It’s a familiar sight these days: supposedly well-meaning lawmakers, often lobbied by unions, believe they are helping workers by substantially boosting the minimum wage. Companies must then pull rabbits out of hats to afford increased labor costs, which leads to higher prices for consumers, decreased demand, and less available work. Who immediately feels that pain? Workers, of course.
Recently, we saw this happen in California ahead of the state’s fast-food $20 minimum wage, which is set to go into effect on April 1. That bill was lauded by the SEIU, which promised that 500,000 workers would reap the monetary benefits. Cue widespread rising menu prices, but Pizza Hut is also laying off 1,200 drivers, and other companies are leaning into automation. The overall impact is not great for workers, companies, or consumers.
Will other cities learn from California’s fiasco-in-process? Nope, and in three major cities, similar effects are landing upon app-based drivers.
Minneapolis: Uber and Lyft announced they will no longer operate in the city as of May 1 after lawmakers boosted the minimum wage for ride-hailing drivers. Lyft voiced disappointment in the city council’s decision to make their operations “unsustainable,” Democratic Gov. Tim Walz expressed concern for how the law, along with the Uber and Lyft response, will leave many riders, including disabled people, without an alternative. Additionally, thousands of drivers will now be looking for work elsewhere.
Seattle: Uber and Lyft’s reaction in Minneapolis is likely a response to what is happening in Rain City this year after the city council raised the minimum wage to at least $26.40 per hour for app-based food delivery drivers. Very quickly, consumers were naturally shocked to receive $26 coffees and $32 sandwiches. Within two weeks, this led to a cratering demand for food deliveries and drivers reporting that their weekly earnings had been cut in half. Last week, the city council finally realized what was afoot and began mulling over a possible rollback of the law.
New York City: This example is a particularly confounding one. In Dec. 2023, food-delivery drivers saw their mandated minimum wage rise to $18+ per hour. Predictably, this led to less work for drivers, but it also left drivers not knowing how much they would be paid because companies can now retroactively choose whether they will pay $30 per hour of “active time” spent delivering food or $18 per hour for total time logged in, including “passive time” spent waiting on deliveries. DoorDash has made it known that both payment options are “unsustainable,” and drivers seem to agree.
The takeaway: Although the details differ in these three cities, the impact is the same. Workers suffer from a substantial overnight “boost” to their hourly pay, and collateral damage will likely include many small businesses that will see their sales dwindle due to higher prices.
What’s next: Seattle’s lawmakers will decide whether to roll back their ordinance to clean up their mess.
