FOR THE FIRST TIME in three years, city cab drivers have been given permission to raise their rates -- modestly. That means that the ride from the Mayflower Hotel to Union Station now costs $1.20 instead of $1.10; the trip from Catholic University to the Anacostia Museum is $3, up from $2.80. The cab drivers deserve an increase. But they don't think much of the size of this one -- and they have a point.

Unlike their counterparts in many other cities, District cabbies don't make much money driving taxis. Many work full time at other jobs, while "monlighting" as taxi drivers. A good number either own their own cabs or rent them; they pay for gasoline and repairs from fares and keep what's left. But the 7,000-odd licensed cab drivers in the city contend that their expenses have increased so much that they can't make a profit -- and some say they are actually losing money. The drivers had asked for a 20 percent increase. Instead, the District's Public Service Commission gave them a 9.5 percent boost, which works out to only an additional 10 cents to 55 cents for each fare.

If the PSC had taken a look at all aspects of the taxi system, the cab drivers might have done better. Group fares, for example, could have been eliminated, since the subway now offers inexpensive transportation for large numbers of people headed in the same general direction. Many riders might be quite willing to pay higher taxi rates if they could go from Southwest, let us say, to Adams Morgan -- and not make the trip by way of Captol Hill.

The commission also might have considered requiring meters for cabs. One obvious advantage to metered rides would be that cabbies could get paid for the time spent threading their way through traffic jams. And if that were the case, they might be less inclined to disappear at rush hour -- or in bad weather, when traffic slows down. Meters would also compensate for the peculiar georgraphy of taxi zones: As they are now laid out, many long rides are no more remunerative than some short hops.

The PSC, perhaps realizing that the fare increase was a little too modest, plans to hold more hearings in the coming months on the taxi system. No doube the commission members will hear from some drivers who oppose meters because they can't afford to buy and install the equipment. But they are also likely to hear from many others who won't be able to afford to drive at all unless some major changes in service and fare structure are made. One way or another, the Public Service Commission will have to find a way to give District cab drives a better break -- and in the process, provide District cab riders with better service as well.