When Drivers are in the Drivers’ Seat for Taxi and Ride-Hail Companies

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The Bottom LineThe Bottom Line

When Drivers are in the Drivers’ Seat for Taxi and Ride-Hail Companies

(Photo by jvargas / CC BY-NC-ND 2.0)

Ever since living in Manhattan in the mid 1980s, Rebecca Kemble harbored a secret desire to be a cab driver. By 2000, she was finishing up her doctoral work and interviewing for a dean position at the University of Wisconsin at Madison. The hiring process was moving slowly, and as a single mother at the time she had kids to feed and shelter. So Kemble walked down her street to the offices of Union Cab Cooperative to see about fulfilling her fantasy, at least for a few months.

“I didn’t know it was a co-op, but once I found out what it was, I was like, ‘ This is amazing. People running a company democratically. Taxi drivers, from all different walks of life, able to run this company. It was so inspiring to me, that’s really when I began to learn all about worker cooperatives, getting involved in local government and national and international organizations as well,” says Kemble.

A handful of drivers founded Union Cab Cooperative in 1979, after they attempted to unionize under their previous employer, who responded by folding the company. They scraped together the cash from friends and family to buy a handful of cabs, radio equipment, and all the necessary permits and insurance — about $150,000 in startup costs at the time. Today the co-op has 157 members, 109 of which are primarily drivers, and it has managed to maintain its footing through more than one upheaval in Madison’s car transportation sector.

Kemble was still taking weekend shifts with the cab co-op till the pandemic temporarily put the brakes to it. She even eventually married another co-op member — and it wasn’t the first or last wedding, funeral or other major family event that involved driving Union Cab taxicabs as part of the ceremonies. “I couldn’t stop driving,” says Kemble. “I love it too much.”

The rise of Uber and Lyft has hurt, but Union Cab’s experience shows what drivers can do for themselves and for their communities when they’re also at the driver’s seat in running the business. No wonder more drivers are turning to the model in other cities across the country.

“On Sunday nights we meet with our driver board, planning the direction of where we’re going,” says Ken Lewis, ride-hailing platform driver and co-founder of The Drivers Cooperative, a new driver-owned ride-hailing platform planning to launch later this year in New York City. “This is driver-led from the very start. We understand the technology is extremely important, but at no point is there a break from this being driver-led, driver-owned.”

Being driver-led and driver-owned means ideas to improve the company that make sense to drivers don’t get shot down because management doesn’t agree or isn’t willing to acknowledge drivers’ perspective. For example, Union Cab Cooperative had the foresight to create its own internal IT department in the 1980s, which created the co-op’s own proprietary software system for dispatching and for billing and payment processing. It started taking online orders in the 1990s, and they’ve had a smartphone app since 2017.

Software isn’t the only prescient investment Union Cab Cooperative has made in its future and the future of its community.

In the 1990s, advocates for people with disabilities pushed the federal government to require recipients of federal transportation dollars to make wheelchair accessible transportation services available 24/7. At risk of losing its federal transportation aid, Madison was set to require its city-licensed private cab companies to provide wheelchair-accessible service after 10 p.m., when the city’s public paratransit transportation services shut down. Any cab company that didn’t comply with the new rules would not be allowed to operate in the city at all.

“We knew not all the cab companies in town would be able to do it, and they just wouldn’t be able to operate in Madison,” says Kemble. “We did not see it in anyone’s interest for any cab company to close down. So we just said you know what, we will do it, you don’t have to change the ordinance and the laws to force us to do it, that way you can keep all the companies around.”

So Union Cab bought a fleet of wheelchair-accessible vans and has offered 24/7 wheelchair-accessible transportation ever since — even through the pandemic.

Union Cab Cooperative saved the local cab industry again in 2011. Previously in Wisconsin, counties set up contracts with local transportation companies for Medicaid-funded medical transportation trips. But in 2011 the state decided it would instead force local cab companies to work through one out-of-state corporate dispatching service.

The state-selected corporate dispatching service offered subcontracts to local cab companies like Union Cab Cooperative, but the subcontracts paid significantly less than what cab companies got under the previous county-set contracts. Union Cab’s drivers ultimately voted to reject the subcontract and counter-offer with a subcontract on their terms. The corporate dispatching service declined. But on its first day of operation, the corporate dispatching services collapsed, and it quickly came back around to sign subcontracts with all the local Madison cab companies, on Union Cab’s terms.

“This was a situation where members of a cooperative set a standard for the whole industry,” Kemble says.

Not long after that, Uber and Lyft showed up, putting cab companies across the country on the defensive. Union Cab Cooperative was no exception, but how it dealt with what happened is perhaps the most powerful illustration of what it means to be a driver-led, driver-owned company.

It all might have been avoided. Madison City Council voted in March 2015 to regulate ride-hailing app companies like regular cab companies, which would have slowed Uber and Lyft’s growth, if not kept them out of Madison entirely. But a month later, the state of Wisconsin approved legislation to pre-empt local governments from regulating ride-hailing platforms.

“Ever since then, they’ve taken a huge bite, especially out of the night business,” says Kemble, who drove weekend overnight shifts for many years.

Pre-Uber or Lyft, Kemble says it was rare for Union Cab Cooperative to have fewer than 20 cabs on the road, even late at night. After the ride-hailing giants arrived, but pre-pandemic, Kemble says that number was more like 10 or 12 cabs on the road for weekend night shifts — often some of the busiest shifts, especially during a college football season. For a while, after 2015, the hit to the co-op’s night business was even worse, but surge pricing and other poor customer service experiences have pushed some regulars back to Union Cab over the years, according to Kemble.

Kemble says the competition’s surge pricing has been both a blessing and a curse. While it has pushed some regulars back to Union Cab, when it comes suddenly it can catch the co-op off guard with only a handful of cabs on the road to meet a sudden spike in demand, leading to a wave of complaints from dissatisfied customers.

The co-op would like to keep more drivers on duty at any given time, but it can’t compete with Uber and Lyft’s prices during non-surge periods, so it can’t afford to keep as many drivers on duty as it once could.

Union Cab wants its drivers to earn a minimum of $12-$13 an hour, so it can’t just give out shifts to everyone who might be available at any part of the day. It’s a calculation you need to make when you have an internal wage standard and you need to earn positive net income as a business — unlike Uber and Lyft, neither of which has yet to become a profitable business. The two ride-hailing giants still burn through billions in cash from investors every year, constantly losing money as they continue to push for growth, gambling that they’ll be able to turn a profit after they’ve eliminated all other competition.

In 2017, facing the challenge of how to remain a financially sustainable company in the face of such deep-pocketed competition, Union Cab Cooperative held a series of general membership and board meetings to discuss options for how the company could survive without massive layoffs.

In non-pandemic times, Union Cab Cooperative’s company meetings usually take place in its drivers lounge, its former three-car maintenance garage with three large garage doors, two-story ceilings and big drains in the concrete floor. At one end of the room is a long table seating 15 or so, surrounded by old van seats perched on blocks, like an audience gallery.

At Union Cab Cooperative Board Meeting no. 860, the big plan came up for a vote. The co-op’s drivers get paid by commission, a percentage of the total fare tallied on their meter at the end of each shift. The commission rate goes up based on experience, and at one point there was no cap on the percentage. By 2017 there were drivers who had been with the co-op for 30 years or more.

In order to save the company, the plan was to lower the cap on commission rates to 42 percent, meaning the 65 longest-tenured drivers would have their commission rates reduced. Most of those drivers were facing a 20 percent pay cut. Three would take a 30 percent cut.

“One of those three drivers, he showed up to that meeting in tears, it’s hard but he knew it was for the good of the co-op,” says Martha Kemble, finance administrator for the co-op (and Rebecca’s sister). “If he hadn’t done that I don’t know what would have happened.”

The plan passed by a board vote of 6-2, with one abstention. Four-full time drivers, one part-time driver and one administrative staff member voted to approve, one full-time driver and one administrative staff member voted against, and one driver abstained.

Since then, Union Cab Cooperative has been able to gradually make up for the loss in individual ride-hails by growing its business from institutional clients.

Revenues from medical transportation have continued to grow, no small thanks to the wheelchair accessible fleet the co-op first bought in the 1990s. Partnerships with the University of Wisconsin-Madison have Union Cab ferrying students around the city for volunteer programs and other activities. The Madison Homebrewers and Tasters Guild pays Union Cab to provide free rides for attendees to and from its annual festival, a 6,000-person event — it was a bitter financial pill for the co-op to swallow to have that event cancelled because of the pandemic.

Epic Systems, the healthcare IT software giant, uses Union Cab to ferry its trainees from local hotels to its headquarters in Madison — somewhat ironic as Union Cab Cooperative’s IT department has served as a training ground for many who went on to work at Epic, lured by much higher salaries.

Drivers in other cities are also leaning on partnerships with institutional clients, including publicly funded medical transportation in that mix.

In New York City, The Drivers Cooperative has set up an early pilot program to provide transportation services for Cooperative Home Care Associates, a worker-owned home health aide cooperative and the largest worker-owned cooperative in the country with more than 2,000 employees.

In the Baltimore-Washington D.C. metropolitan area, AnyTime Union Taxi formed as a worker-owned cooperative with licenses for a 50-car fleet in 2018, and its core business is publicly funded medical transportation.

Having institutional clientele has helped driver co-ops access capital, even in times like these. Shared Capital Cooperative, a Twin Cities-based loan fund, has made loans recently to all three driver-led cooperatives.

“What’s got us comfortable was finding a niche that wasn’t being served,” says Mark Fisk, senior loan officer at Shared Capital Cooperative. “With accessible rides, for example, they’ve found this extra space that they could compete in and not have to worry as much about bidding down to compete with rideshare rivals.”

It helps that Shared Capital is a cooperative itself, created by other cooperatives for other cooperatives in 1979 — unlike most other lenders, its staff and its board don’t need an introduction to the cooperative business model. But that doesn’t mean they lack a certain robust understanding of running a business.

“Our lending decisions are made by our loan committee and when they look at [car transportation companies], the first question that always comes up is how is this going to be viable,” says Christina Jennings, executive director. “What they’re competing against is an enormous pile of money that isn’t requiring the underlying business to be profitable. Whereas we have a higher bar, which is unfortunate but it’s true. We want to support opportunities for cooperative models to take hold but at the end of the day that means being responsible to ensure these loans are to viable businesses.”

It’s definitely riskier lending to startups like AnyTime Union Taxi or The Drivers Cooperative compared with a long-established industry presence like Union Cab.

“We’re using debt to play a role that equity investments from a venture capitalist normally plays here,” says Fisk. “While technically it’s debt, some of our loans are kind of like equity because we’ll step in early and make that as flexible as possible.”

No one becomes a billionaire from investing in or working for a worker cooperative. Even Union Cab, despite offering benefits and a minimum starting hourly wage of $12-$13, isn’t able to offer enough shifts for drivers to make more than $30,000-$40,000 a year at most — although drivers also gradually accrue shares in the co-op and if they stay long enough they get to cash out those shares when they retire or leave the co-op.

The point is for drivers to be paid fairly for the time they are on the job, to have the security of a stable job they can count on and plan around, and to have dignified working conditions. For Union Cab and AnyTime, which are full cab companies, drivers also don’t have to risk their own vehicles — The Drivers Cooperative, as a ride-hailing platform, will still have drivers use their own cars.

Even more important to the drivers is having the chance to exercise the power to create and, when needed, re-shape a business that works for them through an ongoing, collective process. It’s a notion that Kemble has taken into office, where she’s now up for reelection this year as a Madison City Council member.

“When I ran for city council, I looked at the whole city as a giant cooperative. We have collective assets that need taking care of, collective issues we need to deal with,” Kemble says. “If I hadn’t been a worker co-op member for 15 years, I would never have run for city council, but because I learned about democracy, I learned about collective decision making, I had the lived experience of 15 years in this company, I had that experience, the ethics, the drive to serve.”

This article is part of The Bottom Line, a series exploring scalable solutions for problems related to affordability, inclusive economic growth and access to capital. Click here to subscribe to our Bottom Line newsletter. The Bottom Line is made possible with support from Citi.

Oscar is Next City's senior economics correspondent. He previously served as Next City’s editor from 2018-2019, and was a Next City Equitable Cities Fellow from 2015-2016. Since 2011, Oscar has covered community development finance, community banking, impact investing, economic development, housing and more for media outlets such as Shelterforce, B Magazine, Impact Alpha, and Fast Company.

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