A few weeks ago, came the news that many American employees won’t have wanted to hear – that after a post-pandemic period of significant pay growth [where wages grew by 23.3%, outpacing the 21.2% rise in consumer prices], employers are now tightening their belts.
According to consulting firm Gallagher, wages across all industries are only expected to grow by an average 3.6% cent in 2025 – down from 4% this year.
It finds that job openings are now at their lowest level for the last three years, and because of this employers feel under far less pressure to offer big raises to stop staff from quitting.
But it’s not good news
News of all this was breaking however, just as Instant Financial, the provider of on-demand early wage access, was releasing the findings of its 2024 Wages & Wellbeing Study – and the picture it painted was not good.
It finds significant numbers of Americans are ‘still’ under severe financial strain, suggesting that any slowing of pay growth will only make these strains worse.
Top amongst its findings was the fact that nearly half (49%), of working Americans say they ‘frequently’ experience financial shortfalls before payday.
Source: Instant Financial’s Wages & Wellbeing Study
Overall, it finds more than half (54%) worry about their money lasting until their next paycheck.
Nearly two-thirds (62%) of working Americans say they have felt so financially overwhelmed, they’ve had to borrow money from a payday lender or other high-interest lender.
What makes this 62% figure even more alarming is the fact that this significantly higher than in 2022 (53%).
Demand for earned wage access
The research points – once more – to there being an overwhelming desire from employees to have more earned wage access; something TLNT has recently been writing more about.
But what makes this particular research even more arresting is the fact that while most employees still prefer to be paid weekly (43%), Instant Financial finds that a whopping 86% of US workers say they would prefer to work at an organization that offers ‘same day’ pay.
This is up from 79% in 2022.
By having access to same day pay, the vast majority of respondents to the research (82%) said it would significantly enhance their ability to save money. Moreover, they said that learning an employer pay daily would increase their interest in applying:
But is same day pay really a good idea?
Some argue it creates an unhealthy relationship with money, by allowing people to get access it and not budget.
Wouldn’t same day pay make this even worse?
To discuss the results of some of the research, and to tackle this (and other) questions head-on, TLNT spoke exclusively to Tal Clark, CEO of Instant Financial:
Q: your latest research paints a dire picture when it comes to people’s financials. Tell us more:
A: “The overriding picture is that US employees – in general – are not in a better financial place than they were in either 2020 or 2022. In fact, all the data seems to be suggesting that things are going in the wrong direction. The sort of data more employers should be taking notice of, is our finding that 74% of working Americans say they are more likely to apply for a job that offers immediate access to their pay.”
Q: How bad to you think things have gotten?
A: “We’re finding that more many people, even being paid weekly is now a stretch. Nearly a third (28%) say they worry daily about making their money last until their next payday. Back in the day, most people were actually paid daily. The system moved to weekly and fortnightly when things started being done by payroll systems, where employers realized they had a way of holding money and earning interest on it before paying staff. When people don’t have money to meet emergency bills, that’s when they have to start borrowing off friends, or worse, high-interest lenders, which only makes people’s financial situation worse.”
Q: What do you say to CHROs who worry that giving people access to their money immediately isn’t being responsible to them?
A: “I hear this mentioned a lot, but my response is always the same. I think it’s pretty demeaning to say that we can’t trust people with their own money. I’m glad that more employers are realizing this, and realizing that people shouldn’t be left trying to stretch out their money. When people do have access to their money, data shows they’re not doing it all the time, just occasionally, and as they need it. They’re not being irresponsible and blowing it all at once. Earned wage access is now almost being seen as a base benefit. We know people are more likely to take a job with a company if that company offers it.
Q: How much do you think financial wellbeing contributes to overall wellbeing? Is the case pretty much closed on this now?
A: “Undoubtedly. We know that people’s financial wellbeing plays a significant part in people physical and mental wellbeing. We know from our own studies that financial assistance creates financial wellness, which triggers better overall health. What we seeing is that this is still a relatively new market – it really is only about five years old. We will see more adoption of earned wage access. It is just a matter of time.”
Q: Is this a market that has room for innovation?
A: “Yes. There’s room for innovation around how and when people access their funds, and we’re looking into virtual wallets, like Google Wallets. The upshot is, employees need to be able to take more control of their compensation.”