Economics Paradigm Challenge

New York City's minimum pay rule for delivery drivers caused a massive 82% collapse in available work hours.

Delivery platforms responded to mandated wage increases by slashing on-call hours and changing user interfaces to discourage tipping. While the hourly rate for drivers went up, their total income often suffered because the apps shifted costs back onto the workers. The platforms used algorithmic and interface tweaks to transfer 554 million dollars away from the labor force. This regulatory substitution game shows how tech companies can bypass new laws by changing the digital environment. A simple wage floor is often defeated by the flexibility of the platform economy.

ssrn | Apr 26