As Labor Day turns 120, payday advances
Labor Day became a statutory holiday in September 1882.
Over the next 120 years, the very notion of work and the very composition of the workforce have changed dramatically. So are the ways and means by which we get our earned wages into our collective pockets and bank accounts.
A nation of farmers
By the end of the 19th century, about half of the American population was involved in agriculture.
Fast forward to today, and professional and business services remain the largest employment sector with about 22 million people, or about 13% of the workforce, according to data from the Bureau of Labor Statistics. . In fact, non-agricultural jobs make up about 92% of the labor force.
Along the way, as noted in a Federal Reserve story, wages were paid in cash, or in what we might think is a little, well, inventive (the study mentions that laborers are paid, in some cases, in pounds of tobacco).
The two-week pay cycle? Well, that traces its genesis back to the last century, the 1940s – a stable and reliable process that allows state and federal governments to collect taxes.
Now, real-time payments are looming and the gig economy is firmly embedded in the fabric of society. As recently as last year, according to Pew Research estimates, about 16% of the U.S. workforce had at least some experience earning money through indentured labor. In an inflationary environment, the opportunity and attraction is there to accept additional and flexible work to increase one’s income.
Payments should also be flexible. PYMNTS research found that pay-as-you-go, or at least more frequent, options are favored by gig workers. In a recent interview, Tracy Monson, chief product officer of payout platform Onbe, told PYMNTS that “compensation is the number one thing that attracts gig workers and builds loyalty.”
But 41% of freelancers wait a month between paychecks, and 70% say they want to get paid quickly and more often.
Businesses are beginning to recognize that they need to meet these expectations. Around 75% of businesses now see faster payments as an essential service to offer, and around 90% believe they will be able to offer faster or instant digital payments within three years, as we have underlined here.
Elsewhere, Ingo Money CEO Drew Edwards told PYMNTS that “if work is now on demand, the worker must also be paid on demand – it must be an on demand equation of the beginning to end”.
He noted: “Doing the job and going home and then waiting to be paid next Saturday is not the way these workers think. In the world of gigs, this offer means you won’t attract the driver, web designer, or freelancer. »
There are a number of companies – including digital startups – that have raised capital and come to market with their own Earned Wage Access (EWA) products and services. In one example, Tartan raised $4.5 million to expand its payroll offerings, with EWA and salary-related loans in the mix. Additionally, PayPal has implemented pay-as-you-go for its employee roster.
The allure of having immediate access to pay as you work has obvious appeal beyond the gig economy, of course, but the landscape may be changing. . In late June, the Consumer Financial Protection Bureau (CFPB) terminated financial services provider Payactiv’s sandbox approval order for its EWA products.
The CFPB said at the time that it “had received requests” for clarification regarding its advisory opinion on EWA products. The office said it “plans to issue new guidance soon to further clarify the application of the definition of ‘credit’ under the Truth in Lending Act and Regulation Z.”
So the ways we earn our daily bread will continue to evolve.
We are always looking for partnership opportunities with innovators and disruptors.