The Australian Taxi Drivers Association
Representing Australian Taxi Drivers and their Regional Associations.
Taxi Fare Setting 2013
The very challenging process of setting taxi fares in Victoria has commenced as part of the reforms designed to ensure that customers are the first priority of a the service industry providing public passenger transport.
The ATDA welcomes this opportunity to achieve its objective of .. a fair share of a fair fare .. to deliver value and value for money as a regulated maximum fare, and to maintain a sustainable industry capable of both making a commercial profit and meeting its legal obligations. As it stands, the Australian Taxi Industry functions on the exploitation of its workforce and on the continuance of a taxi driver earning significantly less than the Minimum Wage and without the payment of entitlements due to every employed worker.
In the interests of passengers, to provide certainty and prevent abuse, the maximum taxi fares payable should continue to be regulated, and discounting of those fares should be at the decision, discretion and cost of the taxi operator. The taxi meter should at all times show the maximum fare payable.
It is possible to configure a multitude of fares, by time, by day and even by location. But the technical ease of doing so is more than likely to result in consumer confusion and suspicion. Simplicity is better.
Competition from other taxis and other transport modes should preserve transparency, and service quality.
Fares should be reasonably based on the costs of providing the taxi service, including a margin for profit, and reflect the operating costs of the vehicle and the provision of at least standard wages to the taxi drivers driving the taxi during normal weekday hours. Driving outside those hours should carry additional penalty / premium rate, reflective of extended, unsociable and potentially dangerous working hours.
There are three principal fare “periods” :
I Weekday 6.00 am to 10.00 pm
II Week nights from 10.00 pm to 6.00 am and Weekend days from 6.00 am to 10.00 pm
III Weekend / Public Holidays from 10.00 pm to 6.00 am
Our suggested premium is a + 33% night and weekend day tariff and a + 50% weekend night tariff on both Waiting Time and Distance rates, automatically shown on the taxi meter.
The suggested fare structure is for a Flagfall of $5.00, a Waiting Time Rate of $90.00 per hour and a Distance Rate of $2.00 per kilometre in Tariff I.
Fares paid on this basis will effect, on current taxi usage patterns, a total revenue consistent with employed drivers earning $18.00 an hour in PI, $24.00 an hour in PII and $30.00 an hour in PIII, provided the fare surcharge goes to the driver.
However, this will only occur if the (non-operating) cost of Plate Lease Fee is less than $5000 a year. Operating expenses will vary by taxi type and are averaged for a standard taxi at $50,000 a year, plus Fuel / Wash costs of $25,000
If drivers are also to receive standard community employee legal entitlements, then it is necessary also to increase taxi utilization to 12 shifts over 50 weeks a year, and to increase occupancy to 15 paid passenger kilometres per hour or the equivalent 18 trips a shift, with an average fare of $25.00 per trip or $4.00 per kilometre.
If these changes are not implemented, the taxi industry is simply not viable or sustainable.
Booking fees should be discretionary and as advised to the intending passenger at the time of requesting a taxi. Credit Card Surcharges should be not more than 5%. All tariff surcharges on fares must be to the sole benefit of the driver, where there is a prescribed fare split.
The very real problem is that the current fare structure, the current level of utilization and the current passenger occupancy do not result in sufficient revenue from fares to meet the objectives, or even the legal minimum requirements.
The fundamental impediment is the level of Taxi Plate Fees paid by the Operator. If that is not “fixed”, and reduced to less than $5000 a year, the Industry remains unsustainable, financially and morally bankrupt !
Without those increases in utilization to 12 shifts a week, and to occupancy of 15 paid passenger kilometres per hour, the driver does not generate sufficient revenue for the Operator to afford to pay his legal obligations. Relying on fare increases alone is not an appropriate solution.
It is not possible to legislate or determine these factors of utilization and occupancy, and the achievement of those criteria is the function of the taxi operator, and of the luck and experience of the taxi driver, and of the resources made available. The obligations of an employer to pay wages and entitlements to the working driver should not, however, be a matter of choice. Operating expenses will vary, and the assumption is that additional costs for premium vehicles or services will be covered by additional usage brought about by a better vehicle being offered for hire.
The other side of the fare setting must be the acceptability of that fare as providing value for the taxi services provided. There will always be a desire for reduced fares payable by the passenger or intending passenger. There is an underlying assumption that current fares are correct and acceptable, countered by the fact of diminishing usage and, in Victoria, a long period without any fare increases.
The cost of providing a point-to-point service for one or two passengers by a single driver must necessarily be greater than the cost of a train or bus ticket; and even then full public passengers on those modes are subsidized. For taxis there is no subsidy outside the disabled transport schemes.
Economic theories abound of fare cost elasticity. Many make economic sense but most lack practical proof.
At best there is a short term downwards response to fare increases. At worst there is a transfer to other modes, but when required for a specific need, the average person still catches a taxi, and there is not a cost based decision. A large part of the problem is the not unreasonable expectation by passengers that they should pay only for the actual service provided.
That a taxi travels half of its kilometres, and about seventy percent of its time on the road, without a paying passenger, is not of concern to that user. It is however, of desperate concern to the Driver, and to an Operator conscious of his obligations.
The issue that costs of providing the service also include “downtime” must form part of the awareness and understanding of reasonable fares. It must also be made clear that the industry has a functional responsibility to improve utilization and occupancy.
In Melbourne the issue has been raised of a high cost of Airport Trip fares, and of a perceived need to reduce fares on longer trips. There is an alternative already available by Hire Cars or Shuttle Bus transport in which fares can be negotiated, or for a Network / Operator to now provide fare discounts. There seems however to be little understanding of the “downtime” nature of waiting for a fare from the Airport to return to a likely area or obtain another fare, and the inherent costs involved.
The Lime Taxis model in Sydney by Macquarie Bank assumed that every shift would be at the level of a Friday, and that passenger demand would produce 60% of paid kilometres with an occupancy of 40%. In Sydney, the modelling proposed by IPART suggested that a fare decrease combined with an increase in taxi numbers at peak times would achieve an increase in productivity. As a model it might be so; in the reality of the streets it might not be so.
The problem is that on current utilization and occupancy patterns, the current fare structure does not provide a legitimately sustainable industry. It obviously is functioning, but only on the basis of its workers earning less than $13 an hour in Melbourne, less than $11 an hour in Sydney and less again in all Country regions. Fares would need increase to an unsustainable and unacceptable level merely to lift driver earnings to the level of National Minimum Wages.
To pay operating costs, fair wages, worker entitlements and current plate leases would double current fares. Simply not an option. With an achievable improvement in utilization and occupancy, and at the suggested fare of $4.00 per pax km, taxi operators will be able to meet their obligations, but only if the lease fees are less than $5000 a year. The solution is not only the responsibility of the fare setting regulator, it is also the responsibility of the drivers and operators.
The matrix is a complex one. It does not simply rely on maximum fare setting, but relies on significant changes to work practises and services provided. These changes are not capable of being mandated or legislated. They are structural changes to the industry, and require lateral and objective solutions.
As of September 13th a decision of the Fair Work Commission has made the unequivocal statement that a taxi driver is an employee in the employment of the taxi operator. As such there is no middle ground about the payment of wages, the conditions of employment or of the entitlement to Penalty Rates, Annual Leave, Sick Pay, Long Service Leave or Superannuation. In this fare setting by the ESC, and whilst bearing in mind that it is not to be a “cost and stack and divide” approach, there must be recognition, not of the “cost” but of the legal requirements and obligations of the employing taxi operator.
The two other major variables are Utilization and Occupancy.
It is impracticable for all registered taxis to be on the road at any one time, for maximum Utilization, but the observed data of only 70 % on road and of only 550 shifts a year needs be addressed. The often used reason of a shortage of drivers is actually a shortage of drivers willing to work a twelve hour shift for less than $10.00 an hour. There may not currently be the demand for taxi services which would require more cabs at all times, but nor is there the flexibility of meeting demand spikes as they can be predicted or as they occur. Only an “owner/driver” taxi model can provide that flexibility. The bailee model cannot.
Traditional workplace devices and network despatch systems do not assist or optimise Occupancy. Having to be in the taxi, the taxi being vacant and in the area is neither efficient nor productive, as is now the case of Network Systems. The newly developed “apps” can provide forward bookings, and publish job offers direct to a personal mobile smartphone at any time or place. The difference in a Monday night occupancy to a Friday night occupancy may be only 10%, but the revenue differences can easily double hourly takings.
Whilst we cannot mandate a Monday into a Friday, we can improve technology to improve occupancy.
Multiple Hirings, or Share Rides, can lift fare earnings per trip by 50 %, but current attitudes and methodology need be changed. Again, technology is the solution.
The fear of drivers of assaults, evasions and unjustified complaints is a real impediment to maximising late- night services. Technology by way of improved cameras, audio and recordings to provide both passenger and driver security is that solution.
The expectation for passengers must be that presentable and efficient taxi services are available, with competent drivers and a safe comfortable trip as a standard, not a bonus. Publicity campaigns directed at both passengers and drivers is needed to boost confidence and usage. The opportunity to compliment and to complain must be present.
It is the view of the ATDA that uniform maximum fares, throughout the nation, are preferable to locality based variances. It always remains the option for an Operator to discount fares to suit local needs, but it should not be at the cost to a driver. The benefit passed on to the passenger is a business assessment by the operator to best fund his business, and should not be achieved by obliging taxi drivers to subsidize his decisions.
Other than by a display on the meter of the metered fare there is nothing to prevent a race to the bottom, and of third world haggling and abuse by both driver and passenger. A receipt for the actual fare paid against the fare payable retains transparency and fairness.
Whilst the primary concern of our Association is for the drivers of taxis, that concern extends to both the bailee driver and the owner or lessee driver. Whether the model is that of a single owner/driver, or that of an Operator bailing out cabs to employed bailee drivers, it is still necessary that the full operating costs be covered from average fare revenue. There are current issues that the retained earnings by drivers, be they bailees or employees or self-employed or one-out operators, is significantly less than the National Minimum Wage.
Our concern is that the service industry which is the taxi industry cannot continue to be structured on its workers earning a third less than minimum hourly wages, and without community standard entitlements, and thereby effectively subsidizing a public passenger transport mode.
Our concern extends to proper provision of customer services, and the awareness that without satisfied customers there is no industry at all. Making it all better by no more than a fare increase is no solution at all.
The Essential Services Commission has advised that it will not set maximum fares on a “cost, stack and divide” basis, but on the basis of providing services which are of value and represent value for money. The viability and sustainability of the industry as a whole is to be a factor, and it cannot be reliant on the continuance of workforce exploitation.
Michael Jools
President ATDA
Friday, 20 September 2013
CAN THE INDUSTRY AFFORD TO PAY DRIVER WAGES ?
THE ATDA SAYS : YES IT CAN , AND , YES IT MUST !!
Just one of the many issues arising from the Fels Inquiry in Victoria, and which affects the whole Australian Taxi Industry, is the old and recurring issue of whether or not the Industry can afford the payment of wages and entitlements to taxi drivers. Yes it can, and, yes it must !
Every viable business must be able to pay its workers a Fair Work Award wage and the standard entitlements of Annual Leave, Sick Pay, Long Service Leave and Superannuation.
If it can't do that, there is no business.
The issue really is ... Can the Industry also afford to pay non-productive and inflated Plate Lease Fees, excessive Network Fees, or artificially inflated Insurance Fees.
And the answer to that is .... No it cannot !!
It must be able to pay its Operating Costs, or else there is again no business. And, from the average fare revenues of $150,000 to $160,000, there is enough to pay the Operators' operating costs and Fuel / wash costs. Enough also to pay a total of $110,000 to $120,000 to the drivers, in wage and entitlement equivalents.
But not enough to pay anything else.
It could pay a revised portion of the extras that have long enriched, supported and maintained the Industry's other "stakeholders", provided :
The utilization of taxis goes up to 12 shifts a week ( currently only 10 shifts or 70%)
The occupancy goes up to 15 paid passenger kilometers an hour ( currently 12 kms or 28%)
The Plate Fees drop to the cost of the service provided - $1000 ( currently $30,000)
The Network Fees and Insurance Fees get a competitive challange.
And fares can stay as they are, at an acceptable consumer cost.
THE ATDA OBJECTIVE IS TO REQUIRE THE PAYMENT OF WAGES , OR WAGE EQUIVALENTS TO TAXI DRIVER WORKERS, AND TO OBLIGE THE INDUSTRY TO ADJUST ITS PRODUCTIVITY AND UTILIZATION SO THAT ALL VERIFIABLE COSTS CAN BE COVERED FROM EXISTING FARES.