NYC DoorDash, Uber Eats Drivers Could Make $24 an Hour

A little over a year after the New York City Council passed a bill aimed at improving working conditions for app-based delivery drivers, city officials are implementing one of the legislation’s key provisions.

Uber Eats (NYSE: UBER), DoorDash (NYSE: DASH) and Grubhub (OCTUS: JTKWY) drivers in the Big Apple could be making a minimum wage of nearly $24 an hour by 2025 if the city agrees to a department proposal Consumer and Worker Protection (DCWP) on Wednesday.

For New York City’s 60,000+ app-based delivery drivers, the DCWP is proposing an initial minimum wage of $17.87, which would increase to $23.82 by April 1, 2025. The rate would also be paid based on the time the driver spent making the delivery e.g. the time you are connected to the app waiting for a ride offer.

A public hearing on the proposed rule will be held on December 15, 2022 at 11:00 am EST. After the hearing and a consideration of public comments, the rule would go into effect.

“This newly proposed minimum wage rate would help ensure fairer pay for third-party app delivery workers and provide more stability for 60,000 workers in our city,” said New York City Mayor Eric Adams. “We look forward to public comments on the new proposed rules as we prepare to implement the law.”

Brooklyn Borough President Antonio Reynoso added, “It is absolutely unacceptable that the restaurant suppliers who serve so many people in this city are not being fairly compensated for their time, expenses or essential services. Especially since the onset of the pandemic, delivery workers have proven indispensable to the thriving food scene our city is famous for, and it’s time our city showed its gratitude in real, material ways.”

The eventual minimum wage of $23.82 would have three components. The first is earnings, which would amount to $19.86, which is the minimum earnings standard for cab drivers set by the New York City Taxi and Limousine Commission (TLC).

An additional $2.26 is based on rider costs and reflects the average costs incurred by e-bike workers. The final $1.70 comes from workers’ compensation, which reflects the benefits the drivers would receive if they were classified as full-time employees in a comparable capacity.

“Restaurant suppliers serve our city every day, no matter the weather, only to make less than minimum wage with no benefits,” said DCWP Commissioner Vilda Vera Mayuga. “This proposed minimum wage rate would help guarantee delivery workers more dignified pay and rightly establish wage parity with other workers earning a minimum wage.”

The current situation

Currently, New York City’s app-based delivery drivers make less than the city’s $15 minimum wage, on average. Estimates vary, but almost all agree that even with tips, drivers earn less than this threshold.

Workers make an average of $14.18 an hour, split equally between payments from apps and tips, according to a new report from the DCWP. But when expenses are factored in, drivers take home just $11.12 an hour with tips — and just $4.03 without tips.

Another estimate from Cornell University’s Worker Institute put the average hourly wage for app-based drivers at $12.21, falling to $7.87 excluding tips.

Because of those low wages, a third of delivery drivers said they have to work seven days a week to make ends meet, while another third said they have to work six days a week.

Some of the apps have pushed back those earnings numbers, arguing that their drivers are earning more than minimum wage. DoorDash, for example, claims its drivers make nearly $29 an hour on average, including 100% of their tips.

App-based platforms respond

Just as grocery delivery apps pushed back the city’s efforts to put caps on the amount of commissions they could earn from restaurants, they’re already doing so with this week’s proposal.

DoorDash told Modern Shipper in an email that while the company isn’t opposed to the introduction of a minimum wage, it believes New York City’s proposal could have unintended consequences.

“Dashing allows so many in New York City to earn when, where and how often they want,” a DoorDash spokesperson said in a statement. “Unfortunately, the proposed rule does not adequately recognize that flexibility or that dashers can choose which deliveries to accept or decline. If left unaddressed, delivery costs could increase significantly, orders for local businesses decrease and the very delivery people it aims to support could be harmed.

“We will continue to work with policymakers on a sensible approach that better reflects how Dasher uses the Flexible Earning Platform and keeps these services within reach for businesses and consumers.”

One of DoorDash’s main concerns with the proposal is that payment would depend in part on how long drivers have the app open and waiting for an order. The company argued that since drivers can refuse any order, they could theoretically keep the app open and get paid while performing other activities, including delivering for a competitor app.

DoorDash said that in this case, app-based delivery platforms could be forced to limit the number of drivers, remove the ability to accept or reject orders, or even ban delivery for another platform.

Reputation: Incentivizing the gig economy

Uber Eats also had concerns about the proposed rule.

“The day after repealing a rule universally hated by TLC drivers, the city is proposing a nearly identical rule for delivery drivers that would force apps to stop couriers from working when and where they want,” Uber spokeswoman Freddi Goldstein told Modern Shipper in an email.

Goldstein is alluding to a proposal published by TLC on Wednesday that would increase revenue per minute and per mile for drivers.

The rule would also reduce the Commission’s emphasis on usage rates – calculated as time spent on a trip compared to time spent without a passenger but available for shipping – which had the unintended effect “lock” them out of the app in certain areas. Uber and Lyft drivers took to the Brooklyn Bridge to protest the decision in 2019.

However, this week’s minimum wage proposal does not appear to include metrics to determine utilization rate. The DCWP argues that raising the minimum wage will naturally increase utilization as drivers have less incentive to be on call.

The Flex Association — which represents Uber, Lyft, DoorDash, Grubhub, and other app-based delivery platforms — also weighed in, echoing some of the concerns raised by DoorDash.

“The income standard proposed by the Department of Consumer and Labor Protection will have deleterious consequences for earners, consumers and small businesses throughout New York City,” Flex CEO Kristin Sharp told Modern Shipper in an email. “Specifically, the rule would require a company to pay each time a earner opened their app, even if that person provides deliveries for another platform or engages in other activities unrelated to delivery. It is vital that DCWP reconsider this problematic proposal.”

Some observers have also raised concerns that restaurants could lose money from the new rule. As each ride would cost more for the apps, managers fear they will be forced to sell them at a discount to keep costs down for consumers.

Modern Shipper also reached out to Just Eat takeaway company Grubhub, but didn’t immediately receive a response to a request for comment.

Click here for more Modern Shipper items by Jack Daleo.

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