PROTECTING INDEPENDENT WORK
The Real Impacts of (Over)regulating App-Based Worker Compensation
In 2020, the city of Seattle passed a first-of-its-kind FairShare ordinance, which created minimum compensation requirements for rideshare drivers; in 2022, Seattle doubled down and passed PayUp, similar legislation aimed at delivery couriers. Comparable legislation has been passed in New York City.
While well-intentioned, the minimum per-minute, per-mile and per-offer requirements have, in practice, led to a host of unintended consequences that have unambiguously hurt consumers, restaurants, small businesses, and even the delivery couriers they were designed to help.
To reach these new, high minimums, app-based platforms have to pay well above local minimum wage and pass along those costs to consumers in the form of new fees, which significantly decrease demand. Fewer orders harm everyone – including and especially delivery couriers.
App-based platforms are opportunity creators:
- Creating opportunities for local entrepreneurs and merchants to grow their business
- Creating opportunities for consumers to live their busy lives more easily,
- Creating opportunities for communities to improve food access, boost health outcomes, and become more sustainable, and
- Creating opportunities for delivery couriers to earn extra income on their terms.
The local laws and regulations enacted in Seattle, New York and elsewhere often far exceed the minimum wage in those areas—leading to:
- Higher costs ultimately shouldered by consumers, and
- Unintended consequences for local restaurants, small businesses, and even the workers these regulations sought to help.
For instance, the Seattle law—mandating a guaranteed $26.40/hour for couriers *before* any tips, an amount 33% percent higher than Seattle’s minimum wage—has led to:
Fewer Orders—and Millions in Lost Revenue—for Local Businesses. DoorDash estimated that just two weeks after the law took effect, Seattle businesses lost out on over $1 million in revenue from just the DoorDash Marketplace, thanks to a decline of 30,000 fewer orders. UberEats saw a 30% order volume decline.
“A recent survey of its members by the Seattle Metropolitan Chamber of Commerce indicates that 97% of the city’s restaurants want the delivery pay ordinance repealed.” NPR (March 29, 2024)
Fewer Earning Opportunities for Delivery Couriers. Fewer orders mean fewer earning opportunities. DoorDash found that Dashers must wait 3x longer on average between offers. Grubhub found delivery partners are waiting 5X as long and that tips on orders have dropped by 26%.
The empirical data has been clear: any gains that earners have made while they are on a trip have more than been negated by the significant decrease in demand. Consumers – especially disabled and low-income consumers – have had to bear the brunt of higher prices and longer wait times, and local businesses have endured a significant hit to their bottom lines.
Voices on the Ground
“We’re going to be impacted. The customers are going to be impacted. I was hoping for that to grow and if people can’t afford it, that’s obviously going to impact my sales. I can’t keep raising prices. There’s only so much people are willing to pay…”
-Alexandra Serpanos, Owner of Nikos Gyros
KIRO 7 News, Doordash, Instacart prices on the rise for Seattleites following app-based worker law (Jan. 12, 2024)
“[Orders] dropped approximately 35 to 40%. I hope that they rescind [the Seattle law].”
–Jeffrey Stern, Owner, Il Villaggio Magnolia
KING 5, Seattle City Council to review ‘catastrophic impacts of food delivery fee ordinance (March 26, 2024)
“What used to be considered ‘hotspots’ for workers on those apps, feel a little colder since Jan. 13, according to several drivers we heard from. That includes Gary Lardizabal, a longtime, app-based, food delivery driver in Seattle. ‘Sundays before the ordinance,’ Lardizabal. ‘You know, we’d be thinking breakfast. Today, I didn’t even touch it. They’re not going to order. It is definitely backfiring.’”
KING 5, ‘It’s definitely backfiring’: Seattle ordinance intended to help app delivery workers is ‘hurting them (Feb. 7, 2024)
“[T]he fees that can now be seen on peoples’ food orders are hurting Seattle’s most vulnerable populations. Penny Melson, 70, describes herself as disabled. She said, ‘Walking is torture for me. It’s really painful, and I can only go so far. So trying to carry bags and walk with a cane… full of groceries, becomes a struggle.’ Melson relies on grocery delivery apps to provide the food she needs for the month. ‘I’ve used them for years. I love Instacart… I order the things that are too heavy for me to carry: cans, foods, flour, milk, heavy things,’ said Melson.”
-Penny Melson, consumer
KING 5, ‘We can’t afford it’: Disabled, elderly say grocery delivery apps may no longer be an option for them (Feb. 5, 2024)
News Roundup
- ‘It’s definitely backfiring’: Seattle ordinance intended to help app delivery workers is ‘hurting them, KING 5 (Feb. 7, 2024)
- Doordash, Instacart prices on the rise for Seattleites following app-based worker law, KIRO 7 News (Jan. 12, 2024)
- DoorDash says data shows Seattle pay rules have caused ‘unprecedented drop’ in business, Fox Businesses (Feb. 20, 2024)
- Delivery apps adding a side dish of ‘worry’ for restaurants, customers, MyNorthwest (Feb. 20, 2024)
- Seattle City Council to review ‘catastrophic impacts of food delivery fee ordinance, KING 5 (March 26, 2024)
Instead of short-sighted regulations that harm workers, consumers, and local businesses, the app-based industry is looking forward to engaging with lawmakers to update antiquated labor policies and craft programs that improve workers’ livelihoods, without taking away their flexibility or passing the buck onto consumers and small businesses. We encourage you to read more about Flex’s support for Portable Benefits solutions.
Additional Resources:
Grubhub – The Impact of “PayUp”: Unpacking Seattle’s Damaging New Delivery Law
DoorDash – How We’re Responding to Seattle’s New Delivery Laws
Uber – The Impact of Seattle’s Driver and Courier Pay Regulations
Instacart – Changes to Instacart in Seattle
