Nolte: NYC Boosts Food App Worker Wage to $20 Hr., Grubhub Lays off 15%

App-based food delivery workers in New York City currently make an average of $7.09 an hour. The city has announced it will increase the minimum wage for these workers to $19.96 an hour.

Next month, the hourly minimum wage for those who deliver for companies such as Door Dash and Uber Eats will jump to $17.96 an hour. The full benefit of $19.96 an hour will phase in through April of 2025. From then on, the minimum wage will be adjusted with the inflation rate. So, if Joe Biden is reelected, these guys could be making $950.00 an hour by 2028.

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The city also said it would convert vacant newsstands into shelters for these workers where they can charge their electric bicycles and phones.

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The pay rate will be $17.96 when it takes effect on July 12, 2023, and will increase to $19.96 when it is fully phased-in on April 1, 2025. The rate will also be adjusted annually for inflation. Apps have the option to pay delivery workers per trip, per hour worked, or develop their own formulas, as long as their workers make the minimum pay rate of $19.96, on average. Apps that pay workers for all the time a worker is connected to the app (the time waiting for trip offers and trip time) must pay at least $17.96 per hour in 2023, which is approximately $0.30 per minute, not including tips. Apps that only pay for trip time (the time from accepting a delivery offer to dropping off the delivery) must pay at least approximately $0.50 per minute of trip time in 2023, not including tips.

According to the release, there are somewhere around 60,000 food delivery workers in New York City.

The food companies are not happy. Grubhub warned delivery workers that these changes “will severely limit your flexibility. You may not be able to choose when and how you work.”

The company added, “We’ve heard time and again that flexibility and independence are key reasons why you partner with our platform. So, please make your voice heard today.”

In other news, Grubhub announced it has laid off some 400 staffers, which adds up to 15 percent of the company’s corporate staff. CNBC says Grubhub is having problems gaining market share, and just a year after acquiring it in 2021, Grubhub’s parent company, a Dutch firm called Just Eat Takeaway, has considered selling.

Grubhub said its laid-off employees will receive 16 weeks’ severance.

In a memo, Grubhub CEO Howard Migdal wrote in part, “It is…clear we need to make some tough decisions to maintain our competitiveness.”

There’s no indication New York City’s minimum wage increase to $19.96 for app-based delivery drivers had anything to do with these layoffs, but a 300% jump in government-mandated wages for a city the size of New York is no small thing.

Nothing would make me happier than to see these drivers make $20 or more an hour. But you want to see this wage increase happen for the right reasons: a tight labor market that forces corporations to pay a premium price for skilled and conscientious workers.

But a tight New York City labor market is difficult to create when New York City Mayor Eric Adams welcomes tens of thousands of illegal immigrants — a flood of cheap labor that makes labor even cheaper.

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When the government willy-nilly orders a wage increase like this one, the results can be chaotic. Obviously, to cover this 300 percent jump in labor costs, the customers will end up paying a lot more for their food. Where else will the money come from?

Ah, but once those food costs go up, fewer people will purchase this food, which hurts everyone, including the delivery drivers. After all, you can’t make $20 an hour without a job. My math could be off, but I’m pretty sure $7.09 an hour is better than no dollars an hour.