New York City sets new minimum wage for food delivery workers

Perhaps more than any other American city, New York relies on a growing army of delivery workers who have braved successive waves of Covid, extreme weather and toxic air as telecommuting has reshaped the economy. Now they get a raise.

Starting July 12, New York City’s app-based delivery workers must be paid at least $17.96 an hour, not including tips — the first such minimum wage in the country for an industry that exploded in popularity during the pandemic. The increase, which will take effect nearly two years after the City Council passed a set of bills designed to improve conditions for workers, was announced by Mayor Eric Adams over the weekend.

Critics say the rule does not go far enough to compensate the workers, who must absorb a range of expenses as independent contractors, including frequent on-the-job injuries. And industry groups argue that the extra costs could limit opportunities for some workers and pass the cost on to consumers and restaurants, who already pay high fees to use the apps.

The city’s more than 60,000 delivery workers, who deliver takeout, groceries and other goods, are paid an average of about $11 an hour, after tips and expenses, less than New York’s $15 minimum wage, according to a city analysis. They also cover their own health insurance, business expenses and additional taxes.

The new law, first proposed in 2021, would eventually raise workers’ minimum wages to at least $19.96 an hour in 2025, or more, based on inflation.

“This is huge and historic for an entire industry that has no protections,” said Ligia Guallpa, executive director of the Worker’s Justice Project, a labor advocacy group that pushed for the law. “It will have a huge economic impact on workers and their families.”

Waiting for a job outside a Chick-fil-A in Midtown Manhattan on Monday afternoon, Daron Harris, 34, an Uber Eats driver from Far Rockaway, Queens, was excited about the upcoming pay raise.

“I feel like it’s so well-deserved, because some days are good and some days are really bad,” he said, adding that he receives just $2.50 to $3.50 per delivery, not including tips.

Mr. Harris, who delivers about 35 hours a week and also works as a security guard, said he earns about $150 through Uber Eats “on a good day,” $23 of which he has to use to rent an electric bike.

“With this new salary, you’re basically guaranteed to make a decent amount of money every day,” he said.

But the true benefit for delivery workers may be less than advertised, critics said. Brad Lander, the city controller, who first sponsored the bill as a 2021 city councilman, said the city had watered down the intent of the law, after months of delays, in the face of lobbying pressure.

The actual increased pay will be less than $13 an hour, not close to the $20 an hour the city suggests, Lander said, in part because the rule includes a so-called multi-app deduction that considers how workers can be logged into more than one app at a time .

Lander also criticized the city’s decision to stagger the wage increases through 2025, when workers are already making below minimum wage.

The law allows delivery companies to meet the new wage requirements this year through two different models: either by paying a fixed hourly rate, which is not common in the industry, or by paying per delivery, at a rate of approx. 50 øre per minute, not including tips.

A spokesman for the mayor’s office said the rate increase would result in “significantly higher” wages for workers and that Lander’s wage calculation was incorrect.

The multi-app adjustment is appropriate, the spokesman said, based on a study of how workers use the apps, and the Department of Consumer and Worker Protection will review and possibly revise the rule next year. The city is staggering the wage increases over a two-year period to give delivery app companies time to adjust to the new rates, he said.

Industry groups opposed the law. Kristin Sharp, CEO of Flex, a trade association that represents delivery apps including DoorDash, Uber Eats and Instacart, said the added cost to companies could lead to higher fees for consumers, and the reduction or possible elimination of tips for workers.

Some companies may also limit access to the app to some lower-frequency workers, she said, depending on the payment model the companies pursue.

But similarly bleak predictions fell short when the rental car industry, a close analog for gig workers, was forced to raise wages in New York in 2019, said James Parrott, director of economic and fiscal policy at the Center for New York City Affairs at the New School.

A 2020 study on the impact of this wage increase found that driver wages increased by 9 percent and passenger fares rose by about 5.9 percent, in line with the fare increases seen in Chicago, where a minimum wage standard was not established. Customer waiting times also decreased, the study found.

Dr. Parrott, who consulted with the city on pay for delivery workers, said he did not expect the wage increases to fundamentally change the food delivery landscape in New York, and he predicted that demand would continue to grow.

The number of delivery workers in the city has more than doubled since before the pandemic, he said, from about 25,000 to 30,000 workers in 2019 to more than 60,000 today.

And the delivery companies have significant margins to help offset the wage increases, he said. Last year, workers earned about $4.32 per delivery, not including tips, while delivery companies had a gross profit of $4.19 on average, according to a city report.

“It should not be tolerated that business can only operate if they can exploit their workers,” he said. “If this gets us away from a worker-exploiting business model, this seems like a fair trade-off.”

Erin Nolan contributed reporting.