Retailers   //   June 1, 2021

Despite demand for delivery, gig companies are grappling with worker shortages

The gig worker pitch used to be about total flexibility. Over the years, however, things have changed.

“In 2016, I could work about 35 hours a week,” said Tonje Ettesvoll, a driver for both Lyft and Uber. “Then [Uber and Lyft] started cutting the prices, the rates, so I had to drive more. And then they were cutting the rates again. In the end, before the pandemic I was doing 60, 70 hour weeks… There goes your flexibility right there.”

Gig workers have always faced issues related to pay and workload, but many of those came to a head during the pandemic. In retail, the pandemic drove demand for delivery services. Now, as the United States begins to reopen, platforms that facilitate rideshares and deliveries are offering short term incentives to workers amongst workforce shortages, but many don’t think these changes will be enough to support them financially.

In 2020, Upwork estimated that 36% of American workers participated in the gig economy in some form, up from 35% last year. But that 1% boost didn’t match with apps’ growing needs. Demand for delivery services like Instacart, Doordash, and GoPuff rose during the pandemic and these companies went on a hiring spree, at least at the beginning of 2020. Instacart announced plans in April 2020 to hire 250,000 workers to meet pandemic demand. Doordash said it added 1.9 million new drivers between March and September 2020. GoPuff announced plans to hire “thousands” to support its launch in six new US cities in April 2020.

Now, like other traditional retailers, gig work companies are now struggling to recruit talent at scale as need for rides pick up, while delivery demand continues. U.S. drivers for Uber and Lyft are down 40%. DoorDash blamed its first quarter loses on a shortage of delivery drivers. Grubhub cited high demand, poor winter weather conditions and stimulus checks as reasons they couldn’t court enough drivers to meet their needs. 

Despite the worker shortage, some experts believe the last year cemented its mainstream status. “[The pandemic] has accelerated the gig economy, we’ve seen it in our daily lives both for professionals and low income workers,” said Diane Mulcahy, author of the best-selling book “The Gig Economy” and head of private equity at the Kauffman Foundation. “The gig economy is solidified in all of our lives because we’ve been relying on it for the past year and a half.”

Still, some workers and advocates told Modern Retail that the gig model must adapt its worker protections and pay structures be more equitable in the long-run.

In response to these worker shortages, Lyft is offering an $800 bonus to return to the app and giving extra money to drivers when rides last more than nine minutes. Uber is spending $250 million on a “driver stimulus,” suggesting that it will increase wages, though offering few details of the plan in its blog post on the initiative.

Uber has created short-term incentives before, promising to keep “flexibility” alive under the passing of California’s Proposition 22, a ballot measure in which Uber advocated that its drivers and UberEats couriers were contractors rather than employees. The company promised more control over setting fares and better visibility into what trips drivers were signing up for. Yet after enacting these new options in November, some drivers said that the company has since taken these benefits away

These changes to delivery driver pay highlight a systemic issue. Under a contract worker model, gig companies can skirt traditional employee protection laws that promise a “guaranteed minimum wage,” “health benefits” and “paid time off,” said Tia Koonse, legal and policy research manager at UCLA Labor Center. Moreover, drivers report that, in spite of higher prices for riders in recent months, that rideshare apps take too large a share of these fees. Last year, DoorDash was sued, and subsequently ordered to pay $2.5 million to its delivery couriers, after a lawsuit alleged the company stole tips from its drivers.

“[People] want the flexibility, but they also want the guaranteed benefits of a company employee status.” said Koonse.

Ettesvoll agrees with Koonse. In addition to being a Lyft and Uber driver, Ettesvoll is also an organizer at Rideshare Drivers United, an independent organization of rideshare and delivery drivers, and cites a desire for more control over pricing and higher transparency from her work going forward.

“They want to sell us as these happy, independent workers who can control our own lives when the fact is the only thing we can control is when you log on and off,” said Ettesvoll.

Other drivers, however, still enjoy the benefits of gig work flexibility. Kelli Blackburn, a Missouri-based contractor for Amazon Flex and Instacart as well as a former stay-at-home mom, this month started working deliveries with her husband Josh, a former auto-parts worker. Blackburn said changes to the auto-parts industry during the pandemic, a desire to work together and flexibility are what drew her and her husband to the work this year.

“A huge benefit for us at least is being able to set our own schedule and be in control of how much we make,” said Blackburn. “This allows us to spend more time with our kids, make appointments when we need and, if I need a day off because I have health issues, I can do that without feeling bad or putting my job in jeopardy.”

Questions about growing the worker base

While some workers like Blackburn did return to gig work over the last year, on the whole, companies like Uber and Lyft are having trouble recruiting workers. Drivers left the work when there weren’t enough riders to make riding worthwhile, while gig shoppers and delivery drivers faced pandemic stressors like lack of social distancing while shopping and support in personal protective gear provided by their companies. Companies and politicians say that pandemic unemployment insurance is keeping workers away from work, but others think that gig economies’ insistence on flexibility isn’t a strong enough recruiting tool anymore.

Ettesvoll is skeptical that Uber and Lyft’s post-Covid stimulus plans will be enough to recruit workers.

“There’s a shortage of drivers right now because some drivers are still on unemployment, and a lot of drivers are quitting or refusing to drive because the companies have taken away features and lowered the price,” said Ettesvoll. “Instead of paying all the drivers more by increasing our rate, the companies have introduced [short-term] ‘stimulus’ benefits, to get new drivers on the road.”

Ettesvoll’s frustrations with Uber and Lyft had been building even before the pandemic, as over time Lyft and Uber have changed the size of the cut they take from rides, sometimes exceeding 50%.

Labor experts are divided on just how short-term these hiring headwinds are that companies like Uber and Instacart face. Koonse believes increased interest in labor rights and disenchanted gig workers may slow growth of these companies. Mulcahy, however, thinks gig work is nowhere close to saturation and will continue to touch almost every industry, particularly as wage increases and unemployment relief qualification policies shift in favor of gig workers.

“I think what’s amazing is how much the gig economy grew given how punitive our policies [like the lack of long-term national unemployment for gig workers] are… I do think you’ll see continued growth,” Mulcahy said.