Regularized Income? There’s An App For That

Income inequality gets a lot of press time. At this point in history, the majority of Americans are well aware that the gulf between the nation’s highest earners – 1 percenters, as they are colloquially known – and the nation’s bottom earners has been well documented, infinitely discussed and is continually parsed. A quick search of the phrase income inequality with Google News pulls about 6.6 million results, the Top 5 coming from the most mainstream sources: ABC, CNN, PBS, Forbes and The New York Times. They don’t all say the same things, expectedly, but there is certainly no lack of interest in the topic.

What tends to get a good deal less airtime is income volatility. Searching Google News on that topic pulls up a mere 144,000 results, and most of those are not actually on the topic of “income volatility” (instead focusing on the volatility of the income generated through investment).

However, while the wider world of the mainstream media has not taken a great interest in this topic, economists are increasingly taking interest and identifying the trend as a possible reason for concern.

According to a report for the Brookings Institution by economists Karen Dynan, Douglas Elmendorf and Daniel Sichel, nationwide, household income volatility climbed by 30 percent between 1970 and the late 2000s. The report further found that in the last five years, 10 percent of American households reported income levels that varied as much as 50 percent year-to-year. In a report released in 2014, The Federal Reserve reported that about 31 percent of American households experienced income swings — with 10 percent of those saying their income varied “quite a bit” month to month.

According to the Fed, income volatility is essentially a function of irregular work hours. Those hours have a variety of causes. In the service sector, software-based scheduling tools calculate profitable worker staging arrangements,­ meaning that maximally efficient head count is factored for every hour and then adjusted in almost real time. The outcome of that, from a personnel standpoint, is that employee schedules can vary widely from week to week or even day to day – and that those schedules can (and often do, according to Fed data) be shifted with very little notice. Those shifts, obviously, hit the paychecks of those workers.

However, while the service sector is often piled upon when it comes to all things inequality, the changing face of the economy in the 2010s is also building a workforce increasingly detethered from the “set paycheck, every 2-4 week model.” The sharing, or Uberized, economy is built largely around fleets of independent contractors. Apart from having paychecks that are, by design, variable – contract workers also usually do not have benefits or sick leave – meaning that illness (even minor) can seriously disrupt a worker’s financial life.

The trend is becoming increasingly known as “”hidden inequality” and, unsurprisingly hits low-income earners the hardest. Statistically speaking, most low-income Americans do not spend more money each year than they earn – reports The New York Times – when their expenditures and earnings are both averaged over the course of an entire year. But in reality, individuals neither make all their money nor pay all their bills once a year, meaning that day by day – and unexpected expense by unexpected expense – many irregular income (low income) workers find themselves without the cash on hand they need.

PYMNTS has written extensively on the methods consumers use to fill those gaps and this tracker is specifically concerned with the methods that are a standard deviation or two removed from the more mainstream methods like credit cards and bank loans. And when it comes to finance, there are no shortage of options to choose from, from short term (payday) loans, P2P lending or crowdfunding — any of these avenues might work for a worker with inconsistent income — depending on one’s needs, goals and overall creditworthiness. And while they are all different, they all operate from an essentially similar premise of bringing in additional funds to cover costs in the event of a large expense.

However, just outside of the San Francisco tech Mecca in Oakland, California, the team at Even is trying to solve this problem from a rather different direction. Even does not provide consumers with new funds – instead, it helps them control the income they bring in so that their cash flow is normalized, made more predictable and therefore, easier to plan around.

“We’re not bankers. We’re not a payday lender or a credit card company,” Even notes on its website. “We’re people who used to work at places like Instagram, Facebook and Google. And we started Even for one reason: to help people feel less stressed out about money.”

And while the Even staff is drawn from Silicon Valley’s “A-Team,” the business is largely and mostly concerned with people that are typically left behind when it comes to developing “the next big idea.”

The Even app is not quite out to market yet, as it is still in beta testing. The premise, however, is fairly simple. Users sign up for the app and hook it up to their personal bank accounts.

“Everything else happens automatically,” Even notes. “There’s nothing to think about, nothing to keep track of.”

The software then analyzes the user’s income and determines what their average bi-weekly (or monthly, depending on preference) income would be. When the worker earns above average, the app pulls the surplus into a separately managed Even bank account.

“And when the employee has a slow week and their earnings are under average, Even replaces the difference in the user’s account so they still have that regular, predictable flow of money.”

When workers do not have sufficient savings in an Even account to smooth out the difference, the site may provide interest-free credit to cover the difference – though the mechanism or limits on that part of the platform seem to still be under development.  The platform is also constantly updating what it knows about the user so that its averages are correct.

”The app is also constantly learning and evaluating a user’s income – such that if a worker starts suddenly making a lot more money, or a lot less, Even will automatically adjust the average payouts.

The service also offers users one-to-one guidance.

“Every user is assigned a personal Evener— a real person that you can talk to anytime you have a question or money problem you need help with.”

Even, of course, has its limits. According to the FDIC, the millions of Americans without bank accounts are not eligible to use this service, and it stands to reason that if the central problem is that a consumer doesn’t earn enough money period (as opposed to not earning money in predictable time periods), a smoother flow of funds won’t change that fact and Even is of no use.

But Even is making a bet that it can help people – and change significantly the experience of working in a rapidly changing economy. And do it in a way where everyone involved even gets to win, Even Steven.