Source: The Conversation (Au and NZ) – By Andrew Garin, Associate Professor of Economics, Carnegie Mellon University
If you’ve ever ordered food through DoorDash, Uber Eats or Instacart, you may have realized the person who delivers it isn’t a salaried employee. They’re gig workers – independent contractors who pick up delivery tasks through an app, get paid per delivery and have no guaranteed hours, benefits or minimum wage protections.
Policymakers in several cities have tried to change that.
Seattle is a good example. In January 2024, the city implemented a law requiring delivery apps to pay drivers a minimum rate for each task: a combination of per-minute and per-mile minimum compensation that set a floor of US$5 per delivery.
The goal was straightforward: ensure that the people bringing you your lunch earn a decent living.
We are labor economists who have extensively studied the emergence of the gig economy and previous policy efforts designed to provide economic security to workers in unstable employment situations. We wanted to know how new gig economy regulations like the one in Seattle were playing out in practice.When we studied what happened to delivery drivers’ earnings after Seattle’s payment rule took effect, we found that despite base pay per delivery roughly doubling, their total monthly earnings barely changed. That’s because competition among drivers for delivery tasks intensified while customers made fewer orders and tipped less on each order in the aftermath. Those effects combined washed out almost all of the intended gains.
No change in monthly earnings
To understand the policy’s effects, we used detailed data from Gridwise, an app that gig workers use to track their earnings across multiple delivery and ride-sharing platforms. This gave us an unusually complete view of how much the drivers were earning across all of the apps and platforms they were using.
We compared what happened to the earnings of drivers who were primarily working in Seattle before the law took effect with the earning of drivers working in other parts of Washington state, where nothing had changed. By tracking both groups over the months before and after the policy, we isolated the policy’s impact from broader trends affecting all drivers.
Base pay per delivery in Seattle jumped from about $5 to over $12, as intended. But base pay is only part of the picture. Tips typically make up most of a platform delivery driver’s income, since customers generally tip 10% to 20% of the cost of their meals.
After the law took effect, tips fell sharply. Delivery apps passed higher costs on to consumers through new fees. DoorDash added a roughly $5 “regulatory response fee” to Seattle orders, and customers responded by tipping less.
Some platforms went further: Uber Eats removed the option for Seattle customers to tip at checkout. The drop in tips offset more than one-third of the base pay increase.
The other major change was that drivers started completing fewer deliveries.
Beginning in the second month after the policy took effect, Seattle drivers who had been consistently active on the apps prior to the change completed roughly 20% to 30% fewer monthly deliveries than they would have without the policy.
Importantly, these drivers didn’t leave the apps. They were still logging on and spending about the same amount of time working. They just weren’t getting as many delivery offers.
What were drivers doing with all that extra time on the app? Our data shows they were spending more of it waiting.
The share of on-app time spent actually performing paid deliveries fell substantially. Wait times between tasks increased by about five minutes, nearly doubling from pre-policy levels. And drivers went farther between deliveries – suggesting they were actively cruising toward restaurant-dense areas to find their next task, burning more gas without being paid for those extra miles they were logging.
Put those pieces together – higher pay per delivery, but fewer deliveries and lower tips – and they almost exactly cancel out. After a brief bump in the first month, monthly earnings returned to pre-policy levels.
Why gig markets are different
To understand why this happened, it helps to think about how gig delivery markets differ from traditional employment.
In a conventional job, raising the minimum wage creates a clear divide: Workers who keep their jobs earn more, while others may struggle to find work if their employers cut jobs.
But in gig delivery, there’s no such divide. There’s no hiring or firing involved; anyone can download the app and start looking for work. Delivery tasks are distributed among everyone who is online, and there’s no sharp boundary between having a job and not having one.
When what drivers get paid per delivery rises, gig work becomes more attractive, drawing new drivers into the market. Meanwhile, higher costs to pay drivers are passed along to consumers through increased delivery prices, which can lead to fewer orders and lower tips. More drivers chasing fewer deliveries means longer waits for tasks.
This process continues until the higher pay per task is fully offset by the longer gaps between paid work.
Our data confirms this pattern.
While deliveries by existing drivers fell sharply in Seattle, new entrants arrived. Within three months, newcomers were doing most of Seattle’s deliveries.
What this means going forward
To be sure, gig workers’ low pay is a real problem. The impulse behind Seattle’s law reflects legitimate concerns.
But our findings do suggest that efforts to directly regulate what gig workers earn per task they complete won’t easily fix that problem.
As long as anyone can join the platform and start competing for deliveries, the guarantee of higher pay per task will attract more drivers until the benefit is competed away through longer wait times.
Other cities and states are choosing this route
Actually raising earnings might require limiting the number of active drivers – something like the taxi medallion systems some cities once used to ensure high driver pay.
But entry barriers undermine the flexibility that draws many people to gig work in the first place. And platform behavior matters too: If apps eventually restore normal tipping features rather than strategically discouraging tips, which New York City and some other jurisdictions are now requiring, the picture for drivers could improve somewhat.
Still, there may not be a solution that preserves all the benefits of the current system while also guaranteeing higher pay.
Nevertheless, several cities across the country are considering similar regulations.
New York City implemented its own minimum pay rate for delivery workers in late 2023. City councils and state lawmakers in Chicago, Colorado, Minnesota and elsewhere have proposed similar protections.
Seattle’s experience suggests all cities should proceed with caution and be aware of the limits of what per-task pay regulations can achieve when the door is always open to new workers.
– ref. Seattle tried to guarantee higher pay for delivery drivers – here’s why it didn’t work as intended – https://theconversation.com/seattle-tried-to-guarantee-higher-pay-for-delivery-drivers-heres-why-it-didnt-work-as-intended-276576
