NextBillion - An Initiative of the William Davidson Institute at the University of Michigan

For millions of Americans, financial health begins in the workplace. No amount of good budgeting or intent to save can overcome a lack of stable, sufficient income.

Consider Patricia, a single mom who supports herself and her 8 year old son working at a big box store in California. During an interview for the Instability of Work and Care study, Patricia shared that her hours had been steadily reduced over four weeks, from 20 hours to just four hours per week.

Patricia is not alone. According to a study by the Urban Institute and Brookings Institution, between 2009 and 2012, about 39 percent of working-age adults experienced a drop in income at least one month out of the year. Unexpected drops in income can make it difficult to cover constant expenses like food, rent, childcare, utilities and other necessities.

To better understand the root causes of – and potential solutions for – income instability, Common Cents Lab partnered with employee-scheduling company Homebase to analyze real employee data. We studied approximately 520,000 shifts for 25,000 employees at 1,700 business across California over six weeks. The findings clearly show a lack of consistent work schedules for most employees.

By charting the difference between the average number of hours and the minimum number of hours an employee works during a six-week period, we calculated an average fluctuation of 5.5 hours. This means if a person works 24 hours on average over six weeks, they would only work 18.5 hours for at least one of those weeks.

Time is money

While working extra hours in a week can be inconvenient, the real pain point is working fewer hours than you expect. If we use a conservative estimate based off of the average wage for food preparation workers in California^[1] of $12.82, those lost 5.5 hours equate to $70 of wages.

This sample size was small, but if the pattern persists, then annual income takes a hit to the tune of over $600.^[2] Over time, this sort of work schedule variability could add up and have financial implications for basic necessities like food and rent. The California Budget and Policy Center estimates that the monthly food budget for a family of four with two working parents is $773. Another study found the median amount of money owed by those who had been evicted in Richmond, Virginia was $686. If you’re living on the line, $600 is a lot.

Beyond self-reported data, this dataset draws on real clock-in and clock-out timestamps and represents a systemic, national issue. (These findings are not only applicable to employees tracked by Homebase.)

What can be done?

Sadly, many of the current solutions on the market are reactive in nature. Many approaches consist of apps that help people manage their money – budgeting, saving, emergency loans – by plugging holes after they happen. Instead, we need solutions that address a primary root cause of financial distress – income volatility – at the schedule level.

To help, product developers and employers should consider solutions that:

1. Guarantee a minimum number of hours for employees: In 2016, Walmart pledged to redesign its scheduling process to offer two solutions to better accommodate its workers. One option was a “fixed shift,” which allows Walmart employees to lock into a guaranteed schedule for up to a year if they are eligible. This type of commitment can help employees avoid juggling hours, and better plan for long-term financial needs.
2. Make it easy for employees to pick up shifts or trade them: Sometimes, schedule fluctuation is a necessity, requiring employees to either forgo shifts or pick up extra hours. Joan Williams of the University of California Hastings College of the Law and co-author on a recent schedule variability study with Gap suggests that employers eliminate “on-call” shifts, which leave a lot of uncertainty in the employee’s schedule. Instead, she favors scaling up managers’ ability to post open shifts, and boosting employees’ ability to trade them efficiently. Apps or services like Homebase that allow employees to trade shifts could be a viable way to take the pressure off employers.
3. Have the conversation: Often, employers and employees only discuss how many hours an employee wants to work at the point of hire. Months or years can go by until they revisit the issue. Instead, employers should offer formalized check-ins with employees to discuss their schedules and their needs. A Homebase feature that prompts employees to input their desired hours within the app demonstrates this demand. Over the course of just a few days, a prompt for employees to update their hours increased the percentage of Homebase employees who had entered desired hours by 14.7 percent, to nearly a third.

While the economic costs of inconsistent work schedules appear daunting, we remain hopeful. From grassroots movements to fintech startups to academic researchers, people around the world are working to find solutions to improve the financial health of employees.

Kristen Berman is a co-founder of Duke’s Common Cents Lab.

Margaret Gorlin is a senior behavioral researcher at Duke’s Common Cents Lab.

Sarah Elmes is a researcher pursuing her masters in International and Development Economics.

Image courtesy of Pexels.

Footnotes

^[1] In our sample, 75 percent of employees work in the food and drink industry where the average wage is $12.82 per hour, according to the Bureau of Labor Statistics

^[2] A worker making $313 per week will have a week where they only make $242 once every 6 weeks and annual income will drop by $610.65