WorkWhile CEO Wants to take Earning Power Into Account

For a worker paid by the shift, $200 arriving tomorrow can outweigh an annual income figure that looks healthy on paper.

That’s an authentic test of financial health and the one PYMNTS CEO Karen Webster put to WorkWhile CEO Simon Khalaf in the latest Monday Conversation: what happens when the next paycheck isn’t guaranteed?

The Wage to Wallet Index puts the Labor Economy at roughly 60 million workers. Their households spend 28% less overall and 43% less on nonessential purchases. Debit is the default, while one in five hadn’t used a credit card during the previous year. Those numbers can be read as evidence of financial constraint. They can also indicate a preference for keeping spending tied to available cash.

Or, as Webster put it: “What if it’s a rational choice?”

That question cuts into a familiar assumption in financial services. A consumer who doesn’t use credit isn’t necessarily a consumer who can’t use or benefit from it. Someone managing variable income may have a straightforward reason for preferring debit. It puts a hard limit on what can be spent.

The same consideration applies to rewards. Points accumulated for a future purchase have less immediate value to someone deciding whether today’s grocery bill fits within the money currently available. A discount at the point of sale does.

Khalaf’s broader criticism is that the industry’s products were designed around consumers with predictable income.

“Our financial services products in the United States, pre-FinTech, have been designed for the 10% and unfortunately been used by the 90%,” he told Webster.

The credit card itself offers a stark example. Credit can bridge the period between a purchase and a paycheck, giving a consumer access to working capital. For a worker whose next shift isn’t certain, borrowing today can create a problem that has to be solved with future earnings.

The alternative, according to data CEO Khalaf cited from WorkWhile’s annual survey, is often to work more. Sixty-eight percent of workers surveyed said they’d take additional shifts rather than use interest-bearing loans when confronted with an unexpected expense.

That shifts earning capacity into territory credit has traditionally owned. It also raises a harder question: what does a credit score actually miss?

Khalaf argued that lower-FICO workers can exhibit financial discipline that isn’t visible in conventional measures when they choose another shift over expensive short-term borrowing.

“They’re demonstrating better fiscal responsibility than all the top 5% who are over-leveraged in the stock market,” he offered.  Repayment history doesn’t tell a lender whether a worker can find another shift, what that shift will pay or how quickly the resulting income will become available.

The Fourth Rail Is Earnings Power

WorkWhile CEO Simon Khalaf builds his fourth-rail argument from the idea that earnings power is the fourth rail. Work can be viewed as a third rail when credit, debit and buy now, pay later are grouped together. Earning power, that fourth rail, should include the ability to earn, not only money already saved or money available to borrow.

EWA, of course, allows workers to receive wages they’ve already earned before the conventional payday. Khalaf’s multi-rail construct hints at a broader financial relationship with prospective work.

A labor platform can see information a bank generally can’t. A worker’s skills, shift history, availability and the demand for those skills. That information can provide a view of earning capacity before a paycheck reaches a bank account.

WorkWhile has started building around that information. Its assignments feature lets workers commit to multiple shifts, and Khalaf said workers have begun watching wage fluctuations and taking commitments when compensation is favorable. He suggested that software could eventually identify those opportunities and present them to workers for approval.

The model has its own financial constraint. WorkWhile pays workers within 24 hours, while customers generally pay in 30 days. CEO Khalaf said that working-capital gap is limiting the company’s ability to accept more demand.

Same-day pay is where that constraint bites. Faster access to wages still requires someone to finance the interval between labor and payment.

For workers, the payoff is more immediate. Khalaf said same-day pay has the strongest effect on repeat-worker rates on WorkWhile’s platform.

Khalaf made a prediction that would shake up the very nature of payroll itself. “I believe that in the next decade, if workers are not paid daily, they will not show up to work,” he told Webster.

Watch the interview as Karen Webster and Simon Khalaf discuss:

• Why workers may choose another shift over another loan,
• How same-day pay is changing the value of a job, and
• Why earning power could become a new measure of financial capacity.