Tony Illes enjoyed four years of success as a full-time delivery person for several apps: by his calculations, he made 10,000 deliveries, a good living in the gig economy. Just a few weeks ago, it all came to a screeching halt when he suddenly found himself waiting six hours for a single UberEats delivery request.
“The question was dead,” said the 30-year-old Illes Fortune.
Shortly after, he launched Tony Delivers, a service in which Illes takes hungry Seattleites in his Beacon Hill neighborhood on food deliveries on his e-bike or e-scooter. Each order 1.5 miles in diameter costs $5, regardless of what customers order.
“I feel more capable than sitting around waiting for some app to deliver the goods… I can go and get it myself,” he said.
Now that it’s Illes’ full-time job, Tony Delivers has added some coherence to his volatile gig work. He did not share sales data with Fortune, but said the business is successful and “getting better every single day.” But why did this long-time worker have to start his own business?
City Hall has a role in this story and in a minimum wage ordinance designed to help gig workers.
The long waits between orders didn’t begin until after Jan. 13, 2024, when Seattle enacted an ordinance that raised the minimum wage for delivery app drivers. While the ordinance was intended to protect gig workers who rely on the income they earn from deliveries and tips, app-based companies didn’t just absorb those costs. Instead, they rolled them into the rates that customers pay for the service, and if you talk to them and drivers like Illes, there has been a catastrophic decline in business.
Steven Marchese, director of Seattle’s Office of Labor Standards, said the law represents “an important step forward,” but delivery app executives think otherwise. To offset rising operating costs in the city, delivery apps, including UberEats and DoorDash, have implemented additional fees to cover deliveries and platform costs. As a result, fewer customers used delivery apps, leaving drivers waiting, according to DoorDash’s calculations.
“People are upset, they are hurt; their wallets are hurting, Illes said. “They have to make very different consumer decisions.”
Pushing the question away
At 30, Illes is in the same position as a growing number of Gen Zs and Millennials who have turned to temporary work to earn a living. Bank of America found that, as of August 2023, 4.3% of millennials earned money from gig jobs, double the percentage from six years ago. Overall, Seattle’s minimum wage ordinance estimates the city is home to about 40,000 app-using workers.
Classified for tax purposes as 1099 workers, app delivery drivers are not afforded the same protections as full-time W2 employees, such as health insurance or minimum wage. These differences pushed workers to organize. Efforts by temporary workers recently culminated in a Valentine’s Day strike in the US, UK and Canada, with thousands of Uber, Lyft and DoorDash drivers refusing to take orders on one of the busiest delivery days of the year.
Marchese said these actions have encouraged the city to do right by its workers. That’s why Seattle, along with other cities like New York and Minneapolis, have pushed to pass ordinances that protect these workers and establish minimum wages. But app delivery companies have countered that laws that purport to protect workers are actually leaving drivers vulnerable.
The fallout was swift and brutal. After the ordinance went into effect last month, DoorDash implemented a $4.99 regulatory fee and UberEats similarly introduced a $5 local operating fee. Instacart has set the default tip option to $0.
In the two weeks after the law was implemented, Seattle businesses lost $1 million in revenue, according to a DoorDash blog post on Tuesday, which also said there were 30,000 fewer delivery requests on the DoorDash marketplace. Drivers waited an average of three times longer to receive order requests on the app. Uber said it Fortune that its drivers are waiting up to 30% longer, and Instacart has reported similar problems.
Some restaurants back the app companies’ claims. Indian spot Spica Waala saw a 30% year-over-year decline in app orders, which account for 30% of the restaurant’s business, co-owner Uttam Mukherjee told GeekWire.
“I’m frustrated that we now have to bear the brunt of this,” he said. Seattle’s experience may infuriate drivers and restaurant owners, but it’s fascinating to economists, who have debated the pros and cons of a higher minimum wage for years.
The minimum wage wars
Seattle’s ordinance, originally passed in May 2022, sets minimum compensation amounts for app delivery workers. Under the ordinance, companies will pay workers a minimum wage per minute of $0.44 combined with a minimum wage per mile of $0.74, or a minimum per-bid amount of $5. The ordinance requires app companies to pay whatever is greater. These amounts must be adjusted for annual inflation rates and standard mileage rate adjustments. As a result, delivery drivers in Seattle will now earn at least $26.40 an hour before tips. The order also requires apps to provide more transparency into payment records and receipts and gives workers the right to reject delivery requests without being penalized.
This effort is one of many the city has undertaken to support gig economy workers over the past decade, starting in 2018, when Seattle passed the Domestic Workers Ordinance to extend minimum wage protection to all domestic workers regardless of employee status. The pandemic-era ordinances provided increased pay and paid sick time for gig workers, but were suspended in 2022 after the COVID-19 public health emergency ended.
“It has been a policy goal of the city, through all the labor standards that we have, to establish basic protections for all workers, so that we can ensure that this is a fair economy for all workers,” Marchese said Fortune.
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Politicians and union leaders are engaged in a long debate over raising the minimum wage, which at the federal level has not changed since 2009. Due to the lack of movement, state and local lawmakers have taken matters into their own hands, leading to wages that differ significantly across regions based on cost of living and political leanings. While the minimum wage in Georgia and Wyoming is $5.15 (although employers must comply with federal requirements), Washington has the highest minimum wage of $16.28. Seattle’s is even higher at $19.97.
Seattle has experienced its fair share of gig work-related turbulence in recent years. In August, DoorDash agreed to a $1.6 million settlement with the city of Seattle for allegedly violating the city’s paid sick time ordinance. UberEats reached a $3.3 million settlement with Seattle in October 2022 for an alleged violation of the Gig Worker Premium Pay Ordinance.
But app-based delivery companies have continued to push back against these policies. They are calling the minimum wage ordinance a threat to both local businesses and motorists.
“The burden of this type of overregulation is almost certain to impact everyone in Seattle who uses these services, including the customers and small businesses who rely on them and the delivery workers who miss out on revenue opportunities.” , an Uber spokesperson said. Fortune.
Where do the fare increases come from?
Other app distribution workers know who to blame for these demand problems: not the government trying to raise their living standards, but their (non-full-time) employers.
“The thing that pissed me off is them [tried] to shift the conflict between the driver and the customers,” said Wei Lin, a GoPuff driver and member of the courier union Working Washington. Fortune. “It was the company’s decision to set a fee. Seattle never said, ‘Oh, just raise the customer rate so we can have money to pay the drivers.’”
The rejection of the ordinance is just one of the complaints Lin has against app distribution companies. Lin said she has taken six pay cuts since she began working as a food delivery driver in 2020, despite city protections in place. He’s not alone: In 2023, delivery drivers lost up to 15% of their app income.
“I’m just an expendable product for the company,” Lin said. “They really don’t treat us fairly.”
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Public app distribution companies are also feeling pressure as they race to become profitable. Uber just had its first profitable year in 2023, while Lyft’s strong fourth-quarter earnings indicate it’s on track to reach the same goal. DoorDash continues to grow its users, but still reported larger-than-expected fourth-quarter losses.
Adding fees to account for increased operating costs in Seattle is justifiable, Marchese said, but there is a lack of transparency about how various companies, each with different fees and policies, are calculating how to offset operating costs.
The city doesn’t know if the ordinance is costing businesses more money than before or how much it might cost, Marchese said. “This is all information that is within their control or knowledge.”
City officials are meeting with app companies and shareholders to come up with draft legislation to increase transparency between them.
The apps’ lack of transparency is exactly what Illes is capitalizing on to build his business. The ethos behind Tony Delivers is the opposite of that of the apps, Illes said. There is full transparency in his activity because there is little to hide: no commissions to calculate or tariffs to apply. Illes’ philosophy, as indicated by the slogan on his website, “Oh yeah…my friend Tone got me,” is to build trust with clients in a competitive gig economy.
“In the end, it all comes down to one simple thing: price,” Illes said. “And if the price is similar, you will choose the person who cares.”