DoorDash has expressed strong opposition to minimum wage laws for delivery drivers in Seattle and New York City in its first quarter earnings report. The company commented that these regulations have increased costs to consumers, reduced sales to merchants, and decreased work opportunities for drivers. The Seattle law, which went into effect in January, prompted DoorDash and Uber to add a $5 fee for every order paid by consumers, resulting in a significant decrease in demand. Both companies have ramped up lobbying efforts in City Hall in an attempt to change the existing regulations, leading the Seattle City Council to consider a new proposal that could lower the wage standards set by the law.
DoorDash believes that their platform is an innovative aspect of the labor market that many do not understand, leading to policies that hinder individual access and choice, as well as reduce the productive capacity in the economy. The company has stated that wait times between orders for drivers in Seattle have tripled, and the number of new drivers in New York City has fallen by 20% since the implementation of the new earnings standards. DoorDash’s CEO, Tony Xu, noted that these regulations are having the opposite impact of what they intended, and expressed concern about the potential for other cities to adopt similar minimum wage policies.
Despite the challenges brought about by minimum wage laws in Seattle and New York City, DoorDash reported record quarterly orders and revenue in the first quarter of the year. The company generated $2.5 billion in revenue, marking a 23% increase year-over-year, with a net loss of $25 million. While the stock price fell by 15% in after-hours trading, it had doubled over the past 12 months. DoorDash highlights that the regulations reduced Total Orders by less than 1% in Q1 2024, illustrating the resilience of the business despite the impact of the minimum wage laws.
The current minimum wage law in Seattle requires DoorDash to pay drivers at least $26.40 per hour, significantly higher than the city’s $19.97 minimum wage. A new proposal, CB 120775, would set a per-hour minimum of $19.97 for the time when drivers are actively making deliveries. However, Working Washington, a nonprofit that helped pass the original legislation, expressed concerns that the new ordinance would reduce worker pay below minimum wage due to payroll taxes and personal expenses incurred by drivers. Seattle and New York City serve as testing grounds for the impact of labor standards in the growing food delivery market facilitated by tech companies.
DoorDash’s CEO Tony Xu emphasized the importance of governments working collaboratively with businesses to provide services that benefit cities in terms of economic growth and consumer satisfaction. While the company faces challenges from minimum wage regulations, Xu remains confident in the positive impact that businesses like DoorDash can have on local economies. As Seattle and New York City navigate the complexities of implementing labor standards in the food delivery industry, the outcomes will shape future regulations and policies in other cities. Overall, DoorDash continues to adapt to changing market conditions while advocating for policies that support innovation and flexibility in the labor market.
