Published April 17, 2019
Grocery delivery app Instacart reportedly serves 15,000 stores, was recently valued at $7.6 billion, and is said to be preparing for an IPO. The company has also been the focus of repeated controversies over the past several years for cutting pay, mishandling tips, and treating workers poorly.
Most recently the company was the center of a media storm over a shady practice where they used customer tips to substitute for workers’ pay. Under that system, each dollar of customer tip did not raise workers’ earnings by a dollar — it simply meant the company paid the worker one dollar less. Facing intense pressure from workers and customers, the company was forced to relent on its tip-taking policy and modify its pay model.
Their updated pay model still sets pay through a black-box algorithm which they claim accounts for a wide range of various factors; however, workers have no access to the details of how those factors are weighted. They are simply offered a given job which pays a given amount, which they can accept or reject. (However, if a worker rejects too many jobs too frequently, they may receive fewer job offers as a result.)
While Instacart has to-date fulfilled its agreement to begin clearly differentiating between pay from the company and tips from customers, their black-box pay algorithm still buries a host of expenses that has made workers’ effective pay rate difficult to independently assess. However, we have been able to assemble a large amount of pay data directly from workers which provides a unique, independent window into what Instacart is actually paying.
Our analysis of more than 1,400 samples of pay data provided by Instacart workers across the country finds that the average Instacart worker is paid just $7.66/hour, after accounting for the costs of mileage and additional payroll taxes borne by independent contractors. About half of all jobs and half of all weekly earnings reports show pay that’s below the federal minimum wage of $7.25/hour, after expenses. Just 6% of weekly pay reports and 13% of jobs showed pay that meets the standard of $15 + expenses.
In aggregate, workers were paid just $7.66 for each hour with an active job, after accounting for the key expenses of mileage and payroll taxes.
Half of workers and half of jobs are paid less than the federal minimum wage of $7.25/hour after expenses.
Just 6.0% of weekly earnings reports show hourly equivalent pay that meets the standard of $15 + expenses.
The data in this report was assembled from two complementary sources of data gathered from Instacart workers from across the country.
- Weekly pay data: Instacart workers have used our “Check Your Checks” tool to submit weekly pay data from Instacart. After excluding duplicated and erroneous reports, we recorded 553 individual weekly pay reports from late February through early March. (All of these pay reports were for the period of time after the implementation of Instacart’s updated pay model.)
- Job-level pay data: Workers have used our “What did Instacart actually pay?” calculator to assess the hourly equivalent pay rate for jobs they completed. After calculating their equivalent pay rate, workers have the option to add details and submit the job for analysis. The pay calculator has been used nearly 4,800 times, and 993 jobs have been submitted for analysis.
In order to create the best possible cross-section of relevant data, we assembled the weekly pay data, which covers February 18 – March 3, with job data from March 4 – March 21. (We did not include the job data from February 18 – March 3 to avoid the possibility of duplicating jobs which were also captured in the weekly pay data.) This data represents a large cross-section of experience, aggregating the results of 8,883 hours of time on active jobs, and $132,131 in gross earnings logged by Instacart workers across the country.
Instacart workers’ hourly equivalent pay for time on active jobs averages less than $8/hour after expenses:
- In aggregate, workers were paid just $7.66 for each hour with an active job, after accounting for the key expenses of mileage and payroll taxes.
- Workers drove an average of 11.4 miles for each hour with an active job, incurring $6.58/hour in mileage expenses at the IRS rate of 58¢/mile.
Half of workers and half of jobs are paid less than the federal minimum wage of $7.25/hour after expenses:
- 49.7% of weekly earnings reports show hourly equivalent pay that’s below the federal minimum wage of $7.25/hour, after expenses.
- 50.5% of individual jobs submitted show hourly equivalent pay that’s below the federal minimum wage of $7.25/hour, after expenses.
Few workers are paid enough to meet the standard of $15 + expenses:
- Just 6.0% of weekly earnings reports show hourly equivalent pay that meets the standard of $15 + expenses.
- 13.4% of individual jobs submitted show hourly equivalent pay that meets the standard of $15 + expenses
It is important to note that the job data and the weekly pay data are consistent, adding to the robustness of our conclusions. An analysis of weekly pay data alone shows an average equivalent pay rate of $7.65/hour for the two week period of February 18 – March 3, while an analysis of job data alone shows a quite similar average equivalent pay rate of $8.10/hour for jobs submitted between February 18 – March 21.
While these figures are quite similar, it is expected that the job data would tend to skew slightly higher than the aggregate weekly pay day. Instacart workers are able to reject individual jobs they choose not to take, and jobs submitted through the calculator are of course a subset of all jobs performed. Further, they are a subset of jobs submitted by people examining these jobs for whether or not they were worth doing as compared to the typical job — in other words, they are jobs selected by those who do the most “cherrypicking” of jobs for the best offers, and would thus tend to be a higher-paying subset of jobs.
Despite this selection effect, the closeness of the figures for the weekly pay data and the job data adds confidence to our assessment that we have assembled a satisfactory cross-section of pay and our aggregate pay rate is accurate.
Equivalent hourly pay calculation
Gig economy platforms tend to focus on gross earnings — the total amount deposited in a given week, including tips, and not accounting for mileage and other expenses. While this is a way to approach the advertised rates of “earn up to $25/hour” it’s not really an accurate indicator of the amount a worker can expect to have to live on.
The purpose of the equivalent hourly pay calculation is to account for the basic expenses incurred by gig workers and create a baseline of comparison between gig jobs and with conventional employment. This is the basis on which gig workers have made the demand to be paid at least $15 + expenses for all time with an active job.
This simple formula accounts for two key costs not accounted for in gross earnings. The first is the additional “employer share” of payroll taxes which are paid by independent contractors but not employees, which works out to 7.65% of pay. A second and much larger added expense is the cost of driving (including gas, repairs, depreciation, etc). The IRS mileage rate (currently 58¢/mile) is a standard, widely-accepted, and comprehensive estimate of the full costs of driving a typical vehicle. While this mileage cost would be a large aggregate line item on a corporate financial report if the company owned the vehicles, the magnitude of the expense can be difficult for an individual worker to gauge — it tends to be hidden on a job-by-job or day-to-day basis, but then shows up in a large repair or need to replace a vehicle far sooner than otherwise.
Note that we have used an extremely conservative calculation of hourly equivalent pay. It does not account for the cost of paying for basic public insurance benefits like workers compensation or unemployment; does not account for paid sick time or other time off; and does not address other work expenses beyond mileage and payroll taxes.
Definitions & terminology
- Total miles, dispatch miles, and delivery miles: Workers experience job-related expenses due to both “dispatch miles” and “delivery miles.” Dispatch miles are the miles from the location where a job is accepted to the store location; delivery miles are the miles from the store location to the destination. All of these miles are required to do the job, would not be incurred otherwise, and cause expenses to the worker. However, like most apps, Instacart only reports delivery miles on the pay and job reports it provides to workers.
- Mileage reimbursement rate: We use the IRS mileage rate of 58¢/mile to account for the total costs of driving, including gas, repairs, and depreciation. This is the standard rate which both employees and independent contractors outside the gig economy are typically paid, and the best comprehensive estimate of relevant expenses.
- Active time: Our estimate counts the time with an active job, from the start of the trip to the store location through the time of delivery. This time includes driving to the store, shopping for groceries, driving to the customer’s home, and delivering groceries. Time waiting between completing one job and beginning the next job is not counted as time with an active job for this purpose.
- Payroll taxes: Our estimate takes into account the 7.65% in additional payroll taxes which independent contractors have to cover, as compared to conventional employees. Note that this does not include the cost of additional benefits like workers comp, unemployment, paid sick time, and paid family leave which are often paid for via employee payroll taxes, and which contractors typically cannot access.
- Tips on top: As recent controversies have revealed, workers and customers share an unambiguous understanding that tips are supposed to be on top of pay, not a substitute for pay. For that reason tips are not included in the hourly equivalent pay calculation — because tips are a supplement to pay by the company, not a substitute for it.
Analysis of weekly pay data
Example of weekly pay provided by Instacart
The weekly pay data provided to workers in the app includes a breakdown of pay from Instacart (excluding tips) and time with an active job (which includes time travelling to the store, time shopping, and time on delivery). However, the weekly pay data provided by Instacart does not include an easily accessible tally of delivery miles and does not include dispatch miles at all.
Delivery miles & dispatch miles
The app design makes it somewhat tedious, but a worker can calculate their total delivery miles for the week by pulling up each separate job and adding the individual figures for delivery miles listed at the job level. Dispatch miles are not similarly accessible; while a worker must have GPS active to accept a job and so the app certainly could calculate dispatch miles, they do not currently do so. However, many workers do track these miles for their own personal accounting purposes, and there are in fact several “helper apps” which aid in this tracking.
56.5% of weekly pay reports included a total of delivery miles. We used that data to calculate that workers drove a median of 3.96 delivery miles per hour with an active job, then imputed that number of delivery miles per active hour to those weekly pay reports which lacked a figure for delivery miles. An alternative calculation based on mileage per order found a median 4.44 delivery miles per order; the results of this calculation were similar, but because the time data was more robust we felt the first calculation was more reliable.
Just under half of weekly pay reports (49.3%) included a number of dispatch miles. We used that data to calculate that workers drove a median of 5.21 dispatch miles per hour on an active job, then imputed that number of dispatch miles per active hour to those weekly pay reports which lacked a figure for dispatch miles. Again we checked our work by making an alternative calculation which found a median of 1.352 dispatch miles for each delivery mile. This alternative calculation produces quite similar results as the first figure, but again we assessed that the time data was a more robust basis for calculation.
Mileage reimbursement rate
Curiously, Instacart lists pay of 60¢ per mile for the miles from store to delivery, two cents more than the IRS rate. However, this amount is blended into the overall pay from Instacart, and in some jobs, the pay that’s supposedly for mileage actually makes up the largest part of what Instacart pays. (Additionally, they do not pay at all for the miles from dispatch to store, and do not claim to do so.) Further, since the mileage is not enumerated on top of other pay, it’s not really a separate reimbursement for expenses on top of pay.
Regardless of how the pay is listed, we break it down for analysis by taking the aggregate pay from Instacart (including what’s marked as being for mileage), and treating the expense of the full mileage as an expense reimbursement, with the balance as pay. While it’s not clear for what corporate accounting purpose they list that 60¢ figure vs. the 58¢ IRS rate, we have chosen to use the lower, official rate for the sake of the most honest and conservative comparison to conventional employment and to other gig jobs.
Instacart reports total active time as well as “online time.” Active time is all time with an active job, from the moment of dispatch to arrival at the store through to delivery. Online time is all time available to work, including time waiting for a job. We only used active time as reported by Instacart.
After the recent controversy, Instacart clearly lists pay from the company separately from tips. We only count pay as part of the hourly equivalent pay calculation, as tips are intended to be on top of pay.
Analysis of job data
Example of job data provided by Instacart.
The job data provided by Instacart includes a breakdown of pay from Instacart (excluding tips), the amount of in-app tip, the time it took to perform the job (which includes time traveling to the store, time shopping, and time on delivery), and the delivery miles (i.e. miles from the store to the delivery location).
Delivery miles & dispatch miles
The job data includes delivery miles, but does not include dispatch miles. While a worker must have GPS active to accept a job and so the app certainly could calculate dispatch miles, they do not currently do so. We took the figure for dispatch miles per active hour derived from the weekly pay data — 5.21 dispatch miles per hour on an active job — and used that figure to impute dispatch miles to the job data.
Mileage reimbursement rate
While Instacart’s in-app job reports list mileage at 60¢ per mile for the miles from store to delivery, this amount is blended into the overall pay from Instacart rather than enumerated separately. As with the weekly pay data, we opted to calculate mileage at the standard IRS rate for delivery miles and dispatch miles to provide a standard and conservative basis of comparison.
Instacart reports total active time per job, from the moment of dispatch to arrival at the store through to delivery. We used active time as reported by Instacart.
Instacart clearly lists pay from the company separately from tips. We only counted pay from the company as part of the hourly equivalent pay calculation.
Like other gig economy companies, Instacart does not provide workers with the complete information they need to calculate their hourly equivalent pay in an accessible and transparent way. While it is understandable for marketing purposes why the companies focus on gross earnings, the gross itself is not a particularly accurate indicator of economic value — $400 gross pay for 40 hours of work has a substantively different economic result if it required driving 200 miles or 400 miles.
Further, the companies do not provide workers the full information necessary to make a more accurate calculation of their effective hourly pay — despite the fact that the necessary information is easily tracked via already built-in functions of their apps (i.e. GPS and time-tracking). For example, while the full time with a job is shown, dispatch miles from a workers’ starting point to the store location are not. While delivery miles driven are shown at the job level, funds which are supposedly a reimbursement for miles driven are both blended into total pay for each job and not totaled in an accessible way at the weekly pay level. Overall, the lack of a detailed breakdown of pay tends to result in workers being tempted to simply divide their gross pay by their active hours — two numbers they are provided — to estimate their effective pay rate. However, this calculation is wildly misleading, as it fails to account for any expenses, including the cost of miles driven — a very large expense which under Instacart’s pay model is borne entirely by workers.
Using a conservative calculation to account for time and mileage with an active job, our analysis finds the average pay rate for an Instacart worker is just $7.66/hour after accounting for the basic expenses of mileage and additional payroll taxes covered by contractors. Half of all weekly pay reports and half of all jobs show an effective hourly rate that’s less than the federal minimum wage. And extremely few weekly checks and completed jobs pay more than the benchmark of $15 + expenses.
This unique analysis was made possible by the substantial amount of data we assembled from Instacart shoppers across the country at both the job level and the weekly pay level. The data offers a first-of-its-kind window through the gig economy’s opaque pay models into what kind of equivalent pay people are actually making.
The results are alarming, and a renewal of our call to reboot the gig economy by establishing an hourly pay floor for contractors of $15 + expenses, with tips on top, and pay transparency.
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The Pay Up campaign is a national effort sparked by Instacart workers who organized to take back their tips & push back against pay cuts. It has been established as a project of Working Washington, a workers’ rights organization based in Seattle that has led numerous groundbreaking efforts to advance labor standards at the local, state, and corporate levels. For more information about Working Washington, check out workingWA.org