Title

Payday

Document Type

Working Paper

Publication Date

3-27-2020

SSRN Discipline

Economics Research Network; Legal Scholarship Network; Banking & Financial Institutions eJournals; Microeconomic Theory eJournals; Law School Research Papers - Legal Studies; FEN Subject Matter eJournals; Law & Society eJournals; Law & Society: Private Law eJournals; LSN Subject Matter eJournals; ERN Subject Matter eJournals; Financial Economics Network; Employment, Labor, Compensation & Pension Law eJournals

Abstract

Legislation lags behind technology all too often While trillions of dollars are exchanged in online transactions"”safely cheaply and instantaneously"”workers still must wait two weeks to a month to receive payments from their employers In the modern economy workers are effectively lending money to their employers as they wait for earned wages to be paidbrbrThe same worker who taps a credit card to pay for groceries in semiautomated checkout lines depends on dated payroll systems that only transfer payments on a "payday" Workers especially those living paychecktopaycheck are hardpressed to meet their daily needs and turn to expensive shortterm credit products"”notably payday lenders While the need for credit is a real one credit providers charge a steep price often culminating in endless debt spirals So why does the payday still existbrbrThis Article studies various explanations"”economic historical behavioral and legal A primary conclusion is that the payday owes its existence to legacy legal architecture That is payday is a software problem not a hardware problem The hardware"”ie money and payroll technology"”is here We can pay workers daily in fact gig economy workers in developing countries will often be paid more quickly than an American employee for the same work What holds us back is our legal software Dated Eisenhowerera legislation that failed to anticipate technological change Surprisingly even proworker legislation such as minimum wage laws inadvertently encourage the practicebrbrBy revealing the overlooked and dated legal infrastructure that sustains the payday the Article suggests a path for legal reform Daily streams of payment to workers are feasible practical and far more efficient than most people realize A focused reform could effectively bring an end to the puzzling and pernicious practice of having workers lend money to their employers while they wait for their payday

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