Amazon lifts contractor driver pay to nearly $24 an hour

Amazon is investing another $1.9 billion in its Delivery Service Partner program next year, the company said at its annual DSP conference in Las Vegas. The money is meant to help the contractors that run its delivery vans lift driver pay to a national average of nearly $24 an hour, which is about $1 more than this year.

By Amazon’s count, that takes the increase in driver pay to 16% over three years, and it brings total spending on the program to $21.7 billion since it launched in 2018.

What has changed is the pace rather than the size. The $1.9 billion is the same figure Amazon announced a year ago, and the $1 step is the same one it has taken each year since 2024, so the program has settled into a rhythm of one dollar an hour per year.

Amazon does not set the wage itself. Instead, it raises the rates it pays its roughly 4,500 DSPs, and each owner then decides what to pay. “Specifics will vary by DSP and geography, as each DSP determines how best to invest in their business and teams,” wrote Beryl Tomay, Amazon’s vice president of transportation. Every DSP provides health coverage and paid time off for full-time drivers, while many also add a 401(k) and tuition help.

Read across Amazon’s own releases, the average has climbed from $20.50 in 2023 to about $22 in 2024, about $23 in 2025 and nearly $24 for 2027. The money behind those steps started at $840 million, then $2.1 billion, then $1.9 billion two years running. Amazon stopped disclosing driver and DSP counts last year, so the last published figures are 4,400 DSPs and 390,000 driving jobs created since 2018.

Beyond pay, the rest of the money goes to safety and delivery technology. Amazon says it has spent $543 million on safety since 2022, and that serious crashes across the network fell more than 23% last year. It is now adding surround-view cameras that flag vehicles, cyclists and pedestrians, which will be in half its Rivian vans by year-end, while the delivery app reroutes drivers on its own in bad weather or around a hazard ahead.

Amazon is also running AI over its Netradyne in-cab camera feeds to spot the driving patterns that tend to precede crashes, so that owners can coach drivers earlier. Its smart delivery glasses, which put navigation and package details in a driver’s line of sight, will scale to more than 20,000 pairs by the end of 2027.

At nearly $24, the DSP average now sits above most of the drivers Amazon’s contractors compete with for hires, though still well below a union package-car driver.

In New York City, DSP drivers were already averaging about $24 when we covered the council bill that would make Amazon employ them directly, so the national number has caught up to the city rather than moved past it.

The owners say they absorb the cost of the raises. In a December survey of 266 active DSPs by the owner group DEFT, 90% reported lower net margins than when they started, and 73% called them “much lower.” The group blames vehicle, insurance and scorecard costs more than wages, but three in four owners believe the squeeze is deliberate.

Regulators are pressing the same point from the other side. New Jersey’s attorney general sued Amazon in August under the Sherman Act, alleging it dictates contractor pay and stops DSPs from hiring each other’s drivers. “This complaint is not grounded in fact,” Amazon spokesperson Steve Kelly said. Meanwhile, the Teamsters are pushing the New York City bill in Chicago as well.

Amazon’s raise is not part of a wider one. The other two delivery-pay increases this year came from a city ordinance and a union inflation clause, not from carriers matching Amazon. UPS, meanwhile, is moving residential volume toward Roadie instead.

For a retailer or brand shipping parcels, this is a cost signal more than a labor story. Amazon is the one buyer that funds its drivers’ wages directly, and it has been passing the bill along. Sellers have paid a 3.5% fuel and logistics surcharge on Fulfillment by Amazon fees since April, and Amazon Shipping’s per-package peak fee rises to $0.75 from $0.60 this season. Amazon’s own cost to ship an item rose in the second quarter for the first time in four years, on fuel and driver-limited line-haul rates, per its CFO. A fourth $1 raise says the driver line will not be coming down in 2027.

The timing matters, because the rest of the parcel cost stack moved in the same week. FedEx set its 2027 general rate increase at 5.9%, effective January 4, the fourth year in a row at that figure, per its rate page. UPS has raised its ground residential peak fees 25% on last year, and every national carrier’s peak charges begin in late October. On top of that, diesel is at a record $6.28 a gallon, which puts the UPS and FedEx fuel surcharges near 24%, against about 9% in 2021.

Shippers are already feeling it. Delivery operators surveyed by FarEye put their median last-mile cost up 12% for a second straight year, per FreightWaves, and driver cost was the second most-named pressure after fuel. Its CEO splits that 12% about half carrier list price and half the shipper’s own inefficiency, which means about half of the increase sits inside the shipper’s own operation, before the carrier rate cards reset in January.

Amazon now has to hold a $1-a-year step while its contractors report shrinking margins and the New Jersey case proceeds. Two things will show whether it can: whether UPS’s 2027 rate increase, still unannounced, comes in above FedEx’s 5.9%, and whether Amazon’s next FBA fee changes for 2027 carry the driver raise through to sellers.