Taxi reform in Hong Kong? Start by paying drivers more

Proposals to restructure Hong Kong’s taxi system will not necessarily give us better service and could prompt drivers to leave the industry

Richard Harris

Published: 9:30am, 7 Jun 2024

Why you can trust SCMP

The perfect is the enemy of the good. Our behavioural instincts seek the very best answer to a problem but optimal decision-making requires a great deal of thought, which self-justifies the need to do even more analysis and makes reaching the final decision even harder.

Herbert Simon theorised that decisions that are good enough can be made by companies most of the time using only partial information. There is not enough time to collect all of the data, even if all of it could be collected. Plain common sense is more relevant than pencil-sharp decision-making based on dodgy data. He called these decisions that are good enough “satisficing”.

Gerd Gigerenzer developed a decision-making theory about fast and frugal problem-solving – the making of decisions using fractional information. A gut-feeling decision, like that of a fire department chief sending firefighters in at close range, is actually founded on an assessment of risk based on experience. In a split second, the risks of different solutions are mentally calculated and the relatively riskier solutions instantly discarded. The psychologist Daniel Kahneman summarised the spectrum of decision-making in his book, Thinking, Fast and Slow.

Governments, for instance, can be poor at making decisions because there is an inbuilt groupthink, enabled by the availability of huge resources for analysis that is designed for the system to get the blame for errors, instead of an individual. And yet decisions still go wrong – like our recently trashed rubbish bag policy.

Senior individuals responsible for a final decision should make it on the basis of all that research and analysis, but ironically often rely on instinct. Unfortunately, their instinct is seldom borne of real-world experience, unlike warhorses like the fire department chief.

The debate about the future of our taxi service is an excellent example of how optimisation can fall foul of the law of unintended consequences, resulting in much poorer offerings for the general public. I am an expert consumer in the field of Hong Kong taxis, preferring to pay for rides rather than not pay for off-street parking by clogging the streets with a hearse-like, chauffeured car.

Cruise travellers board a taxi at Kai Tak Cruise Terminal on November 16. Photo: Yik Yeung-man

The arguments for taxi reform are well-rehearsed: most the vehicles were designed more than 30 years ago, albeit upgraded since. There are frequent complaints about overcharging, refusal to cross the harbour and not to mention the legendary rudeness of taxi drivers, some of whom have been said to have the temperament of a consumptive, chain-smoking wasp.

There is also a good chance your driver is between 60 and 80 years old. However, these complaints are insignificant against the millions of safe miles our taxis drive to keep the wheels of our economy turning.

Some taxi drivers might enjoy the job as a post-retirement pastime. There are indeed drivers who are pleasant, willing and happy to carry enough luggage to sink a Star Ferry. Hong Kong taxis may be old in design, but they run reliably from the start of each shift to when they are handed over to the next driver.

In the city, you can get a cab immediately when it is not handover time. Such a service is the envy of cities worldwide. Japanese taxis are spotless but drivers may refuse to pick up tourists. London black cab drivers are funny but rides cost a fortune, while some taxi drivers in New York seem to have spent less time there than the tourists and do not know the city as well. Hong Kong taxis may be rough and ready compared to other cities, but they are cheap, popular and plentiful.

The proposed approaches to taxi reform bear the hallmarks of well-meaning groupthink, spun by vested interests. The metropolitan elite do not consider what taxi drivers earn and how they can be at risk for sudden expenses. Drivers, who are mostly not licence holders, have told me they get just HK$800 (US$102) for a 12-hour shift. That is less than HK$70 an hour.

04:41

Where do drivers stand in Hong Kong’s Uber vs taxi battle?

Simple competitive economic theory holds that a premium taxi service will destroy the existing service as drivers will move for more money and less risk, or choose to leave the industry.

Our current taxi drivers need to be paid more if a two-tiered service system is to survive. They are already hanging up their gloves because they are undercut by the lack of enforcement when it comes to illegal Uber drivers.

Of course, some reform is needed to remove anomalies, like the divide between Hong Kong Island and Kowloon taxis throughout the city, which is not helped by the long-outdated separation of urban, New Territories and Lantau taxis.

If more of the fare went to taxi drivers and not licence holders, drivers’ attitudes would improve. Replacing our cheap and efficient taxis with expensive, unaffordable taxis is not going to lead to nicer drivers.

Our Lion Rock Spirit is about getting the job done. We are in danger of sacrificing what works well today on the altar of ill-conceived regulatory optimisation. This was what caused the neon signs so characteristic of lively old Hong Kong to disappear, and now we are yearning for the energetic culture of other cities. It is time to be careful in regulating what makes Hong Kong special. Let us not end up outlawing the city’s highly effective taxi service.

Dr Richard Harris is chief executive of Port Shelter and is a veteran investment specialist, writer and broadcaster, and financial expert witness