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COOP cabs shake up taxi industry

Cooperative system raises drivers’ income, improves service quality

COOP Taxi, launched in July last year, is shaking up the taxi industry with its alternative business model that boosts cab services and drivers’ working conditions.

Taxis in Korea are usually run solely by private operators or individual drivers. COOP breaks away from this convention by establishing a cooperative system in which all members are considered both employees and owners.

A total of 161 cooperative members invested 4 billion won ($3.3 million) for the initial capital. As members, the drivers receive dividends based on how much funds they inject as well as profits earned.

Cab drivers do not have to share their daily earnings with the company.

Korean corporate taxi drivers are usually required to pay around 130,000 won of daily fees to taxi operators every working day. Such fees sometimes lead to drivers being choosy about customers based on travel distances in order to earn more money to meet the daily fees.

The cooperative also has a relatively small fleet of cabs at 76. This enables it to keep a ratio of 2.4 drivers per taxi, thereby, providing more off days for drivers, said Korea COOP Taxi. Generally, taxis are run by one or two drivers, resulting in at least 12 hours of driving a day.

To ensure safety and efficiency, the cooperative also limits the length of time each vehicle is used to three years. This also reduces the fatigue of drivers while improving passenger satisfaction, added Korea COOP Taxi. Other operators normally use cabs for up to five years.

“I believe our cooperative has practically shown how humans can control capital not the other way around. We are attempting to expand human-oriented capitalism not a money-oriented system,” the chief of Korea COOP Taxi Park Kye-dong told The Korea Herald.

Park, a former two-term lawmaker, came up with this innovative taxi system.

He entered politics as a lawmaker in 1992 and served another term from 2004 to 2008. He also made a living as a taxi driver for nearly a year in 2000.

Park explained that he had started to envision the cooperative system and ways to apply it on existing industries while he was serving as a National Assembly secretariat chief between 2008 and 2012. He later went on to take over a cab business and relaunched it under the new business model.

COOP’s unique profit-sharing system and better welfare conditions have, consequently, contributed to higher income for drivers.

As of last month, the cab operation rate by the cooperative reached 98.8 percent, which is about 30 percent higher than other taxi firms. The cab operation rate indicates how frequently each taxi is in operation over 24 hours.

The extra income of drivers also nearly reached 300,000 won a month, which is 60,000 won higher than other non-COOP taxi drivers.

As a result, the overall monthly income of the COOP drivers reached about 2.45 million won, including 1.3 million won of basic wage, 500,000 won of dividends and around 600,000 won of extra profits made individually. The average monthly income of corporate cab drivers is round 1.3 million won.

Given the better work conditions, more drivers are seeking to become a part of COOP. The number of cooperative members has risen to 200, including 180 drivers. About 500 new drivers are also on the waitlist to become COOP members.

Candidates who apply to be part of COOP are required to go through a series of tests including aptitude and physical examinations. They are also strictly screened for any past incidents of car accidents and drunk driving, said the cooperative. Although newcomers must pay 25 million won each for the initial capital, the financial burden is small due to loan programs coordinated by the company, private banks and the city government, said Park. 

“Only 5 percent of drivers have paid the initial capital in cash. Most of them have been allowed to borrow the fund and pay back the principal over five years. For those with low credit or delinquent borrowers, we also provide other types of loan programs.”

Despite growing interest in COOP, the cooperative cannot immediately hire more drivers in Seoul due to a lack of garage space for cabs. Currently, Korea COOP Taxi is using a 2,300-square-meter large parking lot in western Seoul.

The cooperative is looking for more land so that it can expand its business, city officials said. They added that better work conditions have also improved service quality.

“Most passengers welcome COOP Taxi as they think it’s safer and nicer while the fare rate is the same,” said a Seoul City official who is in charge of cab measures. He has regularly driven a COOP Taxi to monitor the system and to gather public feedback.

COOP Taxi’s expansion is not limited to the capital city. It rolled out its service in Pohang, North Gyeongsang Province, last month. It will also be making its way to Incheon and Busan later this month. Talks are also taking place in Daegu and other cities, said Korea COOP Taxi.

According to COOP officials, the cooperative is currently trying to transform itself into a social enterprise. Companies that are designated as social enterprises can benefit from social insurance services, tax cut and other benefits. 

By Lee Hyun-jeong (rene@heraldcorp.com)
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