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 qualified for bonuses — an extra $200, say, for making 40 deliveries in a week.
But within months, that began to change. Then it changed again. Now, the 47-year-old Iraq War veteran from Silverdale, Wash., says he’s lucky to pull down $400 a week for the same 40 hours of work. He used to be guaranteed at least $10 an hour, he adds, but that’s no longer the case.
“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 customers through their groceries, fueling explosive growth for delivery services such as Postmates, Door Dash, Instacart, and Fresh Direct. which are reporting surging sales and 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 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, a 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.”
Contractors, freelancers, and the self-employed have made up a significant part of the U.S. economy for decades. More than 10% of Americans rely on gig work for their primary income, according to 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 say they fear that any pullback in consumer spending could also have an outsize effect on pay, as grocery delivery and takeout orders are relatively easy targets if costs need to be reined in.
“These workers are very much on their own,” said Alexandrea Ravenelle, a sociology professor 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% less than they once did after the company changed its algorithms and eliminated a $4-per-job guarantee in May. A spokesperson 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 wages. After widespread outrage from workers and customers, chief executive Tony Xu said the company would begin giving workers their tips.
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 spokesperson 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."
Delivery workers used to be paid a flat 40 cents per item, with bonuses sprinkled in. Last October, Instacart began calculating pay based on a number of 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.