Seattle's experiment with a $26 minimum wage for app-based delivery drivers has backfired, resulting in higher prices for consumers, reduced orders, and no real income increase for workers, according to a new analysis by John Stossel.
Seattle's Minimum Wage Mandate
Two years ago, Seattle's city council imposed a $26 per hour minimum wage for delivery drivers working for apps like DoorDash and Uber Eats. The policy was championed by Democratic Socialists and activists who argued that gig workers were being exploited. However, the outcome has been far from the intended success.
Apps responded by adding a $5 fee for consumers to cover regulatory costs. Seattle residents now complain about soaring prices. One customer quoted in Stossel's video said, "I ordered a $12 sandwich ... $12 grew to $32!" and added, "I just deleted the app." Drivers also reported slower work, with DoorDash experiencing 1.7 million fewer orders in the city.
Economic Consequences
Economics professor Judge Glock explained the unintended consequences: "Obviously, when you’re increasing cost to businesses, you’re going to increase costs to customers." He noted that these are complex markets where companies interface between restaurants, delivery workers, and customers. "Then you have an economically illiterate city council or mayor who thinks, basically, by looking at an industry through reading the news, they can appropriately regulate the exact wage," Glock added.
Former Seattle City Council President Sara Nelson admitted the mistake, saying, "We created a problem and it’s our responsibility to fix it." However, instead of repealing the law, she suggested adjusting the numbers: "If we had gotten the minimum pay standard right, we would not see the decline in the revenue." Stossel criticized this as conceit, arguing that politicians cannot know the right wage for every worker.
Price Controls and Market Responses
Stossel argues that price controls never work and that flexible pricing driven by competition is the only effective mechanism. "Competition forces businesses to constantly adjust pay and prices to attract workers and customers," he writes. Glock called the political approach "patently absurd," stating, "You’re not going to have any improved well-being for people, and you’re not going to have increased wages for those workers."
A similar minimum wage increase in New York City for app-based drivers, guaranteeing about $20 per hour, also failed. "The decrease in tips and increased competition for jobs offset all of the gains from that imposed minimum wage," Glock said. He described it as a "continual whack-a-mole tendency" where the market responds, and politicians pass new regulations to counter that response, ultimately failing to improve worker well-being.
Conclusion: Competition Over Control
Stossel concludes that competition is the only good way to determine wages. "A lot of politicians believe there’s a free lunch or a fixed pot of money that they can give out to the neediest people," Glock said. "The actual effect was not to improve the well-being of workers, but to increase costs for customers and sabotage one of the most successful businesses in the city." Stossel's video, posted on JohnStossel.com, highlights the ongoing battle between government intervention and economic freedom.
