The coronavirus pandemic has given a massive boost to grocery delivery and created new jobs because of the need to fulfill and deliver more orders than ever, but the quality of those jobs is a cause for concern, a new study says.
A report published Wednesday by researchers for the UC Berkeley Labor Center and shared exclusively with MarketWatch ahead of publication noted that big grocery stores such as Kroger Co.
and Albertsons Cos. Inc.
have seen their quarterly online orders double or more, and Amazon.com Inc.’s
online grocery sales have tripled. As demand has risen, companies have hired new technical staff to build and maintain online infrastructures, begun fulfilling orders from micro-fulfillment centers and more.
The study said it’s hard to know exactly how many positions have been added since the pandemic. It cited Bureau of Labor Statistics numbers that show hundreds of thousands of stockers and order-fillers, and about 13,500 delivery drivers, were employed by grocery and specialty food stores in 2019. The numbers of those positions are projected to rise 1.7% over the next decade. And companies such as Amazon and Instacart announced at the beginning of the coronavirus crisis that they were adding hundreds of thousands of jobs for warehouse and delivery workers.
But the researchers said “many new positions in filling orders and home delivery are insecure and low-paid positions,” raising concerns not only about those workers but whether those conditions could affect others in the industry. About 15% of grocery employees are unionized, according to the report, which also said Albertsons and Kroger delivery drivers are employees who make an average of $15 to $17 an hour.
However, the report said most grocery stores use third-party delivery services. Those services’ delivery drivers are not considered employees and different estimates of their wages vary widely.
Instacart, which is part of a coalition of companies trying to establish a separate classification for gig workers that falls short of treating them as employees, owned 57% of the market for grocery delivery in April, during the peak of the pandemic, the report said. The company increased the number of delivery workers on its platform from 180,000 to 500,000 in eight weeks during the beginning of widespread shelter-in-place orders, according to the study.
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Most of Instacart’s shoppers and delivery workers are independent contractors, although the company has in-store shoppers who have employee status. But the company has laid off some of those employees. One national survey of Instacart workers cited by the researchers estimated median hourly earnings of $9.50 an hour before expenses. Another study, from a labor organization called Working Washington, showed a vast range in pay, from as low as $2.74 an hour to as high as $29.05 an hour depending on the job or order.
The study’s authors estimated that as much as 10% of grocery sales could take place online in the next few years — which is expected to reduce the number of cashier positions — and worry about the “potential of an expansion of platform-based work making its way into other jobs in the store, with similar problems of low wages and insecure work associated with misclassification as independent contractors.”
“I think [Instacart is] moving away from the in-store dedicated shopper model,” said Chris Benner, a UC Santa Cruz professor and lead author of the study commissioned by the UC Berkeley Labor Center and Working Partnerships USA. He said some of the shoppers had been organizing, which the company probably sees as a threat.
“We regularly explore solutions with our partners to find the best model for them and their customers,” an Instacart spokeswoman said.
Matthew Teles worked for and organized against Instacart for years over shoppers’ pay and working conditions. As more shoppers joined the platform, his pay fell to a point where he felt it was no longer worth it. He said at his peak he was making as much as $1,000 to $2,000 a week, but his earnings eventually dropped to $600 or less a week, and he didn’t like the company’s lack of transparency and “control over every aspect of their app.”
At the beginning of the pandemic, Teles switched to Dumpling, which charges delivery workers to use its app so they can take online orders, but allows them to market their services the way they want and set their own rates. Teles said that with the app, he controls how he wants to run his delivery business. He has served hundreds of clients, including 56 regular clients in the Chicago area, and has averaged up to $3,000 a month while working five to six hours a day.
“My life has been way less stressful,” he said in an interview. “I’m more in control of my future.”
Benner said society has “choices about the quality and nature of these jobs. This industry gives clear examples.” When fulfillment of online grocery orders are done by full-time grocery workers, they are employees who make at least minimum wage and have health benefits, unlike gig workers who deliver for Instacart or other platforms.
Some companies directly employ delivery drivers, like Bay Area grocery startup Farmstead. The online-only company fulfills orders from a giant warehouse in Burlingame, Calif. — it had to move out of its original San Francisco location to a spot that’s six times larger — and has seen its business grow quickly during the pandemic. To comply with a California law, it hired its drivers, who were formerly independent contractors, as employees.
“There are companies that can support W-2 delivery workers and companies that can’t,” Pradeep Elankumaran, chief executive of Farmstead, said in an interview. “We can. We know how much we can afford to spend on delivery. Other companies who have [lower profit] margins will have a hard time.”
He added: “Our approach has been ‘can we have a happy medium?’ We can provide flexibility while compensating them fairly.”
Not all executives will think like Farmstead’s CEO. Benner said what’s really needed is federal legislation to help protect workers’ rights.
“The question is, are conditions bad enough and the problems glaring enough in our society during the pandemic that it creates the political will to create something like the scale of the New Deal?” Benner said.