Guaranteed Pay For Delivery Drivers Doesn't Exactly Work
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What are the challenges faced by gig delivery drivers?
We're here because your heightened awareness deserves heightened entertainment The Last Show with David Cooper You would think guaranteeing higher pay for gig delivery drivers would mean higher pay. Simple, right? But when the city of Seattle tried it, something strange happened. The economics of the gig economy started behaving differently. Let's dive into just what happened with economics professor at Carnegie Mellon University, Andrew Guerin. Andrew, welcome to the show. Hi, thanks for having me here today. Andy, I think we all want, you know, these gig drivers who don't have great jobs. They're tough jobs to make a great income. And so cities step in and they try to fix their pay.
How did Seattle attempt to guarantee higher pay for drivers?
They try to pass laws to make things a little better for drivers. Enter Seattle. What exactly happened there?
So there are a lot of gig workers who don't make a lot of money and policymakers, just like they want other sorts of low wage workers to be able to afford a decent living in an expensive city, want the same for gig workers. So a city like Seattle that's been at the frontier of raising minimum wage laws was concerned that these laws don't apply to gig workers who are self-employed. They're not employees of any company formally, so the minimum wage doesn't apply to them. Seattle was a leader in trying to extend minimum pay laws to the gig economy by putting in regulations that ensured that for every delivery you do, you earn a certain amount in base pay, that that's either above a fixed minimum or some formula based on how far and how long you're driving and doing the job.
What unexpected outcomes arose from Seattle's pay guarantee law?
And so at the start of 2024, this went into effect and we wanted to see, okay, How much better off is this making the drivers, focusing on most of the drivers who've been doing it pretty frequently beforehand and will continue to drive into that kind of post-reform period?
Explain this to me like I'm an idiot, because probably I am.
How did the economics of the gig economy change in Seattle?
You would think a higher guaranteed pay would end up in higher pay. But let's dive into the mechanics. Why didn't it end up working out that way for everyone?
Yeah. And so what we did first, in what sense did they not make more money? We got data from this company called Gridwise. It's an app that they make for gig workers who can link all their various gig economy apps to this one central app that tracks their earnings. And we were able to get... and get access to that data for research purposes, which lets us look at people who were in Seattle as delivery drivers beforehand and people in other parts of Washington state who were delivery drivers who were defected by this law. And we were able to see what was happening to their gig economy earnings, delivery in particular, before and after this reform to see, OK, how are things evolving for the Seattle delivery drivers relative to a comparison group?
And what we found is that there was one month where these drivers were earning more. And then afterwards, at least on a monthly basis, they were earning exactly the same as the control group, which is basically to say the same as they were before the reform. And we thought, OK, did we just screw this up? Are we looking at the data wrong? And so we broke it down to its components. And what we saw is that it wasn't a mistake. Actually, you see everything moving the way it should be moving, which is that when you look at how much they're getting paid for each delivery, that is jumping in Seattle, just like it's supposed to. That's what the law regulates. It regulates base pay per delivery. But when you look at total earnings over the course of a month or a day, that is summing up not just the base pay for one trip, it's the base pay across all of your trips.
And the tips on top of that as well. And we saw two things happening at the same time as that pay rate going up, is that drivers were doing 20 to 30% less delivery tasks per month or per day even.
Why?
And- You might think, well, maybe they're quitting earlier. Maybe they don't have to work as long or as hard to make the same amount of money.
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Chapters
6 chapters
1
What are the challenges faced by gig delivery drivers?
0:03–0:44
2
How did Seattle attempt to guarantee higher pay for drivers?
0:44–1:37
3
What unexpected outcomes arose from Seattle's pay guarantee law?
1:37–1:55
4
How did the economics of the gig economy change in Seattle?
1:55–4:06
5
What data was used to analyze the impact on driver earnings?
4:06–9:13
6
Why didn't higher guaranteed pay lead to increased earnings for drivers?
9:13–10:04
Speakers
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