An idea that appeals to employers and workers THE MONTHLY pay cycle is something more hours after loans are made available. people paying more for many goods and 1 that professionals quickly get used to. One client, a security firm, was struggling services. Research by Bristol University But for employees with low-paid, or to fill its overtime rotas. By allowing em suggests that the poverty premium in irregular, jobs it can involve real hard ployees to tap the extra cash immediately Britain averages 490 a year, of which ship. All too often, the bills arrive before after a shift through Wagestream, the around 55 reflects the use of higher-cost the wages do. company found many more overtime credit. However, this average disguises a The temptation for workers is to turn volunteers. In effect, these cash advances deep split: most families do not use to payday lenders. But the costs are high. are a way to bridge the desire of workers to expensive credit but those who do can In Britain, even after the Financial Con be paid on a weekly basis with the prefer pay 540 a year for it. duct Authority imposed a cap in 2015, the ence of employers to pay them monthly. The Joseph Rowntree Foundation annualised interest rates for such loans (TRF), a long-standing anti-poverty average 1,250%. attracted investors with a social focus. One group, backs the campaign and has in- Now there is an alternative. Wage of its backers is the Fair By Design fund, vested in the fund. Tanya Seeley of JRF stream is a British financial services inw run by Emma Steele of Ascension Ven says that tackling in-work poverty is one company which will advance part of a su tures, a venture-capital firm. The fund has of the campaign's most important aims. worker's salary in return for a flat 1.75 i 10m of assets and a ten-year investment The charity estimates that 72% of chil- ($2.30) fee. The money is then deducted horizon that, Ms Steele says, Wagestream dren who live in poverty in Britain have from the final pay packet. This has a fitted neatly into. Among the other compa one or more parents in work. That com- number of advantages for workers. They nies in the portfolio are Credit Kudos, pares with just 50% in the late 1990s. can deal with a cash shortfall while which aims to measure creditworthiness Of course, allowing workers to get a avoiding the vicious spiral of escalating in a way that is fairer to low earners, and salary advance is not a panacea. If their charges and ever-bigger debts.od We Are Digital, which gives consumers wages are not high enough to cover their To An app tells each worker how much financial training and helps the poor get living expenses, they will still struggle. they have earned so far this month, and access to the internet. But many workers can run into trouble allows them to borrow up to 40% of it. 19 Fair By Design is also the name of a when they face an unexpected bill, for The average advance is 83 and is typical campaign that aims to eradicate the "pov instance to replace a domestic appliance. ly tapped twice a month. Clients include erty premium" which results from poor Eliminating the need to depend on pric- Rentokil Initial, a pest control company, O bre ey payday lenders is an important ad- and Stonegate Pubs, which operates vance. Although the service is confined nearly 700 establishments in Britain. im ros to Britain at present, there is no reasons 9 The scheme works for Wagestream why other companies cannot offer some- because it is exposed to the credit risk of thing similar in other countries. the employer, not the workers. As well as Wagestream's example is also a useful the charge on employees, Wagestream antidote for those who are overly cynical also earns a fee from the companies2591 about either capitalism or socially con- 1612 involved. Why would employers accept scious investing. Sometimes financial this? In part, it is because they recognise innovation can tackle social problems, as workers face cashflow problems, and sm well as hopefully make a return for ethi-M they are more likely to retain their ser-ib cal investors--who are not, after all, vices if those issues can be dealt with. ins charities. Asset managers seeking at Blo But the evidence also suggests that once to do good and do well might back 152 employees work harder when they have ideas shunned by rivals obsessed with ON quicker access to their money. Wage- finding the next Facebook. S a d stream says clients that hire workers on an hourly basis find that they work 22% Economist.com/blogs/bartlebybiludo ni tesng What is the financial innovation created by Wagestream? Explain. Why is Wagestream "exposed to the credit risk of the employer, not the workers"? Explain. An idea that appeals to employers and workers THE MONTHLY pay cycle is something more hours after loans are made available. people paying more for many goods and 1 that professionals quickly get used to. One client, a security firm, was struggling services. Research by Bristol University But for employees with low-paid, or to fill its overtime rotas. By allowing em suggests that the poverty premium in irregular, jobs it can involve real hard ployees to tap the extra cash immediately Britain averages 490 a year, of which ship. All too often, the bills arrive before after a shift through Wagestream, the around 55 reflects the use of higher-cost the wages do. company found many more overtime credit. However, this average disguises a The temptation for workers is to turn volunteers. In effect, these cash advances deep split: most families do not use to payday lenders. But the costs are high. are a way to bridge the desire of workers to expensive credit but those who do can In Britain, even after the Financial Con be paid on a weekly basis with the prefer pay 540 a year for it. duct Authority imposed a cap in 2015, the ence of employers to pay them monthly. The Joseph Rowntree Foundation annualised interest rates for such loans (TRF), a long-standing anti-poverty average 1,250%. attracted investors with a social focus. One group, backs the campaign and has in- Now there is an alternative. Wage of its backers is the Fair By Design fund, vested in the fund. Tanya Seeley of JRF stream is a British financial services inw run by Emma Steele of Ascension Ven says that tackling in-work poverty is one company which will advance part of a su tures, a venture-capital firm. The fund has of the campaign's most important aims. worker's salary in return for a flat 1.75 i 10m of assets and a ten-year investment The charity estimates that 72% of chil- ($2.30) fee. The money is then deducted horizon that, Ms Steele says, Wagestream dren who live in poverty in Britain have from the final pay packet. This has a fitted neatly into. Among the other compa one or more parents in work. That com- number of advantages for workers. They nies in the portfolio are Credit Kudos, pares with just 50% in the late 1990s. can deal with a cash shortfall while which aims to measure creditworthiness Of course, allowing workers to get a avoiding the vicious spiral of escalating in a way that is fairer to low earners, and salary advance is not a panacea. If their charges and ever-bigger debts.od We Are Digital, which gives consumers wages are not high enough to cover their To An app tells each worker how much financial training and helps the poor get living expenses, they will still struggle. they have earned so far this month, and access to the internet. But many workers can run into trouble allows them to borrow up to 40% of it. 19 Fair By Design is also the name of a when they face an unexpected bill, for The average advance is 83 and is typical campaign that aims to eradicate the "pov instance to replace a domestic appliance. ly tapped twice a month. Clients include erty premium" which results from poor Eliminating the need to depend on pric- Rentokil Initial, a pest control company, O bre ey payday lenders is an important ad- and Stonegate Pubs, which operates vance. Although the service is confined nearly 700 establishments in Britain. im ros to Britain at present, there is no reasons 9 The scheme works for Wagestream why other companies cannot offer some- because it is exposed to the credit risk of thing similar in other countries. the employer, not the workers. As well as Wagestream's example is also a useful the charge on employees, Wagestream antidote for those who are overly cynical also earns a fee from the companies2591 about either capitalism or socially con- 1612 involved. Why would employers accept scious investing. Sometimes financial this? In part, it is because they recognise innovation can tackle social problems, as workers face cashflow problems, and sm well as hopefully make a return for ethi-M they are more likely to retain their ser-ib cal investors--who are not, after all, vices if those issues can be dealt with. ins charities. Asset managers seeking at Blo But the evidence also suggests that once to do good and do well might back 152 employees work harder when they have ideas shunned by rivals obsessed with ON quicker access to their money. Wage- finding the next Facebook. S a d stream says clients that hire workers on an hourly basis find that they work 22% Economist.com/blogs/bartlebybiludo ni tesng What is the financial innovation created by Wagestream? Explain. Why is Wagestream "exposed to the credit risk of the employer, not the workers"? Explain