The American Worker and Debt: How Earned Wage Access Can Help Break The Cycle

Illustration titled "Thought Leadership" with five light bulbs, one lit among four unlit. "dailypay" logo at the bottom.

In 1965, the country was at an inflection point: there had been nearly a decade of important civil rights activism culminating in the Voting Rights Act, the World's Fair came to Queens, and the popularity of unions was at a near-all-time high at 71%. During this important decade of American empowerment, it is no surprise that people wanted more from their communities and workplaces.

Today, we are at another cultural and economic inflection point and in 2022, union popularity reached a record high of 71% for the first time in 58 years. Since the pandemic, inflation and cost of living increases that outpace wage growth have led to worker debt that requires both public and private sector solutions. Increased union support is a clear reflection of workers again demanding more from their leaders in government and their employers as working lives have been radically changed by COVID-19.

Research shows this as well: that the global pandemic is an important reason for the recent rise in union organizing. During 2020 and 2021, the United States experienced economic upheaval, previously marginalized workers became aware of their importance, and there was an explosion of digital literacy across all generations. Companies and the general public recognized many front-line workers for the first time as ‘essential’ to both our survival and to get America back on its feet during a very turbulent and uncertain time. But a disconnect arose when product pricing realities kept salaries and benefits from matching the importance of much of our essential workforce. All of this has led to a more honest conversation about many of these previously undervalued jobs in today’s society, slightly higher wages for these workers, and more frequent digital organizing campaigns for union expansions.

People on both sides of the issue agree that more needs to be done and that employees deserve more – it’s how this should be obtained where the disagreement mostly exists. As put by a well-known progressive Democrat who has both won and lost union organizing fights in about a tenth of his company’s coffee houses, Starbucks CEO Howard Schultz said in 2022, “It’s my belief that the efforts of unionization in America are in many ways a manifestation of a much bigger problem. There is a macro issue here that is much, much bigger than Starbucks.”

There is of course no mystery as to why anyone seeks higher pay, better hours, and more job security. For workers without adequate savings and especially those with an emergency expense, it is also no surprise that on-demand access to already earned wages is popular with employees: it can save them money.

Never-ending cycles of debt that workers can find themselves in today are very hard to escape. Preventing debt and helping workers pay it off requires a whole lot of government and industry response. The national numbers tell the significance of the problem: the average American holds a debt balance of over $96,000 while American households in total hold $11.67 trillion in debt.

What has compounded this economic crisis is that the cost of living surged in 2022 and with it, the number of Americans living paycheck to paycheck jumped to 64% as of December. In fact, when you add in inflation costs, the average hourly pay for the American worker actually fell in 2022.

According to LendingTree research, nearly 32% of Americans paid a bill late in the past six months and 61% of them did so because they did not have enough money. To make ends meet, 12 million Americans use predatory payday loans, which can have an exorbitant annual percentage rate of nearly 400%.

For the 166 million working Americans in the U.S. living paycheck to paycheck, the difference between paying a bill or not can boil down to something as simple as the timing of pay.

By allowing employees the ability to access their pay after they’ve already worked for it, they can replace expensive financial strategies like paying bills late, overdrafting a bank account, or taking out a payday loan. This won’t solve all existing workers' problems, but late paid bills result in late fees, interest penalties, and other finance charges. In some cases, it also can lead to closed checking accounts which cause significant damage to credit ratings and financial health.

On-demand pay (or earned wage access), offered as an optional employee benefit, is a private sector solution that provides employees the ability to access their earned income as they earn it. With this flexibility, they are able to pay bills, spend, save, or invest on their own schedule – not an arbitrary scheduled payday. This flexibility is making a difference. In a study from the Aite-Novarica Group commissioned by DailyPay, a leading EWA, nearly 9 out of 10 (88%) employees had less trouble with bills and loan payments after gaining access to DailyPay.

This flexibility also speaks to the major issue of employee stress. According to a recent health and well-being survey from PwC, among financially-stressed employees, 49% said that money worries had a severe or major impact on their mental health in the past year. This leads to higher absenteeism, less productivity, and high turnover.

Despite wages growing by 5.1% in 2022, access to wages remains stuck in 1965 for most workers. This compounds the consequences of not being paid enough and not having savings when a bill comes due. Having access to earned wages doesn’t increase pay but it reduces the billions of dollars charged to less well-off Americans in overdraft fees and payday loans each year.

As we emerge from the global pandemic, employee expectations are high. On-demand pay provides a reliable and inexpensive way for employers to offer employees access to their earned wages that leaves the 1960s era idea of getting paid every two weeks behind, while simultaneously responding to the post-pandemic cultural shift demanding empowerment and dignity for all workers.

For more details on the article,  see the source

See Why Top Companies Choose DailyPay

Empowering for Employees

Greater financial control with access up to 100% of their DailyPay balance to meet the challenges of unexpected financial disruptions.

Improved planning with visibility to spending and earned pay in one easy-to-use app.

No need for a pre-existing checking or savings account.

Simple and Secure for Employers

Minimal change to payroll processes — DailyPay handles it all.

Seamless integration with HCM, payroll, banking and benefit applications.

Enterprise-grade platform that keeps data private and the service running so it's always there when your employees need it.

DailyPay is Trusted by Leading Companies

Six Flags
Dollar Tree
HCA Healthcare