In an attempt to ease some of its employees’ financial worries, Walmart announced it is providing a service that will allow them to receive wages before their next payday.
According to The New York Times, Walmart’s more than 1.4 million workers can now use an app to access a portion of wages for hours they have already worked. For the nation’s largest private employer, the goal is to help workers avoid costly payday loans and other debt traps.
“We believe this is the right thing to do, and we are happy to champion it,” Judith McKenna, Walmart’s chief operating officer, said in an interview. She added that workers who are less worried about cash issues “feel more confident and more settled at work.”
But Walmart’s new initiative also unwittingly puts a spotlight on the financial struggles of the company’s low-wage workforce. The minimum starting wage at Walmart is $9 an hour, which is $1.75 higher than the federal minimum wage, but lower than the starting wage at retailers like Costco, which pays $13 an hour, and Target, which recently raised its entry-level wage to $11 an hour.
The average hourly wage for a full-time Walmart worker is $13.85, while the average hourly wage at Costco is about $24.50.
“Their paychecks are too small,” said Paul Sonn, general counsel of the National Employment Law Project, a labor advocacy group.
Walmart is using an app called Even to make its payments initiative happen. The offering — which securely connects to an associate’s checking account, prepaid account or Walmart Associate Paycard and links to Walmart’s payroll systems — will help Walmart’s workers better manage their finances. Even pinpoints exactly how much they can safely spend before their next paycheck, and Walmart pays a fee on behalf of its workers to the technology firm that runs the app.
“Money management is something people across every income level struggle with, in large part because they don’t have access to good tools,” said Jon Schlossberg, CEO of Even. “In real life, if you want to get ahead, you’ve got to make a financial plan, and also have a way to fix the plan when it breaks. Even offers tools for both, together in one app. Working with Walmart and PayActiv gives us the opportunity to put these powerful, easy-to-use financial management tools in the hands of millions of hardworking Americans.”
All Walmart employees can use Even’s financial planning tool and can obtain eight payments, known as instapays, each year free of charge. They can pay extra to receive more than eight instapays. For most of the workers, the instapays will be deducted from their next paycheck. Workers can take out only a portion of wages that they have already earned during the two-week pay cycle.
Labor groups say the best investment Walmart could make is not in a new app, but in increasing wages. “All of these solutions to help people live paycheck to paycheck puts the burden on the worker, not the employer,” said Carrie Gleason, who works on issues affecting retail and other low-wage workers at the Center for Popular Democracy, an advocacy group.