When Ulysses Galves began working for Instacart last year, he easily made $700 a week ferrying groceries from supermarkets. He averaged about $18 an hour and even qualified for bonuses — an extra $200, say, for making 40 deliveries in a week.
“The changes are subtle — they’re small steps, so you kind of accept them,” said Galves, who also delivers for Postmates to make ends meet. “You lose a little money here and there — and after a while you realize you’re making half of what you used to.”
The nation’s largest retailers are jostling to win over customers through their groceries, fueling explosive revenue growth for delivery services such as Postmates, Door Dash, Instacart and Fresh Direct. The companies also have caught on with investors, attracting hundreds of millions of dollars in venture capital.
Walmart and Costco have invested heavily in grocery delivery in recent years, as has Target, which acquired Shipt in 2017 for $550 million as part of its push into the arena. Amazon upped the ante last week by expanding free grocery delivery for millions of its Prime members. (Amazon founder Jeff Bezos owns The Washington Post.)
But filling and delivering grocery orders is labor-intensive and costly, and drivers for many third-party platforms say they are being wrung out in ways that ultimately result in lower pay and less transparency about how their wages are calculated. Their pay is typically structured on an automated maze of moving parts — including order size, driver availability and driving distance. But with one tweak of an algorithm, companies can effectively change wages for hundreds of thousands of contract workers, who are not guaranteed an hourly minimum or other employee protections.
“These companies got established, they got good workers, and now they’re following a classic business playbook: squeezing workers as a first-line approach to making profits,” said Erin Hatton, an associate professor at the University at Buffalo who studies labor issues. “This technology — which could easily be used to increase transparency — is actually being used to do the opposite.”
Gig work is nothing new — contractors, freelancers and the self-employed have made up a significant part of the U.S. economy for decades. More than 10 percent of Americans rely on gig work for their primary income, according to data from the Bureau of Labor Statistics, and experts expect that figure will only grow. But labor analysts say the proliferation of app-based platforms such as Uber, Postmates and Instacart has given tech companies unprecedented power to change how workers are paid.
“Demand for services like Instacart has exploded and it’s going to take a while to reach an equilibrium,” said Paul Oyer, a labor economist at Stanford University’s Graduate School of Business. “These are new business models. They’re creating a market from scratch, so I don’t think there’s any great surprise that there’s going to be some tinkering.”
Experts who study the gig economy say they expect pay rates to inch lower in coming months, as companies such as DoorDash and Instacart take steps to go public. And, they note, any pullback in consumer spending could have an outsize effect on paychecks — grocery delivery and takeout orders are, after all, relatively easy targets if costs need to be reined in.
“These workers are very much on their own,” said Alexandrea Ravenelle, an assistant professor of sociology at the University of North Carolina at Chapel Hill and the author of “Hustle and Gig: Struggling and Surviving in the Sharing Economy.” “All of the power in the gig economy is held by the platforms. Workers are constantly being rated and ranked, and are competing against each other for pay."
That “game-ification” of gig work — offering sporadic bonuses for delivering a certain number of orders, for example — allows companies to keep workers on their toes without committing to higher pay long-term, she said. And the opaque nature of algorithm-heavy platforms, she said, means companies can make incremental changes without raising red flags. “It’s not even like they have to change an hourly rate across the board,” Ravenelle said. “There is no hourly rate.”
In interviews, Postmates workers said they are making 30 percent less than they once did after the company changed its algorithms and eliminated a $4-per-job guarantee in May. A spokeswoman for the company said it “remains committed” to allowing its workers to “cumulatively earn even more in a given hour.” Workers in Washington, D.C., she said, make an hourly average of $18 in pay and tips.
DoorDash, which uses contract workers to deliver food for Pizza Hut and Chili’s, recently made headlines for using customers’ tips to offset workers’ wages. After widespread outrage from workers and customers, chief executive Tony Xu said the company would begin giving workers their tips.
“After a year of research and conversations with thousands of Dashers, we built a pay model to prioritize transparency, consistency of earnings, and to ensure all customers get their food as fast as possible,” Xu wrote in a series of tweets this summer. “But it’s clear from recent feedback that we didn’t strike the right balance.”
Instacart, which paid $4.6 million to resolve similar complaints in 2017, is facing a class-action lawsuit that accuses it of “intentionally and maliciously” using workers’ tips to pay their wages. A spokeswoman for the company declined to comment.
Galves, the Instacart worker, says it has become increasingly difficult to reach his personal goal of $100 a day. He sometimes has to work 15 hours to make that much, which translates to $6.67 an hour, before taxes.
“I’m not expecting to get rich from this job,” said Galves, who is helping put two sons through college. “I just want to be able to feed my family and earn a living wage.”
It’s ‘like the Hunger Games’
Instacart has made two sweeping changes to its earnings structure since October 2018, which company executives say are aimed at increasing transparency and consistency for its 130,000 contract workers. Most workers shop, bag and deliver orders, although some handle only deliveries.
Delivery workers used to be paid a flat 40 cents per item, with bonuses sprinkled in. Last October, Instacart began calculating pay based on factors including product weight and driving distance from the store to the customer. There were other considerations, too: An order from a club store like Costco, for example, might pay more than one from a grocery store. In February, after complaints that it was not properly passing on customer tips, the company began showing drivers how much of their pay was coming from tips. Workers can now see how much they’ll be paid before they accept an order.
Instacart also guarantees drivers at least $5 per delivery, although drivers say a single order can sometimes take them more than two hours to complete, depending on distance and traffic. Full-service workers, meanwhile, are guaranteed at least $7 per order to shop, check out and deliver items.
Drivers also receive 60 cents per mile between the store and the customer (based solely on the distance between point A and point B, not the actual route or drive time). Workers are not paid for the amount of time it takes them to drive to the supermarket, which they say can sometimes be 20 or 30 miles away.
Driver Sharon Harris says it all adds up to an ever-changing guessing game — and lower wages.
“When I first started, I was able to make a living wage,” said Harris, who lives in Anaheim, Calif., and has been delivering groceries for Instacart for two years. “They’ve slashed that by a good 50 percent.”
Two years ago, she says, she could easily make $1,000 a week. These days, she takes home about $500 a week, although some weeks she makes as little as $100.
“Every time they make changes, it reduces what we make. Every single time,” said Harris, 37, a single mother of teenage daughters. “It’s become like the Hunger Games.”
There is a growing movement to reclassify gig workers as employees, which would ensure that they receive a minimum wage, as well as certain benefits and legal protections. California last month passed legislation that makes it harder for companies to classify gig workers as contractors. Uber, Lyft and DoorDash are spending millions to fight that law.
Although demand is growing, grocery delivery is still a small sliver of the market. Online grocery ordering makes up about 2.5 percent of the overall grocery market, although that figure is expected to more than double to 7 percent by 2023, according to data from Met Life Investment Management.
Corwin Samuelson, 58, has been delivering groceries for five years, first for Instacart and then for Shipt. “Gamified” bonuses, he said, have become a growing reality: Deliver 15 orders in two days, receive $200, perhaps, or 50 orders in a week for $700. A spokeswoman for Shipt said that pay varies, depending on location, store and order, and that the company has “evolved our pay structure” in certain cities to account for factors such as traffic and shopping time. Those changes, she said, have resulted in higher average pay rates in Washington, New York and Seattle.
Although such bonuses can be substantial, Samuelson says they give him little control over how much money he takes home each week, even if he keeps consistent hours. Those large swings in weekly pay, he said, can also make it difficult to secure an apartment or estimate the taxes he owes. He has been living in Seattle-area hotels and Airbnbs for the past three months because he says he cannot afford a security deposit for an apartment.
“Just pay us,” he said. “Don’t game my paycheck, don’t mess with our livelihoods. We’re under enough pressure already without feeling like, ‘Oh, no, if I don’t make some number, I can’t pay my rent.’ ”