Hiking the minimum wage for gig workers will cut their earnings to $0
On Sunday morning, I appeared on Fox and Friends to discuss a New York judge’s decision to temporarily block a planned city-ordered pay hike for food delivery workers.
The New York Daily News reports that:
Uber Eats, DoorDash and Grubhub sued the city this week in a bid to halt the hike, which would require companies to pay delivery workers at least $17.96 per hour or an equivalent rate per delivery.
Food delivery workers currently earn around $11 per hour on average. The city’s minimum wage is $15.
The workers have historically been treated as independent contractors, not company employees, depriving them of a minimum wage.
I explained that the cost of this measure will have to be borne by someone, the question is simply who?
The business can pass the cost onto consumers in the form of higher prices. Alternatively, the business could swallow it in the form of lower profits, but businesses like DoorDash and Grubhub are notoriously unprofitable so it is much more likely that they will simply cease providing the service.
Grubhub and DoorDash do have the option of passing the cost onto the providers of the food, the sorts of mom and pop delis and pizzerias that New York is famous for, but all that does is pass the decision on to them: do they hike the prices they charge their customers or do they swallow it in the shape of lower profits? Once again, it is quite likely that these businesses – which already operate on famously low profit margins – will simply stop providing the service altogether. That is what Uber threatened to do during the last legislative session when Minnesota’s House and Senate passed a bill so loopy that even Governor Walz vetoed it.
The New York Daily News quoted the commissioner of the Consumer and Worker Protection Department, Vilda Vera Mayuga, as saying that she was “extremely disappointed that the apps are delaying the implementation of the minimum pay rate.”
“These apps currently pay workers far below the minimum wage, and this pay rate would help lift thousands of working New Yorkers and their families out of poverty,” she added.
How would one of these drivers be lifted out of poverty if the service ceases and their wage drops from $11 an hour to $0 an hour? That, after all, is the true minimum wage.