It seems employers are being encouraged to help their young employees spend their money as fast, or even faster, than they earn it. Some employers are taking the bait. Some even think it is a benefit to make employees loans, help pay them off, or be better at payday loans than payday lenders.
The Wall Street Journal reports that employers are helping employees pay off student loans or offering lower-interest loans than employees can get from regular commercial lenders. “If we can help steer folks away from payday loans and high interest loans, it’s worth it,” said an employer who gives employees interest-free lines of credit.
A recent Barrons article, “Two New Employee Benefits Aimed at Millennials,” reports that a “serious problem for the newly graduated – or anyone living paycheck to paycheck—is cash flow.” One solution, according to the author, Theresa W. Carey, is PayActiv, an app that lets employers compete with payday lenders by giving desperate employees access to the cash they’ve earned before the paycheck comes in.
That is about as sensible as taking a shot of alcohol to temper a hangover. The pain may go away for a little while, but more alcohol will be needed to keep it at bay. And for those who can’t control their impulses, it is a formula for disaster.
The real solution to employees living paycheck to paycheck is for them to manage their spending and build their human capital so they can earn more. As Dr. Robert Walker of Mount Mercy University explains, sustainable financial planning “means balancing your needs and wants with your financial resources, all the while focusing on your long-term objectives.”
If employers are concerned about the financial wellbeing of their employees, they should help them manage their economic lives. They should not help them spend faster.
That is, in fact, the opposite of a benefit.
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