Latest / Inflation Explained with Fexingo: CPI, Prices, and the Cost of Living for Everyday People / Why Your Pizza Delivery Fee Hides a Decade of Inflation
Transcript
- Lucas: Luna, when was the last time you ordered a pizza for delivery? Luna: Probably last week. Large pepperoni, extra cheese — the usual. Lucas: And how much was the delivery fee? Luna: Um, I think it was like four dollars and change. Maybe $4.50? Lucas: Right. And that fee — that $4.50 you barely glance at — is actually a fascinating microcosm of everything that's happened to inflation in the last five years. Especially the kind of inflation that doesn't show up neatly in the CPI. Luna: Okay, I'm intrigued. How does my pizza delivery fee tell a bigger economic story? Lucas: Let's start with the baseline. In 2019, a typical delivery fee from a national chain was about $2.99. Sometimes $3.49 if you were in a high-cost city. Fast forward to July 2026 — today — and that same fee is routinely $4.99, $5.49, even $6.99 in some markets. That's roughly a 70 to 100 percent increase in six years. Compare that to the overall CPI, which has risen about 22 percent over the same period. Luna: So the delivery fee has outpaced official inflation by a factor of three or four. Why? Lucas: The biggest driver is labor. Delivery drivers used to be paid a sub-minimum wage with tips making up the difference. But a series of state and local minimum wage hikes, plus the gig-economy pressure from DoorDash and Uber Eats, have pushed up what restaurants have to pay to keep drivers. In California, for example, the fast-food minimum wage went to $20 an hour in 2024. That raised the floor for everyone. Luna: But doesn't the CPI capture those wage increases through the 'food away from home' category? Lucas: Partially. The CPI does track menu prices. But a delivery fee is a separate line item — it's not part of the price of the pizza itself. And the CPI methodology struggles with these add-on fees. It treats them as a service charge, but it doesn't always catch how quickly they change. The latest CPI reading from May was 334.0, up from 332.41 the month before. That's a 0.5 percent monthly increase. But delivery fees have been rising at two to three times that rate. Luna: So the fee is essentially a hidden inflation vector. It's not in the headline numbers the way we'd expect. Lucas: Exactly. And there's another layer: insurance. Commercial auto insurance for delivery drivers has skyrocketed. Since 2020, premiums for food delivery fleets have gone up something like 40 to 50 percent, according to industry data. That cost gets passed straight to the customer as a higher delivery fee. Luna: And that's not in the CPI either, because it's a business cost, not a consumer price. Lucas: Right. The CPI measures what you pay at the register — or in this case, at the checkout screen. It doesn't decompose that fee into its components. So you see a $4.99 fee and you think, 'oh, inflation,' but you don't realize that $1.50 of it is insurance, $2.00 is driver pay, and the rest is the platform's cut. Luna: So if I want to understand real inflation, I should look at the line items, not just the total. Lucas: That's a really smart way to put it. And this is where the core PCE — the Fed's preferred gauge — comes in. Core PCE hit 130.1 in May, up from 129.67. That's a 0.3 percent monthly rise. But the PCE has a broader scope than CPI — it includes more services and tries to account for substitution effects. Still, it misses the granularity of fees like this. Luna: So the Fed is looking at a number that smooths out the very thing we're feeling every time we order dinner. Lucas: Precisely. And it's not just pizza. Think about any service with a separate delivery or service fee — grocery delivery, ride-sharing, even some online retail. Those fees have all been inflating faster than the headline numbers. They're a kind of 'stealth inflation' that disproportionately affects lower-income households who rely more on delivery services. Luna: Because if you don't have a car, you're ordering delivery more often, and you're paying those inflated fees. Lucas: Exactly. So the pizza delivery fee is really a window into a broader phenomenon: the gap between the inflation we measure and the inflation we live. The Fed sees core PCE at 130.1 and thinks, 'okay, we're making progress.' But if you're a single parent in a city ordering dinner for your kids, you're seeing 5 or 6 percent inflation on that essential service. Luna: And that gap is exactly what we try to unpack on this show. Speaking of which — if walking through the economy with us has made something click, we do have a small way listeners can support the show. Lucas: Yeah, it's buy me a coffee dot com slash fexingo. No pressure at all — just a way to keep the show ad-free and independent. Luna: And we mean it — it's not about rewards, it's just about keeping this conversation going. Now, back to pizza. Lucas: So the question becomes: will these fees ever come down? Or are they a permanent feature of the new economy? Luna: I can't see them dropping unless driver pay or insurance costs fall. And insurance especially — with repair costs and medical claims still rising, that's unlikely. Lucas: Right. And that's the sobering takeaway. Some inflation is structural. It's not a 'transitory' phenomenon or a supply-chain blip. It's the result of fundamental shifts in how we live and work. The delivery fee is just one data point, but it tells a story about a world where services are getting more expensive because the people providing them are finally being paid more — and insured properly. Luna: So the next time I see a $5 delivery fee, I'll think of it as a snapshot of labor markets, insurance costs, and the limits of CPI. Lucas: Exactly. And maybe I'll tip the driver a little extra, too.