What the Government Shutdown Teaches Us About America’s Financially Stressed Workers

People living paycheck to paycheck pay a cost, a Fin-Tax, to access their own money when needed between paychecks. And an emotional cost from the financial stresses they experience. This can be fixed.

When nearly 80% of working Americans are living paycheck to paycheck, the country is facing a national emergency. To be frank, this means we are, or at least the vast majority of us are, one small hiccup away from total disaster. The government shutdown brings this into sharp focus.

This article is not a condemnation or judgment of that decision, a political one. It’s a reflection on the consequences it has on federal workers, many of whom are among the vast majority of Americans living with crushing financial stress and worry every day.

800,000 federal workers did not receive a paycheck last Friday. Many of them still are showing up for work (although employees taking sick days is not surprisingly on the rise). They will accrue earned wages. They will have worked the hours, on the promise that the government will provide back pay. All of which sounds ok, right?

Wrong. This is where the devil is in the details. With no savings to close the gap, mortgages will go unpaid. Credit card bills won’t be paid. Utility bills will be skipped. And every one of them will end up charging late fees. Overdrafts will go into effect. More fees charged. Some accounts will be closed, with a fee to be re-opened. Credit scores will be impaired and borrowing costs will rise.

The Financial Services industry with its Fin-Taxes will roar to life. The Fin-Taxes take the form of fees extracted between-paychecks by the financial services industry – from payday lenders to subprime lenders to the mightiest financial banks. All to the detriment of working people who can’t access their wages because of something that is totally out of their control. And we wonder why financial stress is at an all-time high.

This goes beyond finances.

Virtually every issue that is raised in the news as killing Americans can be traced back to financial stress. It leads to suicides. Opioid use. Alcohol abuse. Smoking. Poor eating habits. Lack of sleep. Crime. Domestic Violence. In a recent report from CNBC, it was posited that “the economic fallout from the epidemic of heroin and prescription painkiller abuse is on track to cost $500 billion from 2018 to 2020 alone.” It doesn’t take a huge leap of faith to correlate those costs to financial stress. And it isn’t difficult to understand how that type of behavior to alleviate the pain of financial duress hurts worker productivity and cost employers millions, if not billions, of dollars a year.

So it’s not alarmist to say that something must be done. This is not a “sky is falling” false flag or “boy who cried wolf” moment.

The sky is actually falling, and the wolf is at the door, hungry and ready to eat.

There is a solution.

It’s called Earned Wage Access. Once earned, wages are made accessible and not locked up for two weeks. The technology exists today. We invented it five years ago, and in the last twelve months we have processed and settled over a billion dollars of earned wages, getting employees’ money in their pockets when they needed it, which was quite often well before payday.

We can now quantify the true cost of financial stress. PayActiv surveyed several thousand users across dozens of employers and asked, “What would you do if you didn’t have access to your earned but unpaid wages?” The answers were stark and stunning:

  • “I would have paid an overdraft fee” – 31% ($35 each time)
  • “I would have taken a payday loan” – 22% (at least $35 +++)
  • “I would have deferred a bill and paid a late fee” –38% ($5 to $60++)

Is that a clear enough picture of the dilemma at hand amidst a government shutdown and a reality where almost a hundred million Americans live paycheck to paycheck? The fees that are inherent to the Fin-Tax machine can be as high as $39 and even more in the case of rolled over loans and other penalties, causing the reduction in take-home pay to be as high as 10% of that month’s salary (over $200)

Let’s quantify the cost of waiting to be paid.

  • Week 1 – 2 overdrafts ($70), 1 late fee ($10), bank balance falls below $1500 (fee is $10)
  • Week 2 – 2 overdrafts ($70), 1 late fee ($20), credit card maxed, Mortgage payment delayed ($40 Fee), Gym payment delayed (late fee is $10)

Total = $230 for the month ($2760 annualized)

If 100,000 people experience this situation the actual cost paid will be $23 Million. A boon for the collectors indeed.

The psychological toll … oh, let’s not go there.

At PayActiv we’ve eliminated costly fees a few million times for our users in 2018 alone. Did we put new money in the pockets of users or did we add new money into the system? No. What we did was enable timely access to earned wages, and by our estimates, increased the purchasing power of our users by at least $100 million over twelve months. But that’s just the monetary value. The emotional value and the peace of mind delivered is inestimable.

A lifeline for employees, this reduction in financial stress has many positive dividends for employers. Employee retention improves by up to 30%, and employee engagement accelerates: Companies providing the services generated employee NPS score of 84 %.

The longer the shutdown continues, the more it highlights the plight of the people whose lives we can save or make better every day. While it shouldn’t take drastic governmental measures to bring to light the startling practices that prey on workers living paycheck to paycheck in America, it’s a reality that needs to be made a foremost priority in American employer’s minds. It’s time for change.

Financial Stress is a Disease Without a Name.

Financial stress is at epidemic levels, and it is soul crushing for hard-working Americans.

Our results are a positive indicator that there is a free market solution, which is fair to the employee, creates quantifiable value for the employer without adding out of pocket cost, and doesn’t involve the employee being exposed to short term loans, personal borrowing and financial engineering.

Which has led us to propose a Bill of Rights on employee financial wellness. This isn’t a sales pitch, it’s a call to arms.

  • Once earned, wages should be accessible.
  • Access to earned but unpaid wages must be affordable and free of traps.
  • Access must include financial counseling and control, as well as guardrails.
  • Banked or unbanked; everyone must have the ability to get funds, pay bills, and participate in online commerce.
  • Access to funds must not require opening a specific bank account or restricted to proprietary debit/prepaid cards.
  • Everyone, employees and employers, deserves the happiness and well-being real financial health provides.


We would ask every employer to consider ratifying it and enacting it in their company. Join us in making real financial health of employees a leading priority in 2019.

Our actions in a boardroom or on the Senate floor have consequences.

Inaction is not acceptable. We now know the cost is real, measurable and cruel.

That knowledge makes us all complicit. Let’s take this moment of national crisis and learn from it by delivering real impact to struggling employees by restoring financial security, personal dignity, and readiness for tomorrow.

Holistic Financial Wellness

Learn how PayActiv measurably reduces employee financial stress and employee turnover.

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Access is more than a paycheck.
It's peace of mind.

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