The Taxi and Limousine Commission voted in favor of the jump by 6-2, with one abstention. City officials, including TLC Chairman David Yassky and Mayor Michael Bloomberg, had publicly backed the measure as way to help drivers recover from financial position slip in recent years.
The vote increases the individual fare unit—the amount a fare rises when a cab travels about one-fifth of a mile or sits idle for 60 seconds—to 50 cents from 40 cents. The initial $2.50 charge for a cab ride, as well as tolls and taxes, didn't change.
The average yellow-cab fare is expected to rise to $11.97 from $9.91. Airport rates will also swell in proportion: a trip from Manhattan to John F. Kennedy International Airport will cost $52, up from $45. The raise won't take effect until September, a TLC spokesman said.
The TLC also approved a last-minute proposal negotiated overnight by Mr. Yassky's staff and Mark Gjonaj, a TLC board member from the Bronx. Beginning in 2013, TLC staffers will be required to present a report every two years on the economic condition of drivers, including recommendations on whether fares should be adjusted. Similar to existing reports that weigh the economic health of taxi fleets, the report would be only advisory. Fare increases are at the discretion of the TLC board.
The increase was a win for drivers, who now average about $130 in take-home pay for a 12-hour shift, according to TLC data. And it was another setback for some industry players who have bridled at Mr. Yassky's recent moves to broaden taxi access and tilt the economic balance back toward drivers.
Michael Woloz, a spokesman for the Metropolitan Taxicab Board of Trade, said the fleet owners who make up his organization do not begrudge drivers a raise but will suffer because of another measure, approved on a 5-4 vote, to eliminate a 5% charge that fleets and garages can currently levy on drivers for the cost of processing credit-card transactions.
Instead of that fee, drivers will now pay a flat $10 per shift to cover credit-card costs. Drivers will also be charged six cents per fare, with proceeds going to a fund to cover their health-care costs.
In a written statement, Mr. Woloz called the TLC's actions "retaliatory" and hinted at possible legal action. His organization has already sued the TLC over its plan to create 18,000 new street-hail taxis outside Manhattan's central business district, a move viewed by the yellow cab industry as a threat.
In an interview, Mr. Yassky defended efforts to ease economic pressures on drivers.
"Over the last six years, gas prices have just eroded driver income to the point where it was just not a livable wage," he said. "The increase today means a driver willing to work his tail off will be able to pay rent and put food on the table for him and his family."
The increase, Mr. Yassky added, "does shift the balance a little bit in favor of the driver, vis a vis the garages, and I think that's fair and appropriate."
Commissioner Frank Carone, who voted against the increase, countered that the TLC had not sufficiently proven that increasing the rates would help taxi customers.
"There's no evidence that the riding public would be benefited by a fare increase," Mr. Carone said.
Drivers weren't necessarily expecting a major change in their fortunes.
They are making only "enough to scrape by," said Jose Nunez, 64 years old, who was in his cab on Houston Street in Manhattan Thursday. He wasn't worried rising prices would drive away customers. Riders would notice for "only a couple days or weeks," Mr. Nunez said, "until they get used to it."
—Eliza Pound and Michael Howard Saul contributed to this article.