by Joseph Coletti
Senior Fellow, Fiscal Studies, John Locke Foundation
An essay in today’s Wall Street Journal (subscription) provides a summary of two alternatives to payday loans that employers can provide to low wage workers with repayment taken directly from their paychecks. Benefit for employers is reduced turnover. Mixed blessing for employees provides a distinct advantage to big employers who can distribute the risk across a number of people. The authors mention specifically Walmart and Target. Mixed blessing for employees who have cheaper way to manage cash flow, but more dependent on company.
Our research shows that employer-sponsored … benefits that take advantage of the powerful “salary link”—automatic repayment through salary deduction—can provide more efficient, less costly and more inclusive liquidity and credit solutions for working American families. These … products also show tantalizing potential for significantly reducing employee turnover and savings millions of expense dollars annually at large employers. Importantly, deployment of employer-sponsored … benefits does not require changes in law or government intervention to be successful.