U.S. workers hit hard by expenses during COVID-19

About half of U.S. workers received an unexpected financial expense each month for 12 months overlapping most of the COVID-19 pandemic, with many resorting to bouncing checks or payday loans to cover the costs.

Almost three-quarters (73.8%) reported that their largest unexpected bill during that period was $400 or more, and 19% stated that it was $800 or more, based on data from the earned wage access provider Immediate.

“Probably what was even more surprising was how some people paid off that unplanned bill," said Matt Pierce, founder and CEO of Immediate. "Twenty percent of people intentionally wrote a bad check [overdrafted] because they didn’t have the money and another 25% took out a payday loan. This shows that American workers, who were already struggling before the crisis, got hit pretty hard financially by the pandemic.”

The study included two surveys, both conducted in November, to understand the financial situation of U.S. workers and how employers are responding to their financial health needs. The consumer survey was conducted among 1,250 U.S. employees and the employer survey was fielded among 200 businesses.

Pierce noted that as a measure of how desperate workers are to get money to help ease their cash flow woes has been the adoption of Visa Direct, a near-instant way of moving money, among Immediate’s user base. Immediate added Visa Direct as a faster payment option to its ACH transfer service last August. By early October user adoption had grown to roughly half of Immediate’s volume. By the end of January of this year, Pierce noted that 72% of its earned wage access requests went through Visa Direct.

“Legally we need to say we move money in minutes with Visa Direct, but in reality we see the money move in about 12 seconds,” added Pierce. “When people see that speed of money movement, it helps them move on in their lives.”

A Federal Reserve report released in May showed that before the pandemic, about two in five (37%) of households would have difficulty in paying off an unexpected expense of $400. Among those who could not pay the expense using cash reported to the Fed that 15% would use a credit card, 10% would borrow from a friend or family member and that 2% would defer the payment until they had funds.

In contrast, Immediate’s study found that 42% would use a credit card, 38% would borrow from a friend or family member and that 20% would defer the payment until they had funds (the question allowed a respondent to choose multiple sources). The rise in borrowing and deferments can be interpreted as an increase in financial difficulty being experienced during the COVID-19 crisis, which has fueled rising unemployment, children having to attend school remotely and increases in health care costs.

The study also found that more than one-quarter (26%) of workers would delay or put off medical treatment if they faced an unexpected cost for health care, even if it increased the chances of having a higher-cost procedure in the future.

The study also found that there is a disconnect between how employers view the financial welfare of their employees and the reality of daily life.

“We found that 94% of hospitality employers rated their employees’ financial wellness as good or excellent. I don’t understand how they can say that when COVID shut down over 100,000 restaurants and laid off all those workers," Pierce said.