The Thorn in Food Delivery Might Signal its Demise

The Lempert Report
January 27, 2020

The topline is that without drivers there is no food delivery – at least for now until we have autonomous vehicle delivery.

And the food delivery companies seem to be doing their best to ruin what has become a major convenience for many people.

Whether it is Instacart, Postmates, DoorDash, FreshDirect, or Uber Eats their  drivers have made less and less money over the past years – and with the Instacart drivers’ strike last year, the signal is being read loud and clear that this gig workforce is fragile.

The Takeout writes that food delivery drivers’ pay is determined by each company’s payment algorithm. Those algorithms weigh factors like order size (number of items and weight), driver availability, and driving distance. The way those factors are used by the algorithm to calculate the driver’s payment, though, is extremely opaque. So opaque that when the tech companies make small changes to their payment algorithm, it doesn’t raise any red flags in the moment.

 “The changes are subtle—they’re small steps, so you kind of accept them,” Ulysses Galves told The Washington Post. Galves, an Iraq War veteran, drives for both Instacart and Postmates. “You lose a little money here and there—and after a while you realize you’re making half of what you used to.” Galves made over $700 per week driving for Instacart last year. Now, it’s around $400 per week, pre-tax.

Erin Hatton, a University at Buffalo professor who studies labor issues, told the Post, “This technology—which could easily be used to increase transparency—is actually being used to do the opposite.”

According to the Post, these companies are essentially making up a new business model as they go along. These companies recruited good workers, cultivated a strong labor base, and now they’re reducing worker pay to make the companies appear more profitable. DoorDash and Instacart are setting their sights to go public, which is likely to exacerbate the issue.