Follow-up: Seattle City Council President Sara Nelson ‘very worried’ about fallout from food delivery shake-up
DoorDash revealed Tuesday in a blog post that it had 30,000 fewer orders than expected over a recent two-week period after it implemented substantial new fees for consumers in response to a new minimum wage law that went into effect last month.
Anna Powell, a government relations manager at DoorDash, said the new $4.99 fee for every order is in place to comply with the minimum wage law. She said the company has no plans to change the fee, despite restaurant owners losing revenue and consumers complaining about higher prices.
“We would like to see a repeal of the ordinance,” Powell told GeekWire.
The ordinance is part of several unique “PayUp” protection laws approved recently in Seattle designed to provide protections to gig workers that are treated as independent contractors. Some studies show that gig workers are sometimes paid less than minimum wage or subject to poor working conditions.
Seattle Mayor Bruce Harrell remains supportive of the law, which enforces a minimum per-minute and per-mile amount for app-based workers.
“Mayor Harrell stands strongly in support of minimum wages for gig and app-based workers in line with other industries so that they can live in the city they work in and remains committed to making Seattle a place where all workers are treated with dignity and respect,” Callie Craighead, spokesperson for the mayor’s office, said in a statement to GeekWire.
DoorDash said the new law requires the company to pay drivers in Seattle at least $26.40, before tips and pay for mileage.
Powell said DoorDash drivers were already earning around $25 an hour before the law went into effect — higher than the citywide $19.97 minimum wage.
Carmen Figueroa, a longtime delivery driver who helped support passing of the “PayUp” laws, said she’s now seeing higher pay per order on DoorDash with the legislation in place. But she’s also getting less work.
“I’m not making any more money,” Figueroa said.
In its blog post, DoorDash said its drivers are waiting three times longer in between offers due in part to the lower order volume.
Danielle Alvarado, executive director of nonprofit labor advocacy group Working Washington, said the data shared by DoorDash is “a predictable corporate move to oppose fair wages.”
“This so-called study by DoorDash has nothing to do with the impact of the minimum pay ordinance,” she said in a statement. “It’s a study of the needless fees the company is imposing on its customers, not the actual cost of functioning as a business that is paying its workers minimum wage for the first time, just like every other business in the city.”
The fee increase is impacting restaurants across the city that depend on apps to generate revenue.
Uttam Mukherjee, co-owner of Indian street food joint Spice Waala, said his restaurant experienced a 30% year-over-year decline in January from app delivery orders.
Mukherjee supports paying workers a living wage. “We are very conscious about how much our employees get paid and their benefits package,” he said.
But he’s fed up about what’s happening with food delivery in Seattle. Spice Waala, which recently announced a third location, generates about 30% of its total revenue from app orders.
“I’m frustrated with the fact that we now have to bear the brunt of all of this,” said Mukherjee, a former Procter & Gamble manager who started Spice Waala with his wife in 2018.
Seattle is one of the first cities to implement this type of minimum wage. New York City passed a similar ordinance last year.
Reports have emerged out of New York City detailing how food delivery companies are making it harder to tip and curbing availability for drivers in response to the new legislation.
Uber Eats and DoorDash also adjusted tip mechanisms in Seattle.
Some Uber Eats customers outside of Seattle city limits report that they are paying the additional fee as well. We’ve reached out to Uber about this and will update with comment if we hear back. Update: A spokesperson from Uber said the fee will only apply to the City of Seattle starting next week.
DoorDash last week reported fourth quarter revenue of $2.3 billion, up 27% year-over-year, with a net loss of $156 million.
Speaking with analysts following the earnings report, DoorDash CEO Tony Xu was asked about the minimum wage law in New York City.
“Most governments that we work with want to actually work with us and want to work with business” said Xu, who co-founded DoorDash a decade ago. “And they understand that in order for something like DoorDash to work, it has to work for all audiences. We’re always trying to keep the most affordable prices for consumers. We want to maximize the sales for local businesses. And we want to offer the most number of work opportunities for [drivers].”
Xu said that some markets “kind of take policies to the extreme” which result in “adverse impacts against its wishes.”
“Whenever you see regulation enter the way it does in a place like New York City, what you see is cost rise for the overall system,” he said. “There is less accessibility to consumers … there are lower sales for local businesses, and there are fewer work opportunities for [drivers].”
Hilary Wething, an economist at the Economic Policy Institute, told GeekWire earlier this month that more data is needed to fully determine the impact of the new minimum wage law in Seattle.
The mayor’s office said it is willing to take a close look at the ordinance as it collects more information from stakeholders.
“Should the data show there have been unintended impacts for workers and small businesses, we are always open to making improvements through Directors rules, in collaboration with the City Council and our labor partners,” Craighead said.
Other “PayUp” policies in Seattle include an ordinance related to the worker deactivation process and a 10-cent per-order fee approved in November that will help fund the implementation and enforcement of the “PayUp” laws. Seattle also passed a sick leave law for delivery workers last year.
Figueroa, the DoorDash driver in Seattle, said she started gig work several years ago due to health reasons that prevented her from having a traditional office job.
“I’m not asking to become a billionaire,” she said. “All I’m asking for is to be paid a fair wage.”
