Saturday Night’s All Right: The invention of payday
laphamsquarterly.org
laphamsquarterly.org
If they pay their workers every two weeks, then they've got a massive pile of cash sitting there waiting (on average) a week before being paid out. Now, a week's worth of interest isn't much to you or me, maybe, but multiplied by the number of workers they are paying it suddenly becomes quite a bit.
Why is it that if I work on a Monday, but you don't pay me until two weeks later, why do you get to hold the interest?
If you assume that your employer is holding 1 week of salary on average, then they’re holding $4,600 for your money at any given time.
Let’s assume an annual interest rate of 3%, which aligns with the IRS rate on overpayments.
So your employer gives you an additional $138 per year because of your money that they’re holding in escrow.
But actually it would be less: they would only need to pay you interest on the amount of your cheque that hits your bank account. The IRS isn’t asking for interest on the amount they withhold for tax.
Why not just ask for a $300/year raise instead? You’ll get more money in the end.
And if we're talking what we can do to best increase the wages paid to workers, it seems to me that we should first and foremost look at wage theft (wages owed to the employee but not paid), which I have heard is more than all other forms of theft, combined.
In fact IIRC this was the big worry during the 2008 crash, if the banks were worried companies would grind to a halt and not pay their suppliers, why should the bank give out loans to said suppliers...
Because you signed the contract accepting that.
Because it’s your employers money first.
The previous commenter raised a valid point: Most paycheck earners lack negotiating leverage, and employers exploit information asymmetry to extract as much value from workers as they can.
Your reply seems unnecessarily dismissive and argumentative. If you disagree, you should try to address their comment more specifically.
In the United States, employers generally issue paychecks for work performed in the preceding period of 1-2 weeks. So most employees are advancing their labor to their employers, on the promise that they will be eventually paid for that work, at the end of that pay period.
The conceptual alternative has nothing to do with annual salary... It would look more like employers issuing daily paychecks, at the end of each workday. Or, employers would keep the pay period system, but pay employees an additional amount to compensate for the loan of their daily labor for the time until the next payday.
Do you get it, now?
And certainly cash workers, aka day laborers, demand to be paid daily.
Looks like some other folks have already poked holes in that, anyway... I was honestly concerned that you were just ignorant, based on your original comment.
(You did explain why the notion of getting a year’s worth of interest was based on faulty assumptions, which is why I abandoned it. But that was never my main point.)
That said, it would be unusual to apply that to wages. And many debts have grade periods during which interest is waived.
I see what you mean, but do they really? If I leave work one day (say, in the middle of the week) and don’t come back, does my employer owe me pay until the day I left? Some people have that situation, but for most people, the situation is more complicated; they can’t just leave without giving advance notice, etc. Included in this complexity is the fact that the employer does not owe the employee anything until the pay is actually due, as specified in the contract.
Yes, they really do. E.g. if the company was dissolving went into bankruptcy proceedings the employees would have a claim.
> If I leave work one day (say, in the middle of the week) and don’t come back, does my employer owe me pay until the day I left?
In my jurisdiction we have at-will employment and it works both ways - either party can terminate the arrangement at any time. In practice, employees usually give notice so as not to poison relationships.
On what basis would an employer not owe an employee for work performed?
> the employer does not owe the employee anything until the pay is actually due, as specified in the contract.
You have confused owing a debt and a payment schedule for the debt. When you take a mortgage on a house you owe the bank money (probably a lot of money). The fact that a payment schedule exists doesn't change the the status of the status of the debt nor does it prevent the bank from paying interest.
Second, you are assuming there is contract - in my experience most workers are not operating under a contract.
Of course, I'm speaking for my jurisdiction (in the US).
Because that is the agreement you entered into when it accepted employment.
That actually sounds like a really good idea. I'm glad that American workers' awareness of how little negotiating power they have is rising.
Biweekly payments seem like a reasonable compromise to me given the logistics of payroll, and more frequent payments would seem like a poor use of negotiating power and time.