Mr Ang Hin Kee, the executive adviser of the National Taxi Association, recently said that the fare cuts by Uber and Grab are “unhealthy and unsustainable”. He cautioned that once these companies get a dominant market share after giving out all these goodies, they could exercise the right to earn profits by (presumably) jacking up prices. Mr Ang then asked:
“What checks and balances do we have to ensure that both commuters and drivers are not taken advantage of?”
As expected, Mr Ang’s comments drew a lot of flak. Mothership.sg subsequently interviewed Mr Ang, giving him a chance to redeem himself. Apparently, Mr Ang said what he said out of concern for the Uber and Grab drivers. He’s worried that the fare cuts would hurt the drivers. It seems that he’s in favour of forming a union to represent the interests of Uber and Grab drivers.
Do the things that Mr Ang said make sense? Absolutely… not. Why?
It’s best explained by Donald Low, Associate Dean at the Lee Kuan Yew School of Public Policy.
Three key points from Donald.
First, the fares before the cuts may not have been “correct” or “sustainable” in the first place. They could have been too high, so everyone – drivers, passengers, companies – would all enjoy lower fares. And even if drivers had to drive longer hours, perhaps that is because drivers were driving “too few” hours currently.
Second, if the cuts are unsustainable, the market will sort itself out, whether or not Mr Ang says anything. If drivers find that the fare cuts hurt them and they can’t drive more hours, drivers would quit. Then Uber and Grab would have to adjust the fares or decrease the commission they take from the drivers to attract drivers back.
Lastly, if the cuts could indeed be sustainable. While drivers earn less, they could make it up with more trips because lower fares would mean more commuters. Technology would also help. Better matching technology and better use of data could help drivers find where the higher demand is. So drivers end up with same income without longer hours on the road. Everyone is happy.
Donald’s main issue is that there is no basis for Mr Ang to conclude that the fare cuts would hurt drivers. There is no evidence to support such a conclusion. But… I realise that Singaporeans aren’t very logical and rational. Sexy headlines and tag lines are far more powerful than careful, detailed, and rational analyses.
[Featured image: NTA executive director Ang Hin Kee. Image from Mothership.sg]