A survey by the American Payroll Association found that more than 78% of employees would find it “somewhat difficult” to “very difficult” to meet their current financial obligations if their paycheck was delayed a week. This statistic is striking to me, as it shows just how much when you get paid matters.
It also shows the unfortunate reality: how many of our nation’s workers are one medical emergency away from financial ruin.
One of the most significant challenges facing American workers is the traditional biweekly or monthly pay model. For many employees living paycheck-to-paycheck, this rigid payment schedule can lead to financial strain when the unexpected occurs, making it difficult to cover both essential and unexpected expenses between paychecks.
Earned wage access (EWA) has been an innovative solution addressing this issue, offering workers the flexibility to access a portion of their earned wages before payday without the credit impact or extra fees. Ultimately, EWA gives workers control over their own money to access it when they need it, providing the flexibility to manage their finances more effectively. In 2020 alone, EWA transactions totaled $9.5 billion nationwide. Retail giants like Target, Walmart, and Macy’s have embraced EWA as a means of supporting their employees’ financial well-being.
Despite the worker-friendly benefits of EWA, Connecticut recently implemented regulations on employees seeking to access their own money on their own timeline, classifying the service as a loan. This move shut down almost every provider of EWA services in the state virtually overnight, leaving workers with little-to-no options to responsibly respond to financial emergencies.
Connecticut’s retail industry is not just a cornerstone of our economy; it’s a vital lifeline for over 470,000 Connecticut residents who depend on it for employment. With more than 41,900 retail establishments spread across our state, the sector serves as a crucial engine of economic activity, contributing over $34 billion annually. Connecticut’s disregard of the economic needs of these retail workers will harm the very lifeblood of the state’s economy.
Studies have shown that immediate access to earned wages can have a profoundly positive impact on retail workers. According to research conducted by the Mercator Advisory Group, the adoption of EWA resulted in a 24% increase in the average tenure of retail employees. The reality is that when people are happy and in control of their lives, they’re more likely to be satisfied at their jobs and be more productive. In turn, employee happiness allows our businesses to run more efficiently and profitably — without this access, our state’s workers will undoubtedly suffer and have greater effects on our local businesses.
As the President of the Connecticut Retail Network, I am responsible for advocating for Connecticut’s retail industry at the state legislature. In recent months, we’ve recorded interviews with state legislators on issues relevant to both our state’s growing retail industry and the workers. One of the questions I asked each legislator was their thoughts on EWA and the steps that the legislature is taking to protect access to workers’ ability to access their own wages.
I appreciate legislators conceding that consumers need alternatives to expensive loans for short term liquidity, but the proposed legislation from the Banking Committee doesn’t accomplish this goal. The proposed legislation does not create any new alternatives for Connecticut residents and still treats EWA as a loan — even though the U.S. Department of Treasury has stated that it is not. Even worse, the legislature’s proposed “fix” cherry-picks a single form of EWA that favors employers at the expense of workers’ choice. If passed in its current form, this bill will not help the tens of thousands of families who lost access to EWA which will, in turn, have rippling effects through our business community.
Our legislature must take action to protect and uplift Connecticut’s workers — that means protecting access to innovative solutions like EWA that make meaningful progress in allowing workers to achieve financial independence.
As State Sen. Kevin Kelly put it in our interview, “the business doesn’t succeed unless the employees succeed and thrive.” I believe all of Connecticut’s workers should have access to spend their money how they want.
Limiting the overwhelming benefits of EWA to narrow definitions will deprive countless families from taking advantage of EWA and limit the growth of our state’s retail industry. Connecticut has the opportunity to set itself at the forefront of promoting innovative solutions that address our modern economy’s issues. I urge state legislators to keep Connecticut’s workers and small businesses in mind and vote against HB5140 until it includes a solution that restores access to EWA in our state.
Tim Phelan is President of the Connecticut Retail Network.