The Law Students on Workers’ Rights series publishes essays from current and incoming students at some of the top law schools in the country. These essays, submitted for the Charles E. Joseph Employment Law Scholarship, address the question “What are the biggest challenges facing workers’ rights in the future?”
Why do we work? While we all hope to find meaning and satisfaction in our employment, the principal objective of employment is to “earn a living,” to earn enough to meet our basic needs and the needs of our families. All workers have a right to earn a living wage, and companies have a responsibility to compensate workers for their labor at a level that allows them to access goods and services that equate to a decent standard of living. Living wage is a complex issue, however, and many more questions than answers arise when confronting the issue. What defines a living wage? Who should be in charge of determining a living wage? Even more complex is the fact that what constitutes a reasonable standard of living may vary by state, city, and even down to the individual family unit. Regardless, it is an issue that must be addressed as housing and healthcare costs continue to soar in the United States, the federal minimum wage remains stagnant, and employees continue to be victimized by predatory business practices.
The Raise the Wage Act of 2023, introduced in Congress on July 25, 2023, would raise the federal minimum wage, in annual increments, to $17 per hour by July 2029. While the federal minimum wage in the United States is meant to be a living wage, this has not been the case in decades. The hourly rate has not kept up with the cost of living since 1970, when the minimum wage peaked at an inflation-adjusted value of $12.61 in 2023 dollars. Today, the earnings of a minimum-wage worker with a family of four fall well below the poverty line. The minimum wage in the United States is no longer a living wage due to inflation and the increased cost of living, and hourly workers have suffered more than anyone as a result.
One insidious issue affecting employees trying to make ends meet is earned wage access, or EWA, a type of financial product that allows employees to receive part of their paycheck before payday. Although the lenders call it access, it is really an advance on workers’ salaries. Companies like Walmart and Amazon offer EWA as part of their benefits at no cost to their employees. However, many companies require their employees to pay fees for the advance. The amount an employee is paid in advance, as well as any fees charged, is deducted from the employee’s next paycheck. EWAs that charge fees can become a problem for employees if left unchecked. Like traditional payday loans, EWAS can lead to a cycle of reborrowing. A worker who cannot afford an expense from this week’s pay and borrows from next week’s paycheck will have a hole, triggering another loan. Most workers who use EWAs do so nearly every pay period—12 to 120 times a year, with an average of 36 times. In Virginia, my home state, a few days into the 2023 General Assembly session, an earned wage access lobbyist persuaded two lawmakers to file legislation to “regulate” the EWA industry. In reality, what the EWA industry lobbyists were looking for was an exemption from Virginia’s Fairness in Lending Act, which was passed in 2020.
In 2020, after years of legislative efforts to foster a viable market for small loans, Virginia lawmakers passed the Fairness in Lending Act. Now, Virginians have access to several lenders offering affordable loans both online and in person. Lenders that refuse to offer affordable installment loans the payday and car title lenders have left the Commonwealth. Allowing an exemption from Virginia’s lending laws would enable new forms of payday loans and allow traditional payday lenders to claim that their loans, too, are based on earned but unpaid wages. EWA lenders are simply pursuing a legislative loophole to the Fairness in Lending Act, and legislators seeking to create better conditions for workers should be extremely wary of a product that leads to employees becoming trapped in a cycle of borrowing. What is the better alternative to earned wage access? Employers should pay a living wage and offer early pay, if at all, for free.
Earned wage access and the lack of a living wage are inextricably linked to other labor rights violations. While legislation like the Raise the Wage Act of 2023 and Virginia’s Fairness in Lending Act demonstrate an encouraging step toward more equitable standards for America’s workers, employment lawyers must continue to fight for the rights of laborers, especially when it comes to their ability to earn a living wage.
Reflections from Charles Joseph
Countless workers live paycheck to paycheck, and earned wage access appeals to these millions of workers. Yet a lack of worker protections leaves employees vulnerable to fees that put them in debt to their employer. Wage theft already costs workers an estimated $50 billion per year, leaving already stretched-thin paychecks even thinner.
In addition to legislative solutions, employment attorneys can play a part in protecting workers’ rights through education, advocacy, and legal support.