The Downside of a Gig Worker Pay Boost

When New York City and Seattle mandated higher gig worker pay for food delivery couriers they wound up with unintended consequences.

Gig Worker Pay

During September 2023, in New York City, DoorDash, Uber Eats and others like them were told to pay their delivery gig workers close to 50 cents a minute. The result? Average pay took a whopper of a leap from $7.09 to $17.96 an hour. And, as you might expect, the companies and consumers responded.

Because its costs were up, Uber implemented two supply side changes. It said that it could save money by grouping drivers into delivery slots. Gig workers, appreciating their flexibility, expressed dismay with the new rules. Then also, Uber cut 25% of its delivery work force. In addition, we should know that drivers have vehicle expenses (insurance, gas, maintenance) that average between $4 and $8 an hour.

Meanwhile, on the demand side, consumers complained about an app fee that Uber added. Already paying an app service fee and a tip, diners said the extra charge was excessive. When the price of a burrito moved beyond $20, they sidestepped the delivery and picked it up themselves.

Elsewhere, seeing the supply and demand power of the market, Seattle considered revoking its gig worker minimum wage.

Our Bottom Line: Unintended Consequences

Uber Eats said that orders shrunk by 45% in Seattle after adding its $4.99 fee.

So, although workers were paid more, fewer orders meant they took home less.

We can ask if the pay boost in France, from 7.65 euros to 9 euros and a guaranteed 30 euros per hour with 1 euro extra for every kilometer driven will create a similar response.

My sources and more: Thanks to WSJ for inspiring today’s post and for these additional facts. Then, for more, these articles here and here, came in handy.