European Notes: The Milan Taxi Industry
In Milan, as in New York and some other U.S. cities, the number of taxis is restricted by the local government; each one requires a permit, of which a fixed number are in circulation. In both cities the permits are transferable. In Milan, the price of a permit is more than a hundred thousand Euros; in New York it is a good deal higher than that—currently over seven hundred thousand dollars.
There is one striking difference between the two industries. In U.S. cities—certainly in San Jose, where I live, but I believe also in New York and other large cities—most cab drivers are immigrants. In Milan, they seem to all be natives. The explanation, I believe, is a difference in the regulatory rules and a resulting difference in the structure of the industry. In the U.S., the permits are mostly owned by cab companies, each of which employs multiple drivers, although in New York there are some that are restricted to owner operators. In Milan, no individual or firm is allowed to own more than one permit. The result is that the typical driver is self-employed, owning his own cab and his own permit.
Cab drivers in the U.S. are immigrants because it is a job that does not require a lot of qualifications or capital and pays better to people who work hard—are willing to drive many hours a day. But in Milan, the driver also has to have, or be able to borrow, something over a hundred thousand Euros to buy his permit, plus more money to buy his cab. That prices poor immigrants out of the market.
Self employment has attractions. But in this case, the rule that creates an industry of self-employed cab drivers also eliminates a major employment opportunity for poor people.