$20 Minimum Wage Backfires

$20 Minimum Wage Backfires as Restaurants See Orders Plummet

A law calling for a $20 minimum wage has led to brutal backlash as customers opt out of ordering delivery in Seattle, Washington.

The Seattle City Council is in the middle of deciding whether to pass a new law that would adjust its prior PayUp bill that went into effect in 2022.

The PayUp law enforced a minimum wage for gig workers, which includes delivery drivers for local restaurants and platforms like Uber Eats and DoorDash. Under PayUp, delivery drivers made $26 per hour before accounting for mileage and tips.

Under the new proposal, gig workers were provided a minimum wage of $19.97, which is Seattle’s minimum wage, plus a per-mile minimum payment of $0.35. However, this rule has many worried gig workers would go without a living wage.
“At the end of the day, this proposal is to return this industry to sub-minimum wages, which is why we oppose it,” Danielle Alvarado, the executive director of Working Washington, told local station Fox 13.

The PayUp bill led to extra customer fees on app deliveries, which fostered a significant reduction in customer demand. But it was also said to protect delivery drivers, who are forced to spend their own money on extra costs like gas and vehicle maintenance.

“Under these revisions, drivers would still be paid at a guaranteed hourly rate, although some advocates say when you factor any other expenses these gig workers face, it would ultimately present a negative effect to their overall pay,” Alex Beene, a financial literacy instructor at the University of Tennessee at Martin, told Newsweek.

DoorDash said the company experienced 300,000 fewer orders within Seattle in the past three months, likely related to the city’s minimum wage guidelines and how they impacted consumer prices.

“It’s painfully clear from listening to Dashers, merchants and consumers that this new law simply isn’t working,” DoorDash said in a statement, as reported by Fox 13. “The latest numbers show that the longer this law remains in place, the more harm it causes. The compromise proposal presented by Drive Forward that the City Council is considering is a promising step toward increasing affordability for consumers and restoring millions in lost revenue for merchants and Dashers in Seattle.”

Uber also said delivery orders had shifted down by 30 percent in the weeks following the law’s passage.

“Protecting gig workers is important,” finance expert Michael Ryan, the founder of michaelryanmoney.com, told Newsweek. “But the real-world impacts have been pretty brutal for all sides so far. That’s why the city council is now considering scaling back some of the wage requirements.”

The new law could be voted on by May 21, and restaurants, employees and customers alike are waiting to see how it will impact them financially. The law could also face amendments before being passed.

Newsweek reached out to the Seattle City Council for comment via email.

Beene said Seattle and other major cities are struggling to figure out how to pass minimum wages that fit the financial needs of employees while not harming the local economy.

“There seems to be a universal agreement that these workers deserve better wages than what they were receiving, but it’s difficult to know exactly how much employers can give while also turning a profit,” Beene said. “The advocates calling for more transparency from employers in this space are spot-on. We need a breakdown of where all these charges to the customer are going in order to know how much truth there is to the claim they can’t pay over a certain amount.”