New York City has announced a whopping near-300% wage increase for food delivery app workers. The Department of Consumer and Worker Protection said that the hourly wage would surge from a modest $7.09 to around $20 within the next two years in an initiative lauded by many as a long-awaited boon for the estimated 60,000 food delivery workers in the city.
New York City Mayor Eric Adams (D) frames the wage mandate as a righteous return for the city’s “frontline heroes,” who, he says, have consistently delivered for the city. Adams noted that the increased pay rate would “guarantee these workers and their families can earn a living, access greater economic stability, and help keep our city’s legendary restaurant industry thriving.”
Food deliverers in NYC will get a min wage of $20/hr in the next 2 years, and were called "frontline heroes" by State Senator Jessica Ramos, while Chuck Schumer called delivering food "the American dream."https://t.co/zFOJxJulEo
— Andrew Chapados (@AndrewSaysTV) June 12, 2023
However, sound economics requires a more comprehensive look at the situation. Yes, delivery workers, who dutifully serve in all weather conditions, have provided an invaluable service, especially during the pandemic. But the question remains if a government-mandated minimum wage increase benefits workers, even in the near term.
Renowned economist Thomas Sowell addressed the topic in his book “Basic Economics: A Common Sense Guide to the Economy,” providing a sobering perspective. Sowell states that a minimum wage law doesn’t inherently make a worker’s productivity worth that new wage amount. He points out the risk of surpluses and job losses, noting, “The real minimum wage is always zero, regardless of the laws.” That’s the wage many workers will receive if they lose their jobs or fail to find new ones due to artificially high labor prices.
“The real minimum wage is zero.”
— Thomas Sowell
— FEE (Foundation for Economic Education) (@feeonline) June 2, 2023
Furthermore, the announcement met substantial resistance from major food delivery companies. They argue this move will limit work flexibility and potentially impose unmanageable consumer costs. GrubHub told its employees that the new rules “will make working conditions far worse” and “severely limit your flexibility.” DoorDash even hinted at potential litigation against the city, labeling the decision as an “extreme policy.” These businesses believe that this policy, however well-intentioned, may interfere with their operational realities and ability to provide flexible work opportunities.
Despite the well-meant intentions of the city administration, one must recognize the potential negative impacts of this drastic wage increase. While ensuring that workers are fairly compensated for their work is undoubtedly crucial, imposing artificial wage floors may yield unintended consequences.
The real solution lies in encouraging natural market competition and improving worker skill sets rather than imposing artificially high minimum wages. This would deliver true gains for the workers, ensuring their long-term employment sustainability and resilience in an ever-changing economy.