When GBL first designed a tool for blue-collar women workers to withdraw their earned salary before payday, our hope was that this intervention would help ease their burden of debt. What we did not expect was that the Earned Wage Access (EWA) program would have a positive impact on the overall earnings of women workers, while dramatically improving their productivity at the workplace. The early findings from the study are out and are exciting, with significant potential for worker well-being as well as for business.
Rukmini works at a textile factory in Bengaluru, South India. She gets paid on a monthly schedule, but often struggles to stretch her salary from one payday to the next. Every time there’s an unexpected expense – a medical emergency or an additional bill from her child’s school – Rukmini has to scramble to borrow money from a friend, a family member or a co-worker. At other times, when she doesn’t want to face the embarrassment of asking her friends or family again, she takes a loan from a moneylender, even though the interest rates are exorbitant.
When Rukmini receives her next paycheck, she has to use a significant portion of it to repay her loans, even as other expenses pile up. In the past, unable to bear the strain, Rukmini has even quit her job, resulting in periods of unemployment which only left her further entrenched in debt.
The financial stress is almost constant for Rukmini, and many other blue-collar workers like her.
At GBL we asked a simple question: would the burden of debt be reduced if women workers were able to access their earned wages when they were most in need of cash? And what impacts would this reduced burden have on workers and on firms?
An unequal burden: the mental load of financial stress on women
Our research has shown that among low-income workers, women tend to be disproportionately affected by financial stress, spending as much as 50% of their income on repaying loans. Limited access to formal banking institutions combined with various social barriers leaves women workers particularly vulnerable.
With money always tight, Rukmini says she is unable to pay her bills on time. She often skips visits to the doctor even when she’s ill or spends less than she needs to on food for her family. Many other women in our survey reported having to reduce spending on personal expenses, transport and other essentials.
Anyone who has struggled to make ends meet knows that it is mentally exhausting to constantly worry about money. These fears occupy mental space, often becoming a distraction both at work and at home. In our exploratory study, a third of the workers surveyed said that financial worries interfere with their daily routine, while one in five said that this anxiety affects their work.
Designing for usability: last-mile connectivity
Based on observations of workers’ financial lives, GBL tested an intervention: an earned wage access (EWA) tool that would give 834 workers flexible access to their pay before payday. This interest-free intervention, supported by the garment factory, was designed to reduce workers’ reliance on informal and expensive sources of credit.
The EWA tool was designed specifically to address the various barriers faced by blue-collar women workers who don’t have the same access to digital financial services as men. Workers can access a simple, Android-based application via a tablet at the workplace to withdraw their earned wages via a direct transfer to their bank account in just a few clicks.
In addition to interactive training sessions, we also made sure that support staff were always available near the tablets to help workers navigate the app. This last-mile connectivity around the technology ensured comfort and convenience of use.
Decreasing debt, increasing productivity
Thirteen months after the launch of the app, some results that we expected were confirmed – namely that the tool eases debt by allowing women workers to access their earned wages in times of need. In fact, we observed a 30% reduction in informal borrowing in the study group.
The single most common reason for withdrawal of earned wage was for the repayment of loans and the workers who reported the greatest financial stress were most likely to use the app. We observed improved liquidity, with workers 20% less likely to forgo essential expenses while being 32% less likely to report finding it difficult to make it from one paycheck to the next.
Another, somewhat surprising result was a significant upside for the employer: a dramatic increase in productivity. The group that had access to the EWA tool during the study was 8% more productive than the control group. Gains in productivity are particularly hard to come by and are major drivers of profit in manufacturing industries, making this finding very exciting.
Our working hypothesis for the productivity boost is that the relief of repaying loans and being able to cover essential purchases freed up mental space, enabling these workers to be less distracted and more productive at work.
An unexpected solution to a leaky bucket problem
The most unexpected study result was that workers who had access to the EWA tool had higher earnings over the study period. This was simply the result of a dramatic reduction in attrition from factory work. The turnover rate in the study group was 24% lower than in the control group – one of the biggest impacts on attrition we’ve seen in a study of this length.
We discovered that, like Rukmini, when women workers quit their jobs, they do not immediately take up other paid work, which results in a reduction in their overall earnings. The EWA tool encouraged women to stay at work and this had a positive impact on their overall earnings.
Worker attrition in India is a huge challenge for firms, who find it difficult and expensive to constantly recruit and train new employees. There is a tremendous amount of investment being poured into addressing the issue of increasing female labor force participation by bringing women into jobs. Still, much less thought and fewer resources are put into how to actually retain women in jobs once they are working. The EWA tool seems to have the potential to address this leaky bucket problem, increasing retention by alleviating workers’ financial strain.
Changing mindsets: a model for the future
There is a prevailing myth that access to earned wages before payday will result in workers collecting their dues and quitting their jobs. Our study shows that, in fact, the opposite might be true. Not only did the EWA intervention reduce turnover, managers and workers saw its intrinsic power – both the firm and its employees requested us not to remove the EWA-enabled tablets from the factory floor, something we had committed to doing at the end of the study. For us, this is powerful evidence that the EWA intervention delivered significant value to both the workers as well as the firm.
Having immediate and flexible access to their own salaries in times of need can have a profound impact on a worker’s sense of personal and professional wellbeing. This could pave the way for further solutions to address financial stress and insecurity among low-wage workers. It also shows that building empathy for workers – both on the factory floor and beyond the workplace – can lead to truly innovative and transformative solutions that benefit employers as much as they do employees.
Rukmini hasn’t borrowed any money since she started using the app six months ago. Another worker, Revathi, says that she used to constantly be worried about missing loan payment deadlines. This has changed since she started using the EWA tool. She says, “It used to be very stressful but now I am not worried. I am running the house comfortably. I have peace of mind.”