By Rachel Schneider, Financial Health Network
At the dawn of the industrial revolution, manufacturing jobs were terrible jobs. Conditions were dangerous; hours were far, far too long. But over time, the nature of the work changed. Whether the changes were the result of unionization, regulation or just good business, what history reminds us is that no job is inherently a good job, and no job is inherently a bad job. Manufacturing jobs started out as truly awful, and now we hold them up as the gold standard of middle class stability and upward mobility.
The dominant jobs of today’s economy — service jobs, caring jobs and knowledge jobs — look as different from the jobs of the industrial revolution as those jobs did from the agricultural jobs they displaced. For these jobs to deliver that same gold standard of stability and upward mobility, workers will need more than safe workplaces and a forty-hour workweek.
But what exactly will they need? To figure that out, we have to start by understanding how the changing nature of work is affecting real families. The U.S. Financial Diaries project, a joint effort of the Financial Access Initiative of New York University and Financial Health Network, gives us some insight. Through the project, my co-author Jonathan Morduch and I worked with a research team to deeply understand the financial lives of 235 families across the United States. The households were diverse in many ways — rural, urban, white, black, Hispanic, Asian, recent immigrants, and families in the U.S. for generations — but they each had at least one working adult, and they were willing to share details about every dollar that they earned, spent, saved, borrowed or gave away with our research team for a full year. A quarter of the families earned near the median income, a quarter were near the federal poverty line, and the rest were somewhere in between.
As the Diaries research team looked at the income data we had collected, something surprising jumped out: a high level of volatility. On average, Diaries families had five months of the year in which their income was at least 25% more or less than their average monthly income. But even this high incidence of volatility fails to give a full flavor for workers’ experience, because on average, these spikes and dips in income were about 50% more or less than the average. The problem that today’s workers experience is, in fact, far different than workers at the dawn of the industrial era, when they had too much work. Now, instead, they have inconsistent work.
The ups and downs have several causes. Workers who rely on tips and commissions have always experienced this kind of week-to-week — or even day-to-day — volatility. The paychecks of a Mississippi-based card dealer in the Diaries study have large swings depending on how busy the casino is on a weekly basis. For others, there is inherent seasonality in their work. We got to know a sidewalk fruit vendor in New York City who sells far more fruit in the summer than in the winter, but the same pattern holds for many in the construction industry. For those in retail and service jobs, productivity enhancements like dynamic staffing mean that they work variable hours each week, flexing up and down with demand for their employer’s services. One Diaries participant who manages a handful of fast food stores in California shared how much she likes her job, except for the fact that she has to send workers home when business is slow. She monitors a real-time ratio of sales to number of employees on site, and if her stores are outside of the expected range, she quickly hears about it from “upstairs.”
The biggest driver of income volatility for Diaries families was changes in the amount of income earned in the same job. But, the second biggest driver was changing jobs or having multiple sources of income. Four out of ten workers in the Diaries families had multiple jobs during the year, whether sequentially or simultaneously. Some workers cobble together multiple part-time or gig jobs, or add occasional extra work on top of a primary job, while others cycle through a series of jobs in search of the best one.
Regardless of the cause, there is no guarantee of steadiness, even for people who work full-time. One result of this unsteadiness is that even if workers earn enough to cover their costs over the full year, on any given week, they may not have the money they need on hand. So families struggle to make sure they can pay this month’s bills, repair a broken-down car or celebrate a birthday. This effort is stressful, and it shifts precious attention away from more important concerns — like family, education and work.
Today’s innovative financial services have more potential than ever to create financial stability and enable mobility. Yet, those who need these services most often have the least access to them. By delivering services such as better emergency savings funds, access to high quality credit and more dynamic, real-time budgeting advice, financial services companies can not only access a growing market opportunity, but can also help to deliver on the promise of stability and mobility to today’s worker.
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