$122 Thai delivery and $26 to-go coffees: New wage laws meant to help gig workers are backfiring big-time

Adam Kovacevich
Spencer Platt/Getty Images

Seattle takeout orders have reached a breaking point. Amid horror stories of $122 Thai delivery and $26 to-go coffees, the Emerald City is now considering rolling back a brand new wage law that's causing food takeout prices to skyrocket and delivery orders to tank. It’s just the latest in a series of wage laws that are backfiring this year, causing chaos for customers, restaurants, and the gig workers they were meant to help.

In an inflation-riddled economy, many families are struggling with rising prices. But instead of fighting inflation head-on, recent laws passed in Seattle and New York have created new rules around how online delivery platforms, like DoorDash and Grubhub, are required to pay their workers. At the same time, cities like Minneapolis have passed new laws restructuring how rideshare apps like Uber and Lyft are required to pay gig drivers.

These new laws are intended to provide app-based delivery and rideshare drivers with livable earnings by creating a price floor for gig worker wages. But their heavy-handed restructurings of the labor market have unintentionally passed eye-opening costs onto consumers. The end result is fewer orders, fewer work opportunities, and less local business.

As Seattle's city councilors reconsider their delivery policy, other cities should think twice before passing similar legislation.

For consumers, especially those living in notoriously costly cities like New York and Seattle, even a small bump in price can mean the difference between ordering in and skipping out on delivery.

The cost of living remains stubbornly high post-pandemic, and data indicates that even as the economy strengthens, many Americans are feeling pessimistic about their finances. While well-intended, stringent new laws establishing price floors for delivery are adding to family budgets.

As employees continue to return to the office post-pandemic, the small convenience of ordering delivery can be a lifeline for workers who find themselves stretched thin. With new regulations, that convenience could now be out of reach for many.

That's not to mention that for many thousands of people, accessible, affordable food delivery isn't just convenient—it’s necessary. Many disabled Americans and seniors, especially those who live alone, have difficulties cooking or driving to the store and rely on fast and simple delivery services like Instacart or Uber Eats for fresh ingredients and balanced meals. About half of seniors living alone rely on fixed incomes under $27,000 a year, and extra fees may strain their budgets, putting healthy food options out of reach.

Customers aren't the only ones hurt by these new regulations. Local restaurant owners are raising concerns that rising delivery costs are causing a drop in orders, cutting into their already-thin margins. A whopping 98% of restaurant owners already report facing challenges due to rising costs, and partnering with delivery apps proved to be a critical source of business for many during the pandemic.

Since COVID lockdowns ended, delivery services have stayed popular, and restaurants have come to rely on delivery app orders as part of their expected revenue streams. But as would-be customers are deterred by new delivery fees, some restaurant owners say they may be forced to raise their menu prices, too, pushing dining costs even higher.

And when restaurants struggle, local economies do too.

Gig-economy squeeze

Despite new wage increases, app-based delivery workers are facing fewer opportunities. In fact, they seem to be worse off in some cases. Workers in Seattle and New York City are seeing lower tips as consumers tighten their belts, and some report a drastic reduction in available work.

And that’s just for delivery workers. New wage laws for app-based workers are also impacting drivers in Minneapolis. There, rideshare apps Uber and Lyft have announced plans to pull out of the city all together due to new wage floor laws that drive prices sky high. The unprecedented departure of the rideshare apps would mean 8,000 lost jobs in the Twin Cities and fewer options for mobility for Minneapolis residents.

App-based workers already face a crowded market, with waitlists for the chance to take an order and dwindling customers. New wage laws are expected to spur even more competition for delivery opportunities, squeezing out workers already in the space.

We can and should be focused on ways to improve opportunities for app-based workers. As legislators consider passing new wage laws, it’s critical they achieve a balance, securing better earnings for gig workers while at the same time ensuring continued opportunities for workers and restaurants on delivery platforms.

Lawmakers across the country should learn from Seattle, New York, and Minneapolis and reconsider before harming the very people they want to help.

Adam Kovacevich is the founder and CEO of Chamber of Progress, a center-left tech industry coalition promoting technology's progressive future. Chamber of Progress partner companies include Uber, Lyft, DoorDash, and Grubhub.

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