Walmart's quest to stabilize its workers' financial lives

It’s not just Walmart’s low-wage workers who struggle to make ends meet — many managers and executives, some making six-figure salaries, also often find themselves short on cash at the end of each month.

So when the Bentonville, Ark.-based retail giant started offering its employees access to their wages before the end of the pay period, entry-level workers making $11 an hour were not the only takers. The service has been available since December, and enrollment has been spread fairly evenly across the income spectrum, according to the company.

“We get paid every two weeks, your bills come once a month, no one tells you how much you have to spend,” noted David Hoke, Walmart’s senior director of employee health and well-being.

Under a partnership with Even, an Oakland, Calif.-based startup, Walmart is trying to address the fluctuations in both income and expenses that plague its employees. The results of the company’s large-scale experiment figure to offer lessons for banks and startups that are looking for ways to improve the financial health of consumers and employees.

“Given that we have the largest private workforce in America, we are very generalizable,” Hoke said.

As part of the partnership, Walmart employees can get fee-free early access to their wages eight times per year. The service, dubbed InstaPay, caps early withdrawals at 50% of the worker’s earned-but-as-yet-unpaid wages.

InstaPay is currently available to nearly all of Walmart’s U.S. employees, though a handful of states have laws that are an impediment. Walmart’s workers also get free access to Even’s app, which shows users how much they can safely spend before their next paycheck.

“It’s early, but initial adoption is very strong,” Hoke said. “We’re continuing to see growth in the overall adoption of the app.”

Walmart’s efforts to address financial instability in its workforce grew out of a growing body of research on the topic. Some of that research has found that financial stress can affect workplace productivity.

Quinten Farmer, a co-founder of Even, said that employees whose lives have more financial stability are more effective in their jobs. “They stay in their job longer,” he added. “And they’re happier employees.”

Researchers have found that financial instability cuts across income levels. A widely cited Federal Reserve study from 2016 found that 46% of Americans would find it challenging to handle an unexpected $400 expense.

One contributor to household financial instability is a dearth of savings. The U.S. personal savings rate was 2.4% in December, its lowest level since 2005.

But another important factor is volatility in income and expenses. A 2015 study by the JPMorgan Chase Institute, which analyzed patterns in Chase customer accounts, found that individuals in the top income quintile experienced as much volatility in both income and consumption as those in the bottom quintile.

“A combination of unsteady income and unsteady needs really cuts across the income spectrum,” said Jonathan Morduch, an economics and public policy professor at New York University who co-wrote "The Financial Diaries: How American Families Cope in a World of Uncertainty," a book published last year.

“While income is important, it is not one of the prominent predictors of financial health,” said John Thompson, chief program officer at the Center for Financial Services Innovation.

He added that consumers’ habits around saving and planning are more predictive of their financial well-being than their income.

At Walmart, income volatility is probably higher among hourly workers than it is among salaried employees, Hoke acknowledged. Hourly workers do not get paid when they take a sick day.

But Walmart designed its partnership with Even for all of its workers, from the warehouse to the boardroom.

“Whether you’re making $30,000 a year or $300,000 a year, managing that cash flow is a challenge if you don’t know what’s coming in, when it’s coming in, what’s going out, when it’s going out,” said Blake Jackson, director of corporate communications at Walmart.

Some of the retail giant’s critics contend that many Walmart workers do not earn enough money, and that the mismatch between when they get paid and when their bills are due is not their main problem.

Jackson responded that Walmart sees InstaPay as just one part of the company’s response to financial stress among its employees.

The retail chain recently expanded its maternity and family leave benefits, which Jackson described as another way to improve workers’ financial stability. And in January, Walmart announced that it was raising its minimum wage from $9 to $11.