> Thinking about money gives her a jolt, “like you’re about to get into a car accident,” she later told me. There’s the $3,700 for massage-school tuition that she still owes on her credit card; the $60 a month for drugs for her anxiety and bipolar disorder, which she might skimp on again
Sentences like that make me sad about the reality of life for tens of millions of working Americans.
I just visited Australia after 9 years in North America, and it's like a slap in the face to realize there are no desperate people there. Almost everybody has enough money for basic essentials, and nobody is crushed with student debt or the fear of not being able to pay medical bills.
It really does feel like another planet when people earning "minimum wage" are doing just fine, are extremely happy, and likely less stressed than the career workers in North America, simply because they earn "enough to live comfortably"
The most horrifying thing is that not only do minimum wage jobs in the US barely get you above poverty, but that many people struggle even to get one of these jobs.
I'm willing to wager that many readers here have never looked for a minimum wage job. If you haven't, you may not realize how much competition there can be. It's really shocking. This is especially true in smaller towns, where there are very few jobs that aren't minimum wage. I remember, years ago when I was in high school, my dad was a local business owner in a small town and was connected with all the other business owners. On several occasions, a friend or family member needed a minimum wage job and literally couldn't get one due to scarcity; my dad had to approach the owners of other businesses and put in direct recommendations so someone could get on at, say, a Dairy Queen or a car wash.
The balance of power between employers and employees in the United States is vastly different from anything else I've experienced. It's commonly said that people are lucky to even have a job, and their bosses know it. It's bordering on slavery, and I really, really don't like the feel of it.
In Australia, the exact opposite is true - employers are lucky to have employees (who could, at any moment quit and do perfectly fine on welfare) and so employers know it and are extremely kind and thankful to their employees.
The trick to that is make yourself "qualified", if you want to work one.
Holes in employment, sketchy details, questionable descriptions.
Or you could go the complete opposite route, and blatantly lie on your resume. As long as you actually know the skills, lie and say you have them. What's the worst they do to you? Fire you?
Just don't do that with a professional degree. Pissing off gov't is a bad idea.
If the job market is really that, a market, then it should not come as a surprise. It's the imbalance between the number the people seeking a kind of job and the number of jobs available that drives the salaries all the way down to minimum wage. Hence the lowest paying of all jobs are the most fiercely fought for.
Now of course there is another side to this equation: the remuneration is capped by the (perceived) value derived from the work done.
I'm not surprised that this could happen. I'm surprised that it has happened. The fact that anyone could have a great life with mostly any job in the US is what catapulted it to fame in the mid to late 1900s as the world's richest country.
Now we're back to the point where minimum wage jobs are poverty level at best and significantly below poverty at worst.
To really put this into perspective, I know families who have immigrated here from Mexico who actually regret it because they didn't realize how low the standard of living is for minimum wage jobs.
Note that I was only pointing out that there is some logic to the lowest paying jobs seeing the most candidates. I certainly do not condone a system where workers do not have access to proper health-care and struggle to live decently. For that matter I think that even unemployed people should have access to health-care and live decently.
I will refrain from commenting on how tragic the situation is in the United States for the simple reason that I don't live there. But your description of the situation doesn't make me want to move there except for a very cushy job.
Here in Japan unemployment is quite low, and health-care is nationalized, so the situation may not be as dramatic as the one you describe. But contractors at low paying jobs certainly hold the shitty end of the stick: all my friends in this situation live with their parents, they simply cannot afford to live alone.
> Hence the lowest paying of all jobs are the most fiercely fought for.
That does not sound like a healthy economy to me.
Minimum wage is for employees with minimal skills. Almost always that should mean entry level positions. You don't want to run a business where the bulk of your workforce is barely qualified. You want a balance between the noobs, the competent young ones, and the old dogs who know all the ropes.
So even if for a position that has an "imbalance between the number of job seekers and the available positions", I would expect the average employee to make somewhere between 2x and 4x the minimum wage. Otherwise, what you are telling me is that an average high school kid can do the job equally well as a person with 10+ years of experience.
I am merely describing how I think the economy is running. Not how it should be running. In fact I agree with you that it is not healthy at all.
Japan used to run the other way around, where the salary was solely a function of age (or rather, how long a worker had been working in a company, but that was essentially the same). I don't think it makes for a healthy economy either. But I'm also not entirely convinced it's that much worse than the "free market" you have in the US.
I don't have any form of competence in terms of economy, but sometimes it feels like the economy we are living in right now is optimizing for the wrong things. It is becoming more and more efficient, more and more optimized, but not at all for the common good. Maybe for quarterly results?
The fact is that many jobs are exactly as you describe. An average high school kid can be trained to do the job within a week and perform at least 90% as well as someone who's been doing it for 10 years. That's why those jobs pay minimum wage. You want almost all your employees to be like this, and maybe one person with experience in a marginally higher position to handle unusual cases.
For instance, a clothing store pays a number of people minimum wage to work the registers, keep the racks/shelves stocked and organized, and clean the place. Then they pay (not substantially) more for a few managers to keep things running smoothly. Usually there are many more employees than managers, and while an employee might be promoted to manager, there are so few openings that the average employee can't expect to rise at all. There's no reason to give these people any significant raise because they can be replaced in a week with another kid at minimum wage. The only incentive to pay a little bit more for someone who sticks around long term is because they tend to be more reliable in terms of showing up for their scheduled shift, but even that isn't uncommon enough to be worth much.
It's the same for any position that doesn't require a developed skill. Stocking shelves, unloading trucks, cashiers, cleaners, some basic customer service positions like a host(ess) at a cheap restaurant (the people who greet you at the door and show you to your seat for $8/hour).
I would guess that there are at least in the tens of millions of these positions in the US, so probably at least 5-10% of the population. Some of these are students who will rise out of it by getting a degree and landing an entry level position elsewhere, but I doubt that covers the majority.
And people will fight over these jobs, simply because they don't have skills to get a better one, and need to either work 2-3 jobs at once to get by, or pool their resources and live in a group with a number of other people who work the same jobs or only slightly better.
Here's some examples [1][2] that cover a small group of the described jobs. This accounts for a bit under 8 millions jobs. The site there isn't granular enough to get many other positions, as they are lumped in with others that earn more, like "Hand Laborers" which has a median income a couple dollars higher and adds a few million more jobs.
Australia is no picnic. The main cities cluster in the top 10 most expensive places to live in the world.
The Australian demographic time bomb is starting to go off, as well. The amount of healthcare and aged care spending is starting to take off like a rocket and this will-inevitably- lead to reductions in eligibility and payments, including what treatments are avialable from the health system.
What Australia does have is a lack of a large poverty stricken underclass, mainly because of the last 50-100 years of the countries history, which includes a lot of prosperity from agriculture and mining so that just about everyone has always had a job and intergenerational poverty has not been able to get a wide hold.
Those things are not guaranteed to last forever. Australia might just look like California in the 1950s right now, with a troubled future ahead.
> The main cities cluster in the top 10 most expensive places to live in the world.
This is mainly because the Aussie dollar was so high for so long, things haven't caught up yet. Pay is a lot higher in Australia as well, with a high minimum wage.
> and this will-inevitably- lead to reductions in eligibility and payments, including what treatments are avialable from the health system.
I was in Oz a couple of weeks ago and the government announced they're "reviewing" Medicare. The way they kept stressing that they're working with doctors and it's not a cost-cutting exercise made it painfully obvious they're going to do cost-cutting.
Various governments of various political flavours have tried stuffing the genie back into the bottle but the public doesn't want any part of it, fanned on by whoever is the political opposite at the time. Introducing a co-payment for a doctors visit (last proposal was $5, I think) was considered to be the end of the world. Of course everyone understands that if you give something away for free, you have to produce more of it, and nobody wants taxes to go up any further, so the can gets kicked down the road.
It has to happen sooner or later. You can avoid most things except for demographics.
I'm not saying Australia is perfect (far from it).. I was pointing out that it's sad and unacceptable to have a society where tens of millions of people are working hard and living below the poverty line, when there are many, many examples to show it doesn't have to be like that (Australia just being one of the many)
I was born in Australia but have lived in the US on multiple occasions.
I agree with your points in general, and choose Australia even though I have the option of either. But Australia started from a different starting point to the US. Adopting Australian policies wouldn't get Australian outcomes because the starting points are so different.
That's not to say that, if I were a US citizen, I wouldn't want change, I would, especially around healthcare. Just the same as I would like Australia to change in some ways as well.
I was pointing out that it's sad and unacceptable to have a society where tens of millions of people are working hard and living below the poverty line
Are you saying Australia doesn't have people living below the poverty line? Wikipedia says 12.5% of the population and 17.5% of children in Australia live below the poverty line.
The US has 16% below poverty line and 20% of children. Not that different than Australia.
I'm having trouble finding data that is using the same methodologies. The CIA World Fact-book specifically seems to be lacking data for Australia.
It would be good to see some solid data, because one thing that surprised me while travelling in the USA was the extreme poverty I saw just down the road from extremely wealthy neighborhoods.
Not to say that Australia doesn't have its own set of problems, particularly in Indigenous Communities, but this seems to operate at a wholly different level.
I don't disagree. I've spent a lot of time in Canada and although Canada has a poverty rate not that different from the US, you just don't see the ghettos like you do in the US.
I'm not sure why that is. My initial impression is that Canadian cities just don't allow certain sections of their cities to stagnate and crumble (maybe funding?). I remember reading that at one point in time Philadelphia had 16,000 abandoned vehicles in the city. In Canada, if a car looks like it's abandoned on a public street, you'd be lucky if 2-3 weeks passed before it was towed. Maybe that extends to other efforts as well?
> It really does feel like another planet when people earning "minimum wage" are doing just fine
There's a big difference between getting minimum wage every 5th of the month on the dot, or getting $2k one month, $10k next month, $1k third month and so on.
The issue the article is talking about is the whole not getting minimum wage every month. It's the uncertainty.
Minimum wage in California is $9/h. That means that if you work minimum wage full-time (160h/month), you get $1440 per month. You won't have luxury, but I imagine that managing your money when $1440 appears on your bank account every 5th of the month at 3pm isn't that difficult.
But when the deposits look like this:
- Jan 10th: $800
- Feb 4th: $2500
- Mar 15th: $1400
- Apr 29th: $1060
Managing cashflow is hard. But the average monthly income in this example is still minimum wage.
In New Zealand this would be considered illegal. You MUST get the minimum wage if you're an employee. Even if you're contract states that 100% of your earnings are commission based, the average over every two week period MUST come to the minimum wage. It's exactly to protect against employment agreements/situations like the one described in the article.
I can't speak for US or Australia, but in New Zealand if you're an employee minimum wage IS minimum wage. Some employers hate it and would rather that not be the case, but we have contract workers for that style of employment, which are more-or-less at will, but the rules are different surrounding those and it much harder to "prove" someone is a contractor rather than an employee (it'll come down to things like: having sick days=employee, having a uniform provided=employee, organizing your own leave=contractor, it actually get's quite complex to prove someone is a contractor even if it states they are one in their employment agreement).
> contract workers for that style of employment, which are more-or-less at will, but the rules are different surrounding those and it much harder to "prove" someone is a contractor
Exactly the situation described in the article, people being forced to stay just under the legal limit of becoming proper employees.
We have the same issue in Slovenia right now. If you're an employee, you get minimum wage (or more). Every month. But more and more people are being pushed into contracting because nobody will give them a job otherwise.
It's not a problem for people who embrace contracting and like all the freedom it provides, but it's a big problem for the person folding discarded clothes at H&M who is technically a contractor.
The government came up with a simple solution: if more than 80% of your income in a given year comes from a single company, they have to employ you.
For the Wal-Marts-in-corporate-character of Slovenia that game the system to prevent providing their employees-in-all-but-name with the benefits due to an employee?
Sometimes, you have to balance the damage done by two wrongs. :)
> people being forced to stay just under the legal limit of becoming proper employees.
I guess this is where New Zealand works things out differently, it's really not clear cut about where the legal limit is for employee/contractor which makes it harder to stay closely under it and if the individual case isn't clear cut, the governing body almost always sides with the employee being an employee. I suspect in the US, things are much more favored towards the at-will type employment.
>if more than 80% of your income in a given year comes from a single company, they have to employ you.
That's quite an interesting solution, I really like it. I feel like it doesn't answer the fundamental legal meaning of contractor vs. employee, but practically it's way easier to test for and I think probably would work better than drawing some vague line in the sand about the meanings in law.
I'm pretty sure the law is the same in the US. If your tips or whatever don't come to at least minimum wage they have to give you more to make up for it.
I've heard concerns about getting fired for under performing if your tips don't cover minimum wage and the company has to make up for it. So they keep quiet and don't make minimum wage.
Surviving on 1440 in many parts of California would not be nearly as easy as you make it sound. One wrong step (e.g., a high medical bill -- even with insurance) and you're into the endless cycle of credit card debt with no way out.
(edit: I agree that uncertainty certainly doesn't help the problem.)
You're missing the point that managing a _consistent_ income of $1440/mo is far easier than doing so for an _inconsistent_ income which averages to $1440.
If your expenses don't show equal flexibility, you'll find yourself cash-strapped: hungry, utilities cut, possibly on the street.
It's part of the great risk shift, creating a new social an political class, the precariat.
> You're missing the point that managing a _consistent_ income of $1440/mo is far easier than doing so for an _inconsistent_ income which averages to $1440.
I think my point was exactly that now we're just comparing degrees of impossibility.
I didn't say it would be easy, but it would be plannable. And that makes a huge difference.
Unexpected expenses will of course mess it up and throw you into a spiral if you don't have a buffer. But that's true at any income level. Even if you're a techie making $200k a year, but without a buffer, you will have a huge problem if something unexpected happens.
Of course why you wouldn't have a buffer if you make that much money is a different problem. But hey, Mike Tyson was making millions and when the shit hit the fan, he went bankrupt in a heartbeat.
These ar two separate issues and I think the original comment makes the point that sure it will be plannable, but simply not enough. The article says as much also when it notes that this offering won't help those with insufficient overall incomes.
The AU example is fascinating, because if true, it really does feel like healthier society.
>>Of course why you wouldn't have a buffer if you make that much money is a different problem.
That is the problem.
Even in the example of unpredictable income you gave two posts above. If you spending all the money you are earning(even if variable) just because you are earning it a little extra every month. Something is badly broken in the way you live your life.
You are essentially not solving any problem at all, all you are doing is delaying your problems one month at a time. Someday that will blow up in your face. And when it does you will back to all the problems you had started with or may be even worse.
You should never be earning to make ends meet(That only delays problems, doesn't solve them). You should be earning towards a framework which enables you to do away with working to make a living(a.k.a retirement).
There are other unexpected expenses that can mess things up. Your home might burn down and you have to replace not only the home but all your possessions.
You might get sued and have to pay lawyers and/or settlements.
You might simply get divorced and spend a bunch of money on that.
> e.g., a high medical bill -- even with insurance
Don't pay them. Nothing at all happens if you don't pay medical bills. Just ignore the bill collectors, don't answer the calls or even open the envelopes.
New rules mean that it has no effect on your credit score.
This is terrible advice; depending on the state, you can have your wages garnished and funds in accounts seized. Missouri debtors have even gone to jail:
Don't outright not pay your debts; negotiate with the creditors for pennies on the dollar, but advising people to straight up ignore them is extremely reckless advice.
All of your links are about payday debt. I'm speaking only of medical debt.
> you can have your wages garnished
Only if they win in court. And in practice if you don't have any money anyway, what do you have to loose? Why go into non-medical debt to pay off medical debt?
Just ignore the debt till you have some money. If you lose in court (which is unlikely) you are no worse off.
> Only if they win in court. And in practice if you don't have any money anyway, what do you have to loose? Why go into non-medical debt to pay off medical debt?
If you don't show up in court, they win by default. Have you never heard of "summary judgement"?
> If you don't show up in court, they win by default.
Then don't do that? Of course show up in court! Why in the world would you suggest not showing up in court?
Tell them you have no money. They'll make you prove you have no money. At worse they'll put you on a payment plan., and you be no worse off than before. At best they'll never take you to court in the first place.
Depending on the amount, the medical creditor may not go as far as taking you to court; it might be too costly to pursue legally. At any rate, the parent said nothing about not showing up to court. (Not saying anything about the credit-score ramifications of not paying medical debts; I'm taking the parent at his word as I don't know the situation.)
"Don't pay them. Nothing at all happens if you don't pay medical bills. Just ignore the bill collectors, don't answer the calls or even open the envelopes."
I took that to mean ignore any court summons as well.
That's totally incorrect. New FICO rules minimize, but do not eliminate, the impact of medical debt on your credit score. They also don't eliminate legal remedies, like taking you to court to pay.
Sure they could take you to court, but if you don't have any money nothing much will come of it. In practice they don't bother - they know they'll win nothing.
You're also missing the other point (from the great-great-grandparent) about not just a decent minimum wage, but also universal healthcare and no crushing student debt.
> Managing cashflow is hard. But the average monthly income in this example is still minimum wage.
You need a $640 cash cushion and you can handle variation like what you list. On minimum wage it's hard to collect that cushion, I'm sure. But much harder is the discipline not to use it.
When you're poor -- and specifically when your low income is unreliable -- money is (or at least feels) perishable. Been there. Worked as a security guard in college for a company that was riding the JIT staffing idea (it was the Hot New Thing of the day; this was the mid 90s) so I had no idea how many hours I'd have in a given week.
So when you don't have reliable income, money just kind of starts disappearing because you fall through the cracks of the banking system. Low balance? Service fee. Cut things too close with that rent check? Overdraft fee. Can't deposit your check in the bank because you literally need the money today to pay a bill and it will take three days to clear? Check-cashing fee.
As a result, you get conditioned (especially if this is the only way of handling money you've ever known) to think "crap, this money is going to disappear pretty soon -- better spend it now so I'll at least have stuff rather than have it get taken away." Luckily I joined the military and took their personal finance classes later, but I still (20 years later) have bad financial habits I have to consciously check from that time in my life.
>>That's like the WORST possible way to run your finances if you want to get out of poverty!
People in poverty mostly don't even see themselves as having any hope of getting out of it, so why bother trying to save? These are the people who spend 40% of their income on lotto tickets because there's just no light at the end of the tunnel unless a miracle happens.
I'm from Melbourne, living in Boston. There's an entire middle class waiting to explode. There's rampant underemployment, rising credit card debt, and my entire generation has given up on the notion of ever fully owning a home. There's many many reasons why I moved to the U.S.
Something that surprised me when I first started hiring employees was how hard it was for people to manage their cash flow, especially at the more limited levels.
We started with a once-a-month paycheck, which my co-founder and I were used to and saved some payroll fees.
This subsequently blew up in our face within a few months as people would spend heavy @ the front end of the month, wouldn't save for things like car repairs / gas / etc, and were out at the end of the month funding living with CCs.
So I applaud this effort for a start-up - I'm excited to see where they take it.
As somebody who varies between managing cashflow well and not-that-well ... it all depends on how much you make and the steadiness of your income.
For instance, last year I had a string of events where clients were a few months late in paying me. This created a snowball effect that took over a year to fully get rid of. During this time I was always running out of money by the end of the month, and it was always a race of whether my credit card payment[1] would get triggered before the wire transfer for my payment arrived.
Now I have enough saved up for just two months of living.
Suddenly cashflow management isn't a problem at all. If something happens, it happens, I can buffer it all out and money just isn't as big a problem. At least not for the big stuff.
It's a bit like clothes. I can manage my laundry perfectly fine. But if for some reason I don't do laundry on Saturday, I will be out of clean clothes by Tuesday.
[1] it's set up so it gets blocked if I don't pay it off in full every month
For historic reasons, I have an overdraft facility on one of my checking accounts of $15,000. This means I can time dividend payments from my company optimally for tax, large investments, and so on, without worrying too much about personal liquidity, which saves and makes me money. The interest isn't free, but we're talking "daily latte" sort of expenditure.
I was surprised to learn recently that this isn't legal in BC: Employees here must be paid at least twice a month, with at most 16 days between paychecks.
It always seemed a bit silly to me, but what you describe explains why it's necessary I suppose.
Monthly payroll is illegal in California, for this reason.
Credit cards half one-month grace period, so living on credit cards wouldn't actually be a problem though. Spending more than income would be a problem.
> Monthly payroll is illegal in California, for this reason
Monthly payroll is the usual in the UK. If you switched to weekly, most people wouldn't save enough to make their rent each month, where the trick on monthly income is to just front-load all the big expenses to just after you've been paid.
>>We started with a once-a-month paycheck, which my co-founder and I were used to and saved some payroll fees.
Just a reminder to any other founders - some jurisdictions may dictate how often you must pay your employees, make sure to check your local laws. My province requires payment at least twice a month. I'm not suggesting aresant was violating any laws here, but once you start to pay people you need to be up on your employment law - there can be serious consequences.
My understanding of this is you set up a monthly allowance with them and they save your surplus for the months where you don't make as much.
This doesn't seem like solving a problem, rather they are creating an illusion of solving a problem. Essentially they are parenting. Which some people might need. But what a better solution might be is to teach people to create a savings account and budget themselves. And not surprisingly there are plenty of apps that do just that.
They also will provide interest free loans if the user hasn't yet built up enough savings. So, in that sense, it is also a bit of an insurance program.
The loans are interest free, but given that they have an undisclosed mechanism of calculating your allowance ("Even Salary"), it should be fairly trivial for them to assure that they are almost never going to be using anything other than the customers own deferred income to pay it.
>>But what a better solution might be is to teach people to create a savings account and budget themselves.
You will be surprised how bad people are at this. In fact this app aims to do what a person must be doing naturally. And don't ever think that this is a problem only with the poor. This is an issue faced by many people. Failure to understand how money loses value(Inflation) and how it multiplies(Investments) lie at the core of why people get into financial issues. Ideally speaking you can get rich if you understand how investments work on long periods of time even on moderate salary. A lot of people do it. Unfortunately such people routinely branded as being miser, or frugal or worse; these days the cool kids call them as 'people who don't enjoy life'.
Every body can benefit from learning how to save and invest. Especially salaried large company folks.
I don't understand why that is so difficult. I'm here in the US for a short term work assignment and getting a checking/savings account was the best experience I've had so far. All I had to do was to walk into a bank with valid identification and they had it done within 30 minutes. And the best part of it, they explained me how checking and savings accounts work. All I do these days is allocate myself a budget at the start of the month and put that in the checking account. That basically now becomes my threshold of spending per month. Plus I see food is really not that expensive in the US if you cook at home. Buy a good pair of shoes, good jeans and you are all set. Though I agree rent rates are atrocious in the Bay Area. But with sharing rooms with a friend I was able to tame that part of expenses too.
It just can't get more easier than this.
Allocate budgets, save the rest. Learn to invest and bootstrap your way out of your problems.
The problem is that high schools don't teach people how to live on a budget and save money.
When people file for bankruptcy, they are given a three hour video course on the Internet and have to take a quiz to learn how to budget their money and save for emergencies. This sort of thing needs to be taught in public schools for free as part of the math classes or something that teaches life skills.
The app that 'solves' this problem costs $158 year to be a member, and holds surplus money to give it on bad weeks when they don't earn as much to have enough money to live on.
This needs to start long before high school (much of a person's personality, including how they view money, is already locked in by that point).
Personally I believe elementary is the place to start education about essential life skills, which include dealing with money (budgeting, saving and investing). And that education should continue throughout until high school graduation.
Perhaps add in critical thinking, study skills, social skills, people skills, as well as anger and stress management to elementary schools to help out later on in life?
Absolutely (still amazed study skills aren't a continuing topic throughout education). Maybe it's just my memory, but really don't remember receiving much of any life skills after pre-school/kindergarten. I know we learn much of it practically, but that leaves a lot of room for uncorrected errors that become bad habits.
> My understanding of this is you set up a monthly allowance with them and they save your surplus for the months where you don't make as much.
No, they calculate what they call an "average" of your income over a period of time (though it is expressly not any of the usual mathematical averages and they don't disclose how they calculate it) and they retain your surplus above that "average" in better months pay you the difference to reach back to your "average" in months that are below.
> This doesn't seem like solving a problem, rather they are creating an illusion of solving a problem.
I'm concerned about what Even's actual business model might be. It's hard to imagine that it doesn't involve somehow skimming a portion of the salaries they manage. Even if it's a tiny percentage, it seems like it would be an incredibly difficult tightrope walk to keep the portion "fair" and not veer off into taking advantage of the very people the app is purported to aid.
> Even’s purpose is hardly to change the distribution of wealth in society. It is simply to redistribute one person’s own limited wealth across time. People in Silicon Valley may believe there’s an app for everything. That’s their hammer. But improving the lot of the poor will require other tools, including an old one the valley often wants to wish away: politics.
Sorry, did you read your own article? The whole idea is that by lightening the load of uncertainty, SOME people will be able to pull themselves out of poverty with nearly zero net spending increase. Are we to fault Even for not trying to solve EVERYONE'S problem so neatly?
> Employers increasingly use cutting-edge scheduling tools like Kronos to calculate the profit-maximizing head count for every hour and adjust schedules accordingly, week to week or even day to day, sometimes with scarcely any notice.
I find the idea that Kronos is 'cutting-edge' pretty amusing. Last time I had to interact with it, it was still an in-browser java applet with a user experience about on par with sticking your hand in a blender.
Is Even a lender?
No, Even is not a lender and Even does not provide loans.
yet the Article claims that:
"....On bad weeks, when users fall short, they still get their salary, thanks to past surpluses or to interest-free credit from Even."
Interest-free Credit == Loan right? What am I missing
There's a legal difference between "loan", the legal transaction, and "loan", the economic transaction.
My sister had an internship once at a South American company that bought receivables. In that country (probably Brazil), loans were illegal. A receivable is a promise of payment in the future according to some schedule. So this company would buy receivables at less than full value from companies (or individuals, I guess) who wanted the money immediately. Obviously, that's a loan (technically, it also assigns responsibility for collecting payment to the owner of the receivable). But despite being like a loan in all other ways, it has the key difference of not being illegal.
It is a thing in the US as well. Retailers and construction companies do it. I was looking into it for apps e.g. advance money against IAPs or ad revenue. It doesn't look like there is demand for it.
> Factoring is not the same as invoice discounting
> Factoring is the sale of receivables, whereas invoice discounting is a borrowing that involves the use of the accounts receivable assets as collateral for the loan
> However, in some other markets, such as the UK, invoice discounting is considered to be a form of factoring
> Invoice Discounting is sometimes referred to as Discreet Factoring as it is essentially the same product as Factoring
(That last quote is from the page on invoice discounting)
None of that indicates to me that there's any difference at all, other than (possibly, but not necessarily) the name, between selling your accounts or borrowing against them. They're both loans, identically structured. There's no demand for this euphemistic product in new US markets because we already have finance.
Oh, another quote from the factoring page:
> in other industries, however, such as textiles or apparel, for example, financially sound companies factor their accounts simply because this is the historic method of financing
> None of that indicates to me that there's any difference at all
Really? There's a big difference in terms of structuring, risk, ownership etc.
When you sell the receivables, your risk is gone. Whether your customer ends up paying or not is no longer your concern. Whether he pays two months late, is no longer your concern. Whether his company goes bankrupt, or he flees the country, is not a concern. You got paid, your financial relationship with your customer just ended. You have no obligations or responsibilities. You need not sue him, chase him, you need not collect payment.
That's NOT a loan. You just sold your receivable to a collecting company. In reality, you didn't borrow money, you SOLD a loan that in essence your customer had with you, but now has with someone else.
When you borrow money, you simply borrowed money. It changed NOTHING about the fact that you still haven't gotten paid. You're still at risk of a customer not paying, you still need to chase him, maybe even sue him. You still haven't actually earned any money. All you did was increase your risk by borrowing money that you have to pay back even if you don't end up getting paid in the end.
The former is a sale of your risk, the latter is a loan. They're not the same and not at all identically structured. In fact in one way they're completely opposite.
What is preferable depends. The former carries less risk, but the discount is higher than the interest you tend to pay. For example to sell a 30-day receivable might cost you 3%, which is a lot of money compared to the <1% you pay to borrow money for 30 days, especially with some collateral (which reduces your interest rates as the risk with collateral is lower, but doesn't absolve you from your debt if the collateral ends up being worthless!).
So these are two different products with different cost/benefit rates, one offloads a lot of risk and alleviates cash flow issues at a high price, the other doesn't really reduce risk but alleviates cash flow problems at a relatively low price.
Maybe they take it as an advance against payroll (direct deposit) and explicitly eat the risk of a user losing their job and never repaying a week. So it wouldn't be a debt.
This seems like just as bad as payday loans to me.
In 2013, there were 45.3 million people in the US under the poverty line. [1]
The article cited a figure of $3.4B / yr for payments to the payday loan sharks.
This startup charges $3 / week and only services cash flow positive customers. A little math presuming we cover the poor as a group with this 'service':
In [1]: 4530000352
Out[1]: 706680000
That's $706 million / year, or about a fifth of the total amount the sharks charge.
But we shouldn't stop there. The sharks are still necessary, since this company is only covering the predictable expenses, not the extraordinary but common visits to the emergency room, or to get a car fixed, or any number of less predictable expenses.
We still need the loan shark. And this guy is taking 20%.
> Jacobs, in her habitual bright pink lipstick and matching headband, was explaining all this via Skype, from her “little box of a house” in Simi Valley, to Jane Leibrock, 33, who had the more muted look of the fortunate and was sitting in the Oakland headquarters of Even, the start-up where she works. Leibrock — an alumna of Yale; a onetime Beijing resident and Mandarin speaker; a street-fashion blogger; a tweeter of first-world problems (“My personal hell would be having my earbuds pulled out over and over throughout eternity”) — used to study the user experience of privacy settings for Facebook. Now she is a researcher for Even, which proposes, for a fee, to help solve the problem of income volatility.
I'm off topic, but am I the only one to find NY times articles to be abusively long? is it a trend in this type of US publications?
While I find the topic interesting and I would like to know more, the article is just too long, repetitive and boring.
This article ran in the Sunday Magazine and not one of the news sections of the paper. Articles in the magazine tend to have a more freewheeling style and are usually longer.
Sentences like that make me sad about the reality of life for tens of millions of working Americans.
I just visited Australia after 9 years in North America, and it's like a slap in the face to realize there are no desperate people there. Almost everybody has enough money for basic essentials, and nobody is crushed with student debt or the fear of not being able to pay medical bills.
It really does feel like another planet when people earning "minimum wage" are doing just fine, are extremely happy, and likely less stressed than the career workers in North America, simply because they earn "enough to live comfortably"