Earned Wage Access (EWA) – the new New Deal
Look around – more than half of the people you see are considered Low and Moderate Income (LMI) earners – the barista at Starbucks, the checker at the local supermarket, the ticket-taker at the movie theatre. According to the Bureau of Labor statistics (pre-Covid), 58% or 85 million Americans are LMIs. What do all these people have in common? They can’t get access to their pay when THEY need it – their companies decide when they will get paid.
Something else these 85 million Americans have in common is that they struggle to make ends meet and are held prisoner to a system where they have no financial control. As an employee, you provide services to your company every day, but companies don’t pay you every day for your work. The reason they do this is because it is convenient for them. Running payroll is expensive, is subject to mistakes and most importantly, companies get to keep your money and earn interest on it.
What is it costing us as individuals and as a society in general?
What does waiting to be paid mean for the LMI? It means that they often live paycheck-to-paycheck struggling to make ends meet, and when short on cash, either incur overdraft fees that banks charge, pay interest on credit card charges, or worse — take out a pay-day loan with upwards of 400% APR! It impacts credit rating scores which diminishes the chance to get a mortgage or a loan to buy into the American dream. It costs financial control and an ability to budget expenses. It costs the ability to enjoy a satisfying life, not just because LMIs can’t afford a nicer life, but because they spend, on average, 3 hours a week worrying about money, so in the end, it costs financial wellness and mental health.
On average the financial cost totals to about $1,300 a year – the equivalent of between 4% and 8% of annual take home pay! Imagine how an extra 8% of disposable income could enrich families?
Worse off, it’s not just that LMIs are spending money on things they wouldn’t have to if their companies allowed them the ability to access their wages, it creates a cycle of poverty and that hurts society. LMI communities experience higher crime rates and higher bankruptcy rates.
The Solution that Benefits Individuals and Society
Today there’s a solution to getting back control of when people get access to their paychecks. That solution is called Earned Wage Access (EWA). EWA is probably the biggest thing since Roosevelt’s New Deal – a program that lifted the country out of the Great Depression. EWA can have the same beneficial impact to individuals and society at large – and the best thing – if you are a business owner or manager, there’s NOTHING you have to do to provide this benefit to your employees, other than to enroll in the service.
Imagine if 58% of Americans weren’t struggling with the troubles that come from not being able to access their pay when they want to. EWA can break the cycle of poverty created with arbitrary pay cycles set by employers. Give people access to their earned wages and we can lift society as a whole.
The following 5 blogs will address how EWA benefits all stakeholders identified in the New Purpose of the Corporation by The Business Roundtable and the World Economic Forum. Focusing on all stakeholders – stakeholder capitalism – includes shareholders, vendors/business partners, communities, customers and of course, employees. It isn’t a surprise that companies that “do good, do well” – and this series of blogs will outline benefits to businesses that “do good” and how EWA allows them to positively impact all stakeholders.