New York City Sets Minimum Wage for App-Based Delivery Drivers

EconEye Admin

3 years ago

Starting in July, the more than 60,000 delivery people in New York City will make almost $18 an hour before tips. By 2025, that’ll increase to almost $20 an hour. Right now, delivery workers make about $7 an hour before tips. Grubhub and DoorDash warn of “adverse” or “unintended” consequences.—marketplace.org

Answer the following questions to check your understanding of the story.

Will the rise in the minimum wage for delivery drivers create a fair outcome?

a) No, because the people who are ordering deliveries are less wealthy than delivery drivers

b) Yes, because all delivery drivers will be better off

c) Yes, because delivery drivers are less wealthy than the people who are ordering deliveries

d) No, because only those people who have jobs and keep them will benefit and drivers who want to work for a lower wage will be unable to do so

Wrong! - A minimum wage is unfair if it delivers an unfair result and imposes an unfair rule. Does this occur in the market for app-based delivery drivers?

Good Job! - The rise in the minimum wage delivers an unfair result and imposes an unfair rule. The result is unfair because only those people who have jobs and keep them will benefit, and the rule is unfair because it blocks voluntary exchange so that drivers who want to work for a lower wage will be unable to do so.

What is an “adverse” consequence of raising the minimum wage?

Raising the minimum wage ____________.

a) increases the firm surplus at the expense of the worker surplus

b) creates unemployment and a deadweight loss

c) increases the worker surplus at the expense of the firm surplus

d) creates a shortage of labor and a deadweight loss

Wrong! - How does a rise in the minimum wage change the quantity of labor demanded and the quantity of labor supplied?

That's Right! - Raising the minimum wage decreases the quantity of labor demanded, increases the quantity of labor supplied, and creates a surplus of labor. A deadweight loss arises.

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