Seattle Study Reveals Gig Economy's Complex Pay Challenge

When Seattle passed a groundbreaking law to guarantee minimum pay for delivery app workers in 2024, it seemed like a clear win for gig economy workers struggling to make ends meet.

But new research from Carnegie Mellon University reveals a more complicated story. The law did raise base pay per delivery task, yet workers ended up earning the same amount each month as before.

Here's what happened: While the new requirement increased what companies paid drivers per task, customers responded by tipping less. Tips are a major part of delivery pay, and they dropped enough to offset much of the base pay increase.

At the same time, highly engaged drivers found themselves completing fewer tasks each month. More workers flooded into the market attracted by higher advertised pay, which meant existing drivers spent more unpaid time waiting for orders and drove longer distances between deliveries.

Researchers compared drivers working in Seattle before and after the law took effect with drivers in other parts of Washington State. They used data from Gridwise, a delivery and rideshare app, tracking workers from August 2023 to July 2024.

The study found that drivers didn't leave the gig economy or switch to ride-hailing work. Instead, they ended up with the same monthly earnings but more idle time between paid tasks.

"Based on a simple model of the labor market for platform delivery drivers, our evidence is consistent with the idea that the free entry of drivers into the delivery market drives down the task-finding rate until expected earnings return to their pre-reform level," explains Andrew Garin, associate professor of economics at Carnegie Mellon's Heinz College.

The Bright Side

This research isn't doom and gloom. It's actually giving policymakers crucial information they need to design better protections for gig workers.

The study reveals that traditional minimum wage policies work differently in gig markets where anyone can sign up to work at any time. Armed with this knowledge, cities can now explore more effective approaches like limiting the number of drivers or guaranteeing minimum earnings per hour rather than per task.

Yuan An, a Ph.D. student who coauthored the study, points out the path forward: "If the market for drivers is indeed subject to nearly free entry, minimum pay policies will struggle to raise drivers' earnings without imposing some form of entry barrier."

More jurisdictions across the country are considering similar laws to help gig workers. This research gives them a roadmap for what works and what doesn't, potentially helping millions of delivery drivers nationwide get the protections they need.

Understanding the problem is the first step toward solving it.