The delivery reckoning is here (2024)

There's a growing contradiction behind that burrito you had delivered for dinner.

Chances are, you paid a premium — over a third more than if you had walked into the restaurant for takeout — just to have someone drop it off at your door.

But at the same time, the gig worker who made the delivery for DoorDash, Uber Eats, or a similar service may be getting paid less than they would have a few years ago.

Making deliveries used to be more lucrative — during the COVID-19 pandemic, for instance — but many gig workers now make less than minimum wage. This is driving some to abandon gig work — a possible problem for companies that need workers to deliver customer orders in a timely fashion.

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And while some cities have imposed minimum-wage laws for gig workers, companies say this leads to higher costs for consumers.

The increasing tension points to a broader question in the delivery world that's become clearer than ever this year: Can the delivery business be profitable for the companies, affordable for consumers, and pay workers a living wage simultaneously?

'I saw the writing on the wall'

One Instacart worker in California said he made delivering for the app his full-time source of income in 2020. But by 2023, his daily earnings started falling.

That's when he first considered that his work for Instacart wouldn't last forever. "I saw the writing on the wall," the worker told Business Insider. He asked to remain anonymous, fearing Instacart could deactivate his account.

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New laws aim to raise gig-worker pay

Cities like New York and Seattle are trying to solve the pay problem with new regulations mandating how much delivery workers earn.

A law that took effect in Seattle in January aims to pay delivery workers for services, including Instacart and DoorDash, a rate equivalent to the city's $19.97-an-hour minimum wage for W-2 employees.

One worker who has delivered food for DoorDash in Seattle since the law was enacted told BI that his hourly earnings have increased since January. He asked to remain anonymous for fear of retaliation at work, but BI has verified his identity and work.

"It's more steady," the worker told BI. "Before, you'd go out and make $14 or $16 per hour." Now, his income before taxes and after costs like vehicle upkeep are as high as $25 an hour. Unlike employees, contractor delivery workers have to cover many of their own costs.

Gig workers have had to get choosier about jobs

The dilemma isn't unique to the food-delivery world.

Plenty of startups attracted early customers by offering their products or services to customers by taking a huge loss — consider all those flyers from meal-kit companies like HelloFresh that used to show up in your mailbox offering a dozen or more free dinners for signing up.

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The strategy: to get you, the customer, so used to what's being offered that you'll keep paying for it — even when prices start going up.

Timothy Turer, who has worked for ride-hailing and delivery companies in Florida since 2016, remembers the dirt-cheap fares that Uber and Lyft offered riders early on.

"I had people jump in a car and being like 'You won't believe how much I paid for this ride: $5!'" he told BI. "I'm getting paid $15, so I don't know what you think you're doing, but they're just addicting you to the service."

Fares are higher now, but Turer said he hasn't seen the benefits, so he's been more strategic about which rides he takes. He sticks mostly to trips that customers schedule in advance, such as early-morning journeys to the airport, which tend to be more lucrative for him.

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Waiting around busy parts of town to pick up rides on the spot no longer makes financial sense, Turer said. "I don't want to do that anymore," he said. "The scheduled rides work very well."

Some gig workers figure it's better to leave the business

Companies face a tough balancing act between paying people enough to keep them working, turning a profit, and not hiking prices for customers so much that it turns them off.

Uber posted its first annual profit in February — 15 years after its founding.

And rival DoorDash has yet to hit the same milestone despite narrowing losses and growing revenue. Meanwhile, Instacart, which said it was profitable in 2022 ahead of its initial public offering, swung to a loss in 2023.

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Paying delivery workers is one of the companies' biggest costs. But with many workers telling BI that their jobs have become less profitable lately, cracks are starting to show in the seemingly well-oiled delivery system.

Are you a gig worker and have a story idea to share? Reach out to this reporter at abitter@businessinsider.com