Walmart will let its 1.4 million workers take their wages before payday


For decades, Walmart has been criticized for the way it treats its workforce, including paying low wages and creating unpredictable hours. Today, the retail giant is trying to ease the financial pressure on some of its employees, allowing them to receive a paycheck before their next paycheck.

Instead of waiting two weeks between paychecks, Walmart employees can now use an app to access a portion of the pay for the hours they’ve already worked.

But Walmart’s new service also highlights, albeit subconsciously, the financial hardships of low-wage workers in the retail and service industries. Even as the economy strengthens, many workers in stores and restaurants do not earn enough to make ends meet.

Walmart said the new initiative is intended to help workers avoid expensive payday loans and other debt traps, and reduce the stress that accompanies financial hardship.

Workers who are less concerned with cash flow issues “feel more confident and more settled at work,” Walmart COO Judith McKenna said in an interview.

“We think it’s the right thing to do and we’re happy to stand up for it,” Ms. McKenna said.

Labor groups say the best investment Walmart could make is not in a new app, but in raising wages.

“It sounds like it can be a useful service, but it doesn’t address the fundamental problem that Walmart workers suffer from,” said Paul Sonn, general counsel for the National Employment Law Project, a workers’ rights group. . “Their paychecks are too small. “

Walmart’s minimum starting wage is $ 9 an hour, which is $ 1.75 more than the federal minimum wage. But it’s lower than the starting salary at retailers like Costco, which pays $ 13 an hour, and Target, which recently increased its entry-level salary to $ 11 an hour.

The average hourly wage for a full-time Walmart employee is $ 13.85, while the average hourly wage at Costco is around $ 24.50.

Walmart executives say raising wages alone will not solve the problems many Americans face in managing their cash flow. Rather, according to the company, the new service is intended to help workers solve broader financial management issues.

The app, called Even, has been used by other employers, but never on such a large scale as Walmart.

With the new service, every Walmart employee can get a portion of their earned salary eight times a year for free. For most workers, the so-called Instapays will be deducted from their next paycheck. Workers can pay extra if they want more than eight Instapays.

The Even the app also helps workers manage their finances by showing exactly how much they can safely spend before their next paycheck.

Alexis Adderley, who works nights at a Walmart distribution center in Fort Pierce, Fla., Has started using the Even app as part of a pilot program.

At first, she was wary, she said, that the app was yet another in a long line of financial products like payday advances and “overdraft protection” that end up pushing workers to low. came back deeper into a hole.

But Ms Adderley, the mother of boys ages 8, 7, 4 and 2, said she was pleasantly surprised.

The app, which connects to her bank account, calculates how much she pays for accommodation, food, and phone bills, and tracks when she makes large monthly payments. With this data, Even provides Ms. Adderley with a real-time estimate of how much she needs to spend before payday.

She earns $ 19.25 an hour, more than the average Walmart employee, and works 30 hours a week. But money is still tight, especially since she was forced to leave her home after Hurricane Irma. Earlier this week, the app warned Ms Adderley, 30, that she only had enough money to safely spend $ 9.08 before her next paycheck.

“I would like to save more,” she said.

Walmart executives said they heard of Even after reading a New York Times article about the company a few years ago. The retailer is also working with another tech company, PayActiv, which facilitates certain payments.

These partnerships reflect Walmart’s broader efforts to make inroads into Silicon Valley, where the old-fashioned retailer is looking to acquire talent and ideas to increase its digital clout in its battle with Amazon.

Before creating Even, one of the company’s founders, Jon Schlossberg, had developed an app called Knock, which allows phone users to unlock a Mac computer by knocking on their phone.

Idealist and full of money thanks to the success of Knock, Schlossberg said he had started to study how a cash crunch affects people’s physical and mental well-being.

“This is a fundamental problem with capitalist society,” Schlossberg said in an interview.

Mr Schlossberg, 30, said he intended to create a product that could reduce the stress associated with money problems, joining a host of other so-called fintech start-ups seeking to disrupt the traditional banking model. .

Walmart pays Even a small fee to allow workers to withdraw their wages before payday. Workers can only withdraw a portion of the wages they’ve already earned during the two-week payroll cycle – so technically, Even says, these aren’t loans.

“You made this money,” said Safwan Shah, founder of PayActiv. “Who decides you should get paid every two weeks?” “

For years, consumer advocates and regulators have warned of the dangers of using high interest loans to pay for unforeseen expenses.

Walmart employees will not pay interest if they choose to get their salary in advance. But getting paid early, while it may solve an emergency cash flow shortage, will leave workers with less money on payday.

“It’s always going to be a struggle for most people,” said Alex Horowitz, senior researcher at Pew Charitable Trusts which focuses on consumer credit.

Matt Fixel, 29, a Walmart employee in Tucson, lives on financial edge. He works part time and earns $ 10.20 an hour unloading trucks and stocking shelves. When he struggled to pay his rent for a month, he overdrafted his bank account, resulting in huge fees. Unable to get a credit card because “his credit has just been drawn,” Mr. Fixel pays for services like Hulu with gift cards.

“This app seems useful,” Mr. Fixel said of the Even service, but added: “I would rather they give me more hours.”

Cash flow problems, Walmart executives say, are not just a problem for the poor, but affect a large segment of Americans. Ms McKenna cited a Federal Reserve poll who showed that 46 percent of Americans would struggle to afford an emergency expense of $ 400.

Ms. McKenna said Walmart was making a “reasonably large investment” by paying for Even service for its employees. The company increased starting salaries almost three years ago, and McKenna pointed out that Walmart has also increased employee training programs that aim to advance workers into management, where they can earn more.

“We continue to seek to invest in our associates,” Ms. McKenna said.


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