The U.S. economy is supposedly booming, but according to one recent study, an incredible four-out-five Americans are still living paycheck to paycheck.
A new perk being offered by McDonald's and other large employers is aimed at helping this large and struggling group of cash-strapped employees. It's called "accelerated pay" and it's either a genius innovation or morally bankrupt exploitation, depending on whom you ask.
Asking your boss for an advance goes 21st century.
Back in the day, "accelerated pay" was simply known as an advance on your paycheck, and you got one by going hat in hand to your boss and explaining you were facing an emergency and needed some of the money from your next paycheck now. These days, the idea has gotten a snazzy new makeover from a handful of startups.
These companies have rebranded the idea as "accelerated pay" and smoothed out the logistics to make offering this sort of short-term loan a breeze for employers. Which sounds lovely, but a new name and new tech still hasn't solved the central problem of lending money to the desperate -- it will cost you.
"DailyPay, the leading accelerated pay provider, boasts the lowest transaction fees in the industry at $2.99 per wage pull, and says its service helps to reduce turnover, aid in recruitment, and promote financial wellness for employees," explains The Hustle. "Even, another provider, charges a flat monthly fee of $6-$8, and users pull an average of $150 each month -- equating to about a 5 percent fee for taking out money early."
"This isn't your crazy-high interest payday loan, but it's not nothing," the Hustle concludes of the fees cash-strapped employees pay to access their money. Still, some critics insist it's too close for comfort.
Innovation or exploitation?
Startups that facilitate accelerated pay frame their service as using technology to give workers more flexible access to the money they've earned (and businesses describe it as another way to lure employees in an incredibly tight labor market).
"There's no reason that payroll has to be done once a week or once a month," Jeanniey Mullen, chief innovation and marketing officer at DailyPay, told CNBC.
They make a good point. It is undeniable that this perk could help workers facing a truly desperate one-off emergency. And it's equally true that one missed bill can cause a cascade of hardship if you end up getting hit with late fees or, worse, evicted. But if you look at these services from an ethical rather than just a logistical perspective, they do look a lot like profiting from others' desperation.
Even beyond the basic yuck factor of building a business on top of the gaping cracks in the American economy and social safety net, experts warn there is another potential issue with accelerated pay. Namely, that employees might get too comfortable with it.
The worry is that by giving people a way to paper over poor planning, accelerated pay might make it even less likely that lower-wage workers will budget and save over the longer haul.
"What it tends to do is make bad discipline worse," said certified financial planner Douglas Boneparth in the same CNBC article. Though anyone who's ever worked in fast food would probably reply that making peanuts in a world of skyrocketing rent, healthcare, and educational costs is the main reason they don't have an emergency fund saved up.
Basically, the dispute over accelerated pay boils down to two ways of looking at the problem of so many Americans living paycheck to paycheck. Do you accept the precariousness of life as a low-wage worker as the way of the world and build a product that might make things a bit better? Or do you insist on more fundamental change (such as a higher minimum wage or changes to healthcare and housing policy) and reject stopgap measures that help people limp along in dire financial straits.
What do you think -- is this new perk innovation or exploitation?