This week, Need to Know travels to rural Vermont, where local businesses had a common problem: many of their lower-wage workers were consistently late or absent. Most of these workers were being derailed by small financial crises: a broken-down car, medical bills, parenting demands. In response, dozens of employers, along with a branch of the local United Way, formed “Working Bridges” — a program that gives worker an immediate short-term loan — an “income advance” – no questions asked. The loans are then paid off through small paycheck deductions.
In this program, we visit employers implementing the program, who agree it has dramatically reduced employee turnover and increased productivity. It has also brought many workers financial stability for the first time; once loans are paid off, their payroll deductions are automatically diverted into savings accounts unless the employee chooses to end them — which most do not. Making saving the default option is a classic example of behavioral economics at work.