As Labor Day Marks 120 Years, Payday’s Transformation Marches On

Labor Day became a holiday in September of 1882.

In the ensuing 120 years, the very idea of labor, and the very composition of the workforce, has changed markedly. So have the ways and means by which we get our earned wages into our collective pockets and bank accounts.

A Nation of Farmers 

Back at the end of the 19th century, roughly half of U.S. population was involved in farming.

Fast-forward to today, and professional and business services remains the largest sector of employment at about 22 million individuals, or roughly 13% of the workforce, per data from the Bureau of Labor Statistics. Nonfarm jobs, in fact, account for roughly 92% of the labor force.

Along the way, as noted in a Federal Reserve history, wages were doled out in cash, or in what we might think of as being a bit, well, inventive (the study makes mention of laborers being paid, in some cases, in pounds of tobacco).

The two-week pay cycle? Well, that traces its genesis back into the last century, into the 1940s — a steady, dependable process that allows the governments at state and federal levels to collect taxes.

Now, real-time payments loom, and the gig economy is woven securely into the fabric of society. As recently as last year, as estimated by Pew Research, about 16% of the U.S. workforce had at least some experience earning money through contracted work. In an inflationary environment, the opportunity and the lure is there to take on supplemental, flexible work to augment one’s income.

Flexible Payments  

The payments need to be flexible, too. PYMNTS’ research has found that on-demand, or at least more frequent, payment options are favored by gig workers. In a recent interview, Tracy Monson, chief product officer at disbursements platform Onbe, told PYMNTS that “compensation is the number one thing that attracts gig workers and builds loyalty.”

But 41% of freelancers wait a month between paychecks, and a full 70% say they want to be paid quickly and more often.

Companies are starting to recognize that they need to satisfy those expectations. Approximately 75% of firms now consider faster payments as a critical service to offer, and roughly 90% believe they will be able to offer faster or instant digital payments within three years, as we’ve spotlighted here.

Elsewhere, Ingo Money CEO Drew Edwards has told PYMNTS that, “If the work is now on-demand, then the worker must also now be paid on-demand — it’s got to be an on-demand equation from beginning to end.”

He noted, “To do the work and go back home, and then wait to get paid next Saturday, is not the way these workers think. In the gig world, that offering means you won’t attract the driver, the web designer or the freelancer.”

There are any number of firms — digital upstarts among them — that have been raising capital and coming to market with their own earned-wage access (EWA) products and services. In one example, Tartan raised $4.5 million to expand its payroll offerings, with EWA and salary-linked loans in the mix. Additionally, PayPal has on-demand pay in place for its employee roster.

The appeal of gaining immediate access to wages as one works has obvious appeal beyond the gig economy, of course, but the landscape may be changing. In late June, the Consumer Financial Protection Bureau (CFPB) ended financial services provider Payactiv’s Sandbox Approval Order for its EWA products.

The CFPB said back then that it “had received requests” for clarification regarding its advisory opinion on EWA products. The bureau said it “plans to issue further guidance soon to provide greater clarity concerning the application of the definition of ‘credit’ under the Truth in Lending Act and Regulation Z.”

And so, the ways in which we earn our daily bread will continue to evolve.