New Yorkers were treated to in March as the city’s taxi federation protested the existence of ride-sharing services and the decline in the fortunes of their industry. Desperation over their financial situations had supposedly driven four cab drivers to die by suicide since the end of 2017, and the coffins were meant to be a graphic reminder of the havoc being created by the industrial change.
Those protesting suggested legislation was needed to effectively turn back the clock and prevent further hardship, but the situation is not so simple. As technology wreaks havoc across a range of industries in years to come, we certainly want to avoid the kind of transition that leads people to drastic actions. That, however, might mean changing expectations rather than changing legislation.
In fact, the taxi industry was protected by very generous legislation for decades. As generations of first-year economics students are taught, the taxi industry in New York and elsewhere is an example of monopoly power. “Medallions” conferring the right to drive a cab are issued by the city in restricted quantities. Their numbers are controlled to prevent an oversupply of cabs. The small numbers also meant the value of the medallions was kept high as well and tended to climb over time.
The rise in value of medallions made them an investment as well as a way to make a living. The most recent driver to have died by suicide bought his medallion for US$180,000 in 1989, an investment that allowed him to make a living for three decades. The value of the medallion had at one point risen to more than US$1-million, but in recent years had fallen closer to US$200,000. Many investors were not prepared for the volatility.
The medallion system for a long time gave a windfall to those who owned them. Young drivers could not easily buy into the system, instead having to rent out a medallion from existing holders. Much like buying into the New York real estate market, it was a case of too late, too bad. For those who had bought one, however, it seemed like a sound investment.
The advent of ride-sharing services such as Uber and Lyft has turned the taxi industry on its head, but it will not be the only industry to suffer that fate. As technology and new business methods take hold, a lot of other industries and occupations will come under pressure. Drivers for ride-sharing services will be among them: Self-driving cars, which will happen sooner or later, could run them out of business. How, then, to make it easier for people to adapt as business models change?
The first step might be to raise awareness that there is no sure thing in the investment world. Second, we should make that awareness true about education and job training as well. Of course education will matter more than ever, but so will acquiring skills that will allow people to stay in the work force.
According to the World Economic Forum, the top 10 skills that will be valued by employers in 2020 are complex problem solving, critical thinking, creativity, people management, co-ordinating with others, emotional intelligence, judgment, service orientation, negotiation and cognitive flexibility. The future will be about using those skills and others, getting continuous retraining and being open to whatever comes next: One popular estimate suggests 65 per cent of kids entering primary school now will end up working at jobs that do not yet exist.
Maybe we need to accept that some occupations that were “jobs” may be transitioning to becoming “work” that will make up part of total incomes. That is, what taxi drivers could earn at their peak may be more than what an Uber driver can earn, but the Uber driver is a lot more likely to be doing something else on the side as well. If you use ride-sharing services regularly, you will hear stories of drivers building up their own small businesses or their writing careers and using driving as an income buffer, or of semi-retired drivers bringing in a little cash. That model clearly has its pros and cons, but it is not going away.
No one wants a future where people are sold one set of expectations and then become desperate when it is snatched away from them. We try to warn people about that in the financial markets, urging them to diversify their portfolios. A generation of U.S. homeowners also got educated on that point when the value of their homes sank, sometimes to less than the value of their mortgages.
Those realities should not stop anyone from investing or buying homes, and the fact that the economy is changing around us should not stop people from acquiring skills and businesses either. More than ever, however, we all need to go into the future with our eyes wide open.