Q: How rich is a taxi driver and can a taxi driver get rich?

Hi there guys, I am going to discuss a topic which came up recently in a conversation with a friend - it was about how much taxi drivers in the UK can earn. My friend told me that some taxi drivers can potentially earn quite a lot, especially if they work very long hours and hence we shouldn't assume that taxi drivers are poor. Now I did some research and there is a range depending on how many hours a taxi driver works a week - obviously, the longer the hours, the more passengers the taxi driver can pick up and the more the taxi driver will earn. Just to clarify, London black cabs can now work for Uber as well to pick up more passengers - the only difference is that if you flag down a cab in the street the old fashioned way, the taxi driver gets to keep all the fare but if you book a ride on Uber, then Uber keeps 25% of the fare for having facilitated that transaction. Hence on the low end of this scale, a taxi driver working 30 hours a week can earn £2,640 a month, for 45 hours a week they can earn 3,964 a month and for those working 60 hours a week they can earn £5,280 a month, These are all figures before tax and expenses, so you need to get a car, maintain it, pay for everything from petrol (or cost of charging if you have an EV) to insurance, the London Congestion charge and ULEZ charges, so once you factor all of that in, even at the higher end of the scale where the taxi driver is earning £5,280 a month (making that £63,360 a year), that figure is not the take home pay once you factor in all the costs and taxes. Whilst one can reasonable business expenses can be offset against taxes, a taxi driver would be lucky to keep about half of their earnings after you factor all of the above in. Let's compare this to a train driver who could earn up to £65,00 a year at the very top end of the scale, train drivers are not responsible for the cost of running the train: the train company pays for all that and the train drivers just have to operate the train. So if you compare that to the very long list of costs that the taxi drivers have to pay for out of their own earnings, the train drivers are not responsible for any of that at all, making their job a lot more lucrative. But I know what you're going to say if you're a regular reader, Alex you're just going to write another post to put down taxi drivers - well, no, I think they deserve a fair hearing and given that I had that long discussion with my friend on the issue, My friend was mostly basing it on the fact that a typical taxi ride in London is expensive: a 10 km journey across town can easily cost you £40. I think it is important to look at this issue in detail to answer the question: just how rich can you get as a taxi driver in London if they work really hard and would it be totally wrong to make any kind of assumptions about taxi drivers being poor simply because it is seen as a working class job? 

So if you have fixed costs when it comes to running a business, then the obvious way to maximize your profits is to work longer hours. In the case of the taxi driver, their car insurance is going to be same whether they work 30, 40, 50 or 60 hours a week but if they do work 60 hours a week and earn a lot more then the cost of the car insurance is going to be proportionally smaller as a result - that is just simple maths of course and it encourages taxi drivers to not only do this as a full time job but work longer hours.  I would like to compare this to something my Singaporean readers are very familiar with: hawkers and for the rest of you in the rest of the world, think of anyone selling delicious street food and how they run their business. The hawkers have to spend a lot of money purchasing all the ingredients they need, they also have to pay for the cost of renting their hawker stalls as well as obtaining all the necessary licenses to operate. Thus they have to spend a lot of money before they can even start serving their first customer in the morning and that is in sharp contrast to someone who works for a restaurant as a chef: the chef merely turns up for work and isn't responsible for anything apart from cooking - at the end of the month (or week) they will receive their wages. So even if the restaurant gets no customers at all because it rained so heavily that the street outside was completely flooded, the chef still gets paid regardless. Whereas if that was the same situation affecting  the hawkers, then they would suffer a massive loss because they had spent all this money preparing the food but no customers turned up because of the terrible weather. Thus you can see how anyone who is self-employed and runs a business has to take on a certain level of risk when it comes to their earnings, This is often a calculated risk for all business owners but there is another problem for our taxi driver: it would be very hard for the taxi driver to set himself apart from others in order to retain any kind of customer loyalty. Let's compare this situation to the Singaporean street food scene: the most successful hawkers have long queues everyday and thus if you have a Michelin star or if you go viral as a hawker because some social influencer did a TikTok about your food, then you can charge more for your food. The fact is there is actually plenty a street food hawker can do to differentiate themselves from their competitors in order to triumph in this market but as for taxi drivers can't do that - I remember having a very nice taxi driver Ivan who was Bulgarian, we had a pleasant chat comparing life in the UK vs life in Bulgaria. But would I specifically request to use his service again? No, he was easily replaceable and as pleasant as he was, he couldn't cultivate any kind of customer loyalty on my part. The one way business owners can increase profits is by adding value to what they are providing for their customers and it is hard for taxi drivers to do that. 

Now you could argue that Uber offers different levels of service and you can pay more for Uber Comfort or Exec to get more legroom in a luxury car - those options exist of course but there is still little room for trying to establish any kind of brand identity or customer loyalty even if you are driving a limousine and the running costs of a nicer, bigger car are higher as well. It seems that the only way for taxi drivers to earn a lot of money is to work ridiculously long days without taking any days off, which is what Ivan the Bulgarian taxi driver was doing. He was supporting his extended family back in Bulgaria, paying for his nieces and nephews' education as well as the medical bills for some elderly family members. Ivan was willing to make whatever sacrifice necessary in order to ensure that his extended family are provided for, which is a noble decision on his part. There are many downsides and this is not me making any assumptions - these came from Ivan himself. The job is inherently boring, he was very grateful that I wanted to chat because most of his passengers don't - they would just be engrossed on their phones, want to sleep or just find it plain awkward to have a conversation with a total stranger like a taxi driver. He can't even listen to the music he likes when there's a passenger in the car because he has to let the passenger decide what kind of music or radio station to listen to. Everyday is the same and it will never change, it will always be the same routine. Working such long hours means spending a lot of time away from his friends and family, he rests for a few minutes between passengers to respond to Whatsapp messages, but Ivan doesn't complain as he is just grateful that he is able to provide for his family this way. It was at that moment that I realized, even if he is making pretty good money this way, he isn't doing it for himself - it is mostly his extended family who are benefitting from his hard work whilst he is hardly spending any of the money he has earned on himself. There was one thing he said that really resonated with me: he told me that he was working so hard so his children could get a good education, then they could get better jobs and won't have to end up like him, driving a taxi. So what is Ivan's idea of a good job for his children then? Well, he wants his children to have two key benefits: shorter working hours so they can have a decent work life balance and actually doing a job that they enjoy - not one that they are forced to do in order to support their families. Ivan has essentially given up on having those benefits for himself and as long as his children get those benefits, then at least he could feel like all his sacrifices have been worth it. Ivan isn't exactly happy with his job as a taxi driver, but he is willing to do whatever it takes to give his children have the chance to have a much brighter future. 

There are three measures we need to look at which are clearly not the same thing: the first thing is the amount of money you earn in a year and the second measure is how long you took to earn that money. Then of course, the third measure is what happens to that money. Ultimately the goal is to ascertain the quality of your life and that doesn't always have a clear correlation to the amount of money you earn. In Ivan's case, even if he is earning a lot of money by working 12 hours a day, 7 days a week and barely ever taking any days off, his quality of life is poor - he isn't getting enough sleep, he doesn't have any time off to do the activities he enjoys, he doesn't enjoy his work and even if he is earning lot of money, he is not spending enough of that money on himself to improve the quality of his life. Secondly, Ivan is spending a lot of time to earn that money, he is working about 80 hours a week. Even if he is earning £80,000 a year (which is extremely high for a taxi driver, but we know Ivan works crazy long hours), then his hourly rate is still relatively low compared to others who are in highly skilled professions who could make the same amount of money in a much shorter period of time. If we apply some basic maths to the situation, you can see that the maximum amount that Ivan can earn is capped by the number of hours he can work a week at about 80 to 90 hours even if he does little else apart from work, eat and sleep; he has already reached that limit. If he pushed himself any further by sleeping even less, he risks falling asleep behind the wheel of the car when he is driving causing a major accident. There is simply no way he can try to increase his earnings by adding increasing his hourly rate because there is virtually no career development for a taxi driver: this is a double edged sword: you can start driving a taxi very quickly as there really isn't much of a test, as long as you have a vehicle, you can register with Uber and start driving today. There are virtually no barriers to entry for this career, anyone can do it but the job doesn't ever evolve into something more complex.  In an ideal world, if Ivan is willing to work so hard for several years to accumulate a pot of wealth, he ought to invest that wisely so he would have some passive income. For example, if he had saved up to buy a really nice apartment in London (that would cost about £800,000), then he would now be a landlord collecting rent every month and thus it would be a reliable source of passive income. Is Ivan saving anything? Hardly, he is spending almost everything he is earning on his family so whilst they're enjoying the benefits of his hard labour, I'm afraid he has done nothing to improve his own financial situation and hasn't planned for his retirement, thus I wonder what he intends to do after his children become adults? Does he intend to keep working into his 70s and 80s, to continue driving a taxi to support himself? Will Ivan expect his children to support him? 

Allow me to use a case study to show you an alternative to what Ivan is doing: there is a massive labour shortage in Scandinavia, especially for the agriculture and they rely heavily on foreign labour to come and do the lowest paid and most physically demanding work. One of these jobs is berry picking - a lot of wild berries grow wild in the forests of Scandinavia and it is hard work to harvest those berries. The locals don't want to do the work, so every summer, thousands of migrant workers are hired from poorer countries like Thailand, Cambodia and even Myanmar to harvest the berries - the work is particularly hard as the berries grow very close to the ground, so the harvesters will have to be bent over as they look for the berries. Loads of insects thrive in the Scandinavian forests in the summer and the workers have to cover everything up to avoid painful stings. These workers are paid according to the weight of their harvest, so the more berries they pick, the more they will earn - that gives them an incentive to work especially long hours from dawn to dusk but the quality of the harvest is mostly down to weather conditions during the spring. Some years, the migrant workers can arrive in Scandinavia after a drought or a particularly cold spring, leading to very poor harvests and they pick very few berries. Nonetheless the migrant workers are grateful for the opportunity to work in Scandinavia as they earn a lot more than they ever will back in South East Asia, if they work really hard and save up their earnings after a few summers, they would have accumulated enough money to buy a big house or start a business. That is why you can find these amazingly luxurious mansions in some parts of rural Thailand because of this opportunity to pick berries in Scandinavia. There is a recurring theme with all of these berry pickers who go work in Scandinavia: they have the same plan - work hard for a few years, save up a nice big pot of money and then do something with the money. For example, there was a poor man in Thailand who parents were labourers who worked on a farm and paid very little. They knew how to farm but had no money to buy the land they needed to create a farm; so this young man went to Finland for five summers in a row to pick berries, accumulated enough money to buy a decent plot of land along with a lot of modern farm machinery for his parents who could now make a better living as farmers. All his earnings have been invested in that farm, so even this young man in rural Thailand seemed to have had a better plan than Ivan, who has to continuously work very hard in order to keep supporting his extended family. I have nothing but admiration for that young Thai man who made his parents' dream come true by buying them that farm, but the moral of the story is you need to have a long-term plan to invest the money you make wisely, rather than simply give it all out to your family members like Santa Claus on Christmas morning. Therefore I believe it is important to look at the wider picture, rather than just net earnings per se.

So how would I advice a taxi driver in the UK to get rich(er) then? Well, I would follow the basic principle of what that young man in Thailand did. Firstly, be prepared to work very hard for a predetermined period of time (to be set at about ten years). Now you need to give yourself a light at the end of the tunnel, don't do what Ivan did and believe that the tunnel is the final destination, life whilst you are in the tunnel is going to be really hard and you need to know where the exit of that tunnel is. The next step is where Ivan went wrong - whilst you're in this tunnel, you need to accumulate your wealth, that means not supporting your parents, that means staying single and definitely NOT having children, you can also forget about supporting nieces and nephews at this point. You should also live modestly at this time, saving the vast majority of your earnings whilst minimizing your outgoings - even if you do have some money at this point, avoid the temptation to spend it on things like lavish holidays. At the end of the tunnel, if you had stuck to your plan by working very hard and saving most of your earnings, you should have accumulated a sizable nest egg, ideally one that is at least £500,000. Once you have achieved that, you then need to make an investment plan to invest that nest egg wisely so it will constantly generate plenty of passive income for you, speak to someone like a financial advisor to get the best advice on how to create such a plan. You want that nest egg to deliver a safe, steady return on your investment, so you should avoid highly risky ventures and definitely avoid putting all your eggs in one basket. Thus the ideal solution would be for that money to invested in a range of medium to low risk ventures, so even if one of them does go badly wrong, the others would still ensure that you have a reasonable return on your investments. With this nest egg generating some passive income, the taxi driver now has a choice: he can either stick to what he knows best and continue driving a taxi, or he can use this opportunity to consider if this is what he wants to do for the rest of his working life. If the answer to that question is no, then this would be a good time to consider a career change to a far more highly skilled job which will command a far higher hourly rate. Having a decent amount of passive income every month should make this transition and retraining period a lot easier. But if our taxi driver decides to continue driving a taxi, then at least he wouldn't have to work such long hours, as he knows that his monthly earnings would be topped up by his passive income. This would mean having a much better work life balance and an overall improvement to his quality of life. But you reap what you sow: the bigger your nest egg you build up, the better your financial situation would be later on in your working life. So this is a question of delayed gratification: are you willing to suffer a lot for a short period now, in order for your life to be much better later? 

In conclusion, getting rich is not just about your career per se but as much about wealth accumulation. The fundamental problem with Ivan's situation is the lack of any kind of savings - he is collecting water with a very leaky bucket, the water simply drains out from the holes the moment more water is added to the bucket. As noble as Ivan's sacrifice may be, he is really counting on the fact that his children will turn out to be rich and successful, on top of that, they will be willing to take care of him in his old age - there's simply no guarantee that either of those would happen for sure and that's a massive gamble on his part. If you are in a lowly skilled profession like Ivan where the only way you can make a lot of money is by working ridiculously long hours, you have to recognize that this is at best a short term strategy to accumulate a nest egg but not something that can be sustained throughout your entire working life without having serious consequences on your wellbeing. So really, what I think or presume about the earnings of a taxi driver matters far less than how he is managing his earnings and whether or not he has made any long term plans to accumulate wealth. Hence a person who earns less than Ivan but manages their earnings and wealth a lot more carefully would be in a much better position to retire in the long term. Personally, I find it quite sad that Ivan thinks that it is too late for him to try to have any other kind of career - that driving a taxi is the limit of his abilities and he has channelled all his hopes and dreams onto his children, as long as they go on to have successful careers in the future, he will be happy. He is like a man who has given up on himself ever achieving anything else in his life; I'm not saying that he will definitely succeed if he tried, but he simply doesn't want to try and there's a sense of, "this is it, I'm just a taxi driver, that's all I'll ever be and that's perfectly fine with me. I am perfectly happy with this outcome." This does remind me very much of my own parents who are very working class, if you lower your expectations when it comes to your career, then you will never be disappointed. Conversely, the more ambitious you are, the more likely you won't achieve your goals, the more likely you are to be disappointed and my parents always believed that in not trying to achieve more, they are sparing themselves that disappointment in the long run. There is this sense of contentment with what fate has given them and telling themselves, "this is good enough for me, I'm happy with my life, thank you." That was certainly Ivan's attitude, but what do you think? Would you consider Ivan a rich man or not? Please leave a comment below and many thanks for reading.