Minimum Wage Increase vs. Maximal Cost of Living

The New Wage

New York City just raised the minimum wage for food delivery workers to almost $18 per hour. However, many drivers say it’s still not enough to make ends meet in one of the most expensive cities in the world.

At the same time, delivery companies like DoorDash (DASH) and Uber Eats (UBER) are also displeased. The new minimum wage could force them to make changes to their business models.

The new proposal states delivery companies can choose how they pay workers — per delivery, per hour, or any other model — so long as they are able to reasonably earn $17.96 per hour.

Breaking Down the Costs

Under existing laws, NYC’s delivery drivers make a minimum wage of $7.09 per hour.

With that in mind, a new minimum wage of $18 per hour would appear to be a major win for workers. But NYC Comptroller Brad Lander pointed out the new minimum wage would only be equivalent to about $13 per hour after accounting for job-related expenses like gas or renting an ebike.

On top of that, $18 per hour is still only $36,000 on an annualized basis, assuming a 40-hour workweek and 2 weeks off. This is less than half of the $78,500 reportedly required to live comfortably in New York City.

Too Little Too Late

Many delivery drivers feel the proposal is too little too late. It may seem particularly insufficient considering there was a proposal to raise the minimum wage to $24 per hour last November. Drivers are likely hoping to push for a higher wage now while the offer is still on the table.

With this negotiation comes the reminder that the gig economy is still very much a work in progress. The upside of working for a company like DoorDash is that you can pick and choose shifts as you please. But, on the flip side, those companies do not provide employee benefits. And, after accounting for necessary expenses, you may make less money in practice than on paper.

Gig economy roles are still a great way to make side income. But if the discussions around the negotiating table remain open, it may be best to wait until they close before deciding whether or not to sign on full-time.

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