When I asked Palaniappan if he thinks these problems could be solved by paying workers more, he agreed that it’s “always better for people to have larger paychecks,” but stressed that there’s a “timing issue” with when they get paid as well. “Bills don’t show up on payday,” he said; they’re often due before the direct deposit hits. Palaniappan said Earnin is addressing this problem with a financial calendar that helps people keep track of when their paychecks are coming in and when their bills are due, which he said can help users with budgeting. Another feature, Balance Shield, helps prevent overdraft fees by alerting users when their checking account balance falls below a certain threshold and, if they want, automatically transferring money to them via Earnin.
But is a lack of immediate access to their paychecks really the reason so many Americans are struggling to get by? If a minimum wage worker got their pay at the end of the day instead of two weeks later, would they still live paycheck to paycheck?
It’s no surprise that millennials, the demographic Earnin markets itself to, are in dire financial straits – but the reasons for the generation’s economic precarity are more complex than payday not always aligning with when the bills are due
And according to a 2018 report on how millennials compare to previous generations, the average millennial household had a net worth of $92,000 in 2016, which is nearly less than 40 percent of the average net worth Gen X households had in 2001. Put simply, wages have barely been able to keep up with inflation, especially for low-income people.
A growing number of millennials work on a freelance basis or in the gig economy, which means they’re on the hook for benefits that would otherwise be provided by their employers, like health insurance or retirement plans. Between 2003 and 2015, the proportion of income that millennials earned from contract work increased from 57 percent to 72 percent, according to data from Deloitte. Generally speaking, millennials are more educated, less wealthy, and more indebted than previous generations, and these inequities are compounded along racial and gender lines.
Student loans are yet another monthly expense: The average American household with student debt owes almost $48,000, and experts believe that student loan debt has held millennials back from major life milestones like marriage, homeownership, and having children
Giving people access to their money faster won’t help solve the root causes of economic insecurity, but, Palaniappan says, it’s a start. And it’s just one part of Earnin’s big-picture plan. On Wednesday, Earnin launched HealthAid, a service that will give users access to patient advocates who will help them negotiate down their medical bills, set up payment plans, or secure financial aid. Like Earnin, HealthAid will function on a tip system.
For Palaniappan, it’s another way to introduce a degree of parity to a vastly unequal economic system. “Health care is more expensive for our customers,” he said. “They don’t have the best insurance. Quite often, their medical bills are largely unexpected.” On top of that, he added, hourly workers lose even more money when they get sick since they have to take time off work.
HealthAid, he explained, is a way of helping people navigate complex health care billing systems. “The way it works is really simple: You upload your medical bills through the app; then we have a team of people who will try to negotiate the price down with the provider,” he said. “They will try to get you a payment plan and they will also try to match you up with financial aid.” According to Palaniappan, 90 percent of bills users submitted during HealthAid’s pilot phase were reduced or otherwise addressed in some way.