The 3 R's of the New Deal: How EWA Achieves This High Ideal

In the prior post, we proposed that employer-sponsored Earned Wage Access (EWA) is like the new “New Deal” created by President Roosevelt in the 1930s to lift the country out of the Great Depression. Today, we are faced with a similar challenge, and employer-sponsored EWA provides comparable wide-sweeping benefits. According to Roosevelt, there were 3 R’s of the New Deal:

1. Providing Relief for the poor
2. Economic Recovery, and
3. Reform of financial systems

Much like these laws, organizations that offer their employees access to their pay through employer-sponsored EWA will achieve their own “3 R’s of the New Deal” with comparable benefits:

1. Relief: Allow workers access to their earned wages when they need them in order to help avoid the poverty associated with costly measures by providing liquidity — reducing bounced check fees and high-interest pay day loans. Why should hard-working Americans have to go to these lengths to make ends meet? Employer-sponsored EWA allows workers to access the money they have already earned and need to pay bills, buy groceries, and just go about their everyday lives without the stress of not having money.
2. Recovery: The shortest path to economic recovery is to get people money (like the government did with 2020 and 2021’s stimulus checks), to allow people to get access to their earnings faster, or to enhance the disposable income of Low and Moderate Income earners (LMIs). The cost of having to pay bounced check fees, late fees on bill payments, or high payday loan interest — the two most used solutions to having to wait for a paycheck — is costing the average LMI upwards of $1,300 per year. For someone earning $7.25/hour, that is the equivalent of 8.6% of their annual pay — or a little more than 1 month of pay. According to the Pew Foundation, research report entitled , almost 20% of American workers regularly have overdraft charges or late fees — that is 17 million workers. If these workers were able to spend $1,300 per year more on consumer products versus fees or interest, that would generate $22.1 billion more in economic activity. That would certainly speed the rate of recovery.
3. Reform: The New Deal focused on reforming the financial system so that the Great Depression could never happen again, and they succeeded in their efforts. However, since the 1930s, a shift has occurred from governments protecting the interest of the average citizen to the corporation taking a more active role in this responsibility. The rise of shareholder activism, the focus on corporate responsibility, and the general concern for the health and well-being of employees continues to be a focus of companies.

How this Benefits the Community

Stakeholder capitalism places five constituents as the focus of the new purpose of the corporation: Communities, Customers, Strategic Partners, Employees, and Shareholders. Companies offering EWA provide a benefit to their communities. The benefit flows from the fact that providing more disposable income to employees generates:

• More local spending which lifts communities
• Less crime as there is a proven relationship between poverty and crime rates[1]
• Lower rates of personal and business bankruptcy[2]

A Call to Action

It is time for a major change to occur —and that is for corporations to allow their employees access to their pay when employees need it, rather than when employers dictate it. This reform may be the biggest benefit to personal financial well-being, but also economic recovery and growth.

This change, which has a de minimis cost to companies, and which does not increase the company’s financial risk exposure (as the is risk taken up by the EWA provider), is probably the best and most transformative initiative a company can undertake, generating direct value to all stakeholders.

[1] Poverty and Crime: economics.fundamentalfinance.com
[2] Yale: Do Payday Loans Cause Bankruptcy?