As the world enters the fourth industrial revolution, industries using the Internet of Things have diversified. Above all, a platform service is a representative business of the sharing economy. Platform, in this case, means ‘station.’ In other words, once a company offers one platform, market participants transact with each other on this platform. Typical examples of this are Airbnb and Baemin. Like these two examples, the sharing economy is profitable to market participants because they are able share products that have already been produced as well as doing other economic activities. However, the jobs of existing businesses can be threatened due to these platform services. So, the conflict between a new service and existing businesses is inevitable. Recently, on December 20 last year, the taxi industry went on nationwide strike. According to a strike organizer, about 100,000 taxi drivers went on strike that day and 37% of all taxi drivers in the nation participated in the move. They staged the strike to protest against Kakao’s ‘carpool service’, which is a ride-sharing service.
This is not the first time that a carpool service has been introduced. From the past to the present, many companies have been working on ride sharing businesses in Korea. But this kind of business has always failed in Korea because of government regulations and the taxi driver’s strong opposition. Uber, the world’s largest ride-sharing company, was introduced in Korea in 2013, but withdrew after only 2 years due to government regulation. “ChaCha Creation”, which dreamed of becoming a Korean-style Uber, was also caught in a regulatory trap. Since then, the emergence of the ride-sharing has been quiet for a while until the recent carpool service by Kakao was released. Taxi drivers are complaining that the carpool service will infringe on their ability to work. So, why then, is this worldwide trend unable to be applied in Korea? From now on, let’s look into the sharp conflicts between taxis and carpool services.
Taxis VS Carpools
Taxi drivers consistently have been opposed to carpool services because they reduce their earnings. One taxi driver even burned himself to death in front of the National Assembly, intensifying the conflict further. What kind of damages do carpool services inflict on taxi drivers? Why do they react so violently?
First of all, there is a need to know about the carpool service in detail. A carpool is a ridesharing service where several people who have the same destination to ride together in a car. This service has become popular in U.S. to the degree that a lane of traffic for carpool service has been set aside for their use. The service is operated by providing users with searching, selecting, and boarding vehicles with their desired destinations and the users pay for service fares and driving fares.
The important difference of carpool services are their fares. Kakao’s carpool service costs 3,000 won per 2km, and this is about 70~80% of traditional taxi fares. That is the biggest reason why the taxi industry opposes this service. Another reason is operating hours. According to Korea’s <Passenger Transport Service Act, Article 81>, private cars aren’t allowed to provide transport service for profit. But there is an exceptional clause, which states that passengers may take a ride together during rush hour. So, Kakao tried to run the service only during the rush hour taking advantage of this law. Although there’s no legal problem on the surface, the taxi industries’ stance was slightly different. They argue that even with limited service, customers will find the carpool service at a lower price. And in the end, this will lead to the expansion of the carpool industry. They also state that the standard of commuting time is ambiguous because it only says “rush hour” in law but does not include an exact time.
What is the reaction of citizens?
Despite the taxi drivers’ objections based on their continuous pleas and reasonable grounds, citizens still show a callous attitude toward the strike. Citizens responded favorably to Kakao service because it is much better than taxi in terms of fares and services. Also, they think that carpool services can solve traffic jams.
Problems of Korean taxi
Then, what is the root cause of these conflicts? In fact, it is actually not the carpool service that threatens the livelihood of taxi drivers, and the main reason lies somewhere else. Now let’s find out about the real problems of the Korean taxi industry.
First, the taxi industry makes up too large a part of the economy compared to our economic scale. The scale of taxi business is about 8 trillion won with a very low demand, compared to 18 trillion won in Japan where the economy is five times larger than Korea. There are even private taxis that are unlikely to be reduced, so more than 50,000 taxis oversaturate the market.
Second, taxis as transportation have been declining for the past decade. As a share of total public transportation, trains, busses and cars have been increasing steadily. On the other hand, the rate of taxi use dropped from 4.3% in 2009 to 2.9% in 2016. Furthermore, the taxi utilization rate which has dropped by half in 7 years is still falling.
Third, the burden of money that taxi drivers should turn over to the company is getting higher. This is the money which the corporation taxi drivers pay a certain percentage of their daily earning to corporations that lend cars to them. As of last September, the number of taxis in the nation was about 250,000. About 90,000 taxi companies have continued to reduce the number of cars and drivers. So, the problem has been that corporations have tried to reduce the number of drivers but wanted to maintain the size of their company. This forced drivers to pay the money at higher rate than before. The average payment is 130,000 won, not a small amount. This system degrades the taxis’ service quality such as refusals on short-distance destination passengers.
Taxi VS Carpool? No, Taxi and Carpool!
Some people are discussing various methods for both taxi and carpool services to coexist. Most important of all, isn’t the main problem coming fundamentally from the taxi industry? For this problem, the first solution is to change the taxi industry and the second solution is to improve the drivers’ conditions. Already, the sharing economy has become an inevitable key point in our society, and the taxi industry should accept this fact. A simple strike won’t solve every problem. Taxi drivers need to think about how they can offer a quality service to their passengers. Also, governments and companies should guarantee the taxi drivers’ rights to live in a variety of different ways to improve their conditions such as solving premium matters, the abolition of the current payment system and the introduction of a new salary system. In fact, on December 14 last year, the government announced an agreement to abolish the system and push for the introduction of the salary system for corporation taxi drivers who suffer hardships in life. Also, some suggested the solutions for the coexistence of taxis and carpool services like combing the carpool service with the taxi industry or limiting operation times for carpool vehicle to twice day.
The sharing economy is an inevitable future< Copyright © The Gachon Herald All rights reserved >
There are many examples of the sharing economy abroad; all which are focused on ‘sharing’ from car sharing, house sharing and even to earning sharing. Like this, the sharing economy has the benefit of making profits while efficiently utilizing limited resources as it only connects resource suppliers and consumers. Also, the promotion of the sharing economy in Korea is very important because it can create new jobs.
It is hard to search for the perfect solution because the conflicts between the taxi industry and carpool service are a matter of interest to many people. However, these conflicts will be a big issue of whether our society will develop into a sharing economy. Taxis and carpool services should no longer try to take different paths in a meaningless fight. The two should find ways to coexist and get out of the dilemma of the sharing economy as soon as possible.