New York City’s pay hike for third-party delivery workers has been a resounding success. At least according to New York City.
In a report released Thursday, the city said the $17.96 minimum hourly wage that went into effect in December resulted in significantly higher earnings for couriers and had only a minimal impact on delivery demand in the first quarter of 2024.
But the report also revealed that the total number of couriers fell, and that tips plummeted while delivery fees skyrocketed.
Still, officials called the pay standard, which is opposed by third-party delivery apps, a “true success.”
“It has helped lift up some of our hardest working New Yorkers while still allowing the app-based restaurant delivery industry to grow and thrive,” said Vilda Vera Mayuga, commissioner of the city’s Department of Consumer and Workforce Protection.
Delivery apps, on the other hand, accused the city of cherry-picking data that does not reflect the full effects of the wage hike.
New York City’s pay standard for delivery workers is one of the first of its kind in the U.S. The city estimated that couriers were previously earning an average of $11 per hour after tips, well below the citywide minimum of $15.
Under the new rule, they brought in an average of $19.26 per hour after tips in Q1, a 64% increase compared to last year, before the pay rate was in effect.
Couriers were also more productive. The amount of time they spent waiting for an order decreased 39%, and the amount of time they spent making deliveries increased 15%, per the report.
Delivery apps responded to the higher wages by raising their fees. Customers saw an average per-order fee increase of 46%, the report found, from $4.96 to $7.26.
Nonetheless, they continued to order delivery at higher rates. The total number of orders rose 8% year over year, to more than 2.77 million, and total spending rose 10%, to $108.3 million.
The combination of earnings and commercial growth was applauded by labor advocates, including a prominent workers rights group.
“These strong results show yet again that we don’t have to make the false choice between business growth and workers’ rights,” said Ligia Guallpa, executive director of Worker’s Justice Project.
It appeared that the blow of higher fees may have been softened by a change in the way delivery apps handled tips. After the wage hike went into effect, the apps shifted tip prompts from checkout to after deliveries were complete. The average tip amount declined 68% year over year, from $3.87 to $1.23.
Overall, the higher fees and lower tips translated to just a slight increase in the total cost of delivery for consumers in Q1. Their average spend, including subtotal, tips, fees and taxes, increased by just 76 cents, to $39.11 per order, a difference of 2%.
One fact the city did not go out of its way to highlight was that the higher wages went to fewer workers. The total number of couriers in New York City declined by 9% year over year, to 99,000.
That decline was likely due to the onset of tighter scheduling guidelines by delivery apps that are intended to match driver supply with demand to satisfy the minimum pay standard. That could be preventing casual couriers from logging on and picking up orders here and there.
Uber Eats in a statement called the rule a “job killer” and said that it now has 12,000 fewer delivery workers than before the hike went into effect and a waitlist of 27,000.
“The couriers who are still able to work need to work much harder, doing 80% more deliveries per hour than they did before the rule took effect,” the company said in a statement.
“[The Department of Consumer and Worker Protection] predicted in its 2022 study that couriers would earn more, but that earning opportunities would be concentrated in fewer hands. This report shows that to be true,” Grubhub said in a statement. “Grubhub believes couriers should be paid fairly for their services, which is why our existing model used in most markets that pays per delivery, plus tips works so well.”
The apps also argued that though total orders increased, demand was still stunted by higher fees.
DoorDash, for instance, estimated that customers placed 850,000 fewer DoorDash orders than they otherwise would have in the two months after the wage hike went into effect.
“The real numbers bear out that sad truth: higher costs causing thousands of lost orders for Dashers to deliver and millions of dollars in lost revenue for local businesses,” the company said in a statement.
New York's minimum pay rate for couriers rose to $19.56 in April.
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