THE NEFF ZONE -- BY JIM NEFF
CADILLAC NEWS -- NOVEMBER 3, 2018
Economic standards are changing in America and maintaining a position of a middle-class citizen is more difficult than ever. Managing your finances may be more critical now than ever before.
“Despite an unemployment rate that has reached a 50-year low of 3.7 percent, most jobs across the U.S. don’t support a middle-class or better lifestyle, leaving many Americans struggling, according to a new study. Sixty-two percent of jobs fall short of that middle-class standard when factoring in both wages and the cost of living in the metro area where the job is located, according to the study by Third Way.”
Third Way is a think tank that advocates center-left ideas, but they are not the only researchers in this arena. “A slight majority of Americans, fifty-two percent, do live in middle-class households, according to recent annual reports by Pew Research Center. And another twenty percent or so live in upper income households. But that’s because they’re juggling multiple jobs, for example, or relying on investments, an inheritance or other household members who may have higher-paying jobs.”
(https://www.usatoday.com/story/money/2018/10/30/jobs-62-percent-fall-short-middle-class-standard-us/1809629002/ and https://www.thirdway.org/report/the-opportunity-index-ranking-opportunity-in-metropolitan-america)
the Third Way study determined some interesting data about job types. “Thirty percent of jobs are hardship jobs, meaning they don’t allow a single adult to make ends meet. Thirty-two percent are living wage jobs, enough to get by but not to take vacations, save for retirement or live in a moderately priced home. Twenty-three percent are middle-class jobs, allowing for dining out, modest vacations and putting some money away for retirement. Fifteen percent are professional jobs, paving the way for a more comfortable life that includes more elaborate vacations and entertainment and a more expensive home.”
This data indicates that being middle-class may be a fast-fading dream for many Americans. So, what to do? Well, it may be imperative to wisely manage the money you make and to stay out of debt.
A relatively new banking concept may be a help in this regard. It is quickly growing in scope and popularity. It's called “real time pay.” Here's the deal. “The fundamental structure of America’s banking system has remained virtually unchanged since the 1950s. Yet one simple update could open the door to people who have been locked out of basic banking services for far too long. Millions of Americans today get paid twice a month, often on the first and the fifteenth. But why? That made sense when payroll was entered manually and checks were cut by hand. The reality is that digital financial technologies have made it possible for workers to get paid on their individual schedules instead. Not only is this a more fair way to go, but it could also help workers stay in the banking system and out of the cycle of debt. This is not science fiction.”
In simple terms, rather than getting your pay every week or two, you get paid for your work at the end of each day. End a shift, get your pay for that shift. No delays. “This delay often compels workers to spend money they don’t have just to access needed cash. About twelve million Americans use payday loans to cover emergencies and living expenses at effective interest rates that exceed 300 percent.
The loans are supposed to be repaid when workers’ paychecks land in their bank accounts, but many are still short of cash when it’s time to repay. They must borrow again, racking up more fees in the process and falling into the debt trap.”
Real time pay seems to be popular with workers. “Daily paychecks give low-wage workers more flexibility with their finances. The option is partly meant to cater to a preference shared by millennial employees that quick cash is better than waiting two weeks for a lump sum.” A Business Insider article noted: “This program really aligns with their real-time life and being in control of their whole life experience." (https://www.businessinsider.com/restaurants-trying-to-appeal-to-millennials-with-daily-paychecks-2017-10)
Businesses and corporations also seem to like the real time pay concept. “Eighty-seven percent of executives expect real-time payments to have a positive effect on liquidity planning, forecasting and cash investment. The forecasted growth for the real-time payment solution market through 2022 is 100 percent. And more corporates are showing an interest in real-time payments...the potential of faster payments seems to be capturing the imaginations of a significant share of corporate respondents. Forty-two percent of respondents said they believe the integration of real-time payments with online banking will be the most significant innovation in the commercial payments sector over the next three to five years.”
Recently, a television station in Cleveland produced an excellent video explaining real time pay. You can see it at: https://www.cleveland19.com/2018/10/22/more-companies-trending-towards-paying-workers-real-time/.
It may be more difficult to maintain middle-class status these days, but being able to more efficiently manage the money you make seems like a positive step in the right direction. It will be interesting to track future developments as the technology to accomplish this evolves.