Not All Fees are Created Equal: Equity Implications of Ride-hail Fee Structures

Ride-hailing is a source of opportunity and consternation for cities, presenting both opportunities to expand mobility and added challenges such as increased congestion. In an effort to curb congestion—and to tap a new source of revenue—cities and states across the US have imposed fees on ride-hail trips. Fees are far from uniform; the fee bases, amounts levied, and use of these funds once collected range considerably between cities and states. Despite previous research that toll and transit fare structures affect equity, no research to date has examined the equity implications of ride-hail fee structures. This paper addresses that gap in understanding and asks: what are the equity implications of different ride-hail fee structures? I answer this question using trip-level data from over 97 million ride-hail trips taken in 2018 and 2019 in the City of Chicago. Examining trips serving low-, middle-, and high-income neighborhoods, I examine equity implications under four different fee scenarios: 1) flat rate, 2) percentage of fare, 3) varied rate for pooled trips, and 4) per mile fees. Fees that charge a percentage of total fare deliver a more progressive fee compared to flat, per-mile, or pool-differentiated fees. Yet stark income differences between neighborhoods means that even varied fees remain regressive with respect to income. Cities or states considering ride-hail fees should start by identifying concrete equity-first goals and design fee structures to achieve these goals. Cities should identify and require data needed to assess progress on identified goals and adjust fees as needed to better align with these goals. Far from being a silver bullet for issues like increasing congestion or bolstering transit funding, ride-hail fees should be seen as just one among a broader suite of policies needed to realize broader city goals.