A Periodic Busboy Offers Tips for Helping Workers Save
Whenever I’m in my hometown of Akron, Ohio, I really enjoy busing tables on Sundays at the restaurant that’s been in my family for over 70 years. My brother, David, who now owns it, never lets me do anything beyond busing tables; I was so inept in the restaurant business that, when I was 14, my dad asked for my resignation, forced me to find other work (the slower-paced work of pumping gas, it turned out) and urged me to consider going to college instead. So off to Ohio State I eventually went.
Busing tables is such a welcome break from the desk work that I do for a living. Among the many pleasures has been getting to know the 25 or so hardworking servers, dishwashers and cooks over the many years, who, among other things, have shared with me their financial aspirations, struggles and strategies for getting through the week. My main takeaways for these workers? Beyond higher wages, cash management is key, and more savings would really help.
Cash Is Still King, but Wages Aren’t Enough
“Cash Remains King (PDF),” by Kathryn Anne Edwards and Bradley Hardy, is the title of one of the essays in a book I co-edited with Ida Rademacher of the Aspen Institute, “The Future of Building Wealth: Brief Essays on the Best Ideas to Build Wealth—for Everyone,” published last September. As the authors observe in their essay, “Cash is essential to economic security—it is a bedrock of savings and is essential to building wealth.”
The authors further point out that wages, which have not kept pace with inflation for the last four decades, are not enough—even, I would add, as David pays, by far, the highest wages he’s ever paid. How else, he’s resigned to ask, can he compete with the good pay, day-one benefits and signing bonus offered by the brand-new Amazon warehouse one mile up the road?
To fill the gap between what they earn and what they need to survive—especially as inflation makes that harder, in particular, among these working-class Americans—I’ve learned that David’s employees breed dogs, sell skin care products online, work as substitute teachers and sometimes tap into public safety nets. One employee, a mother, works fewer hours than she’d like so she can remain eligible for Medicaid. Recently my brother loaned a waitress $200 to rent a U-Haul; he says he advances his employees money periodically, presumably sparing them the high interest rates at the payday lender nearby.
And whatever extra savings they may have accumulated during the pandemic appear to be declining—a trend affirmed by data from the JPMorgan Chase Institute. In fact, the most recent Survey of Household Economics and Decisionmaking, or SHED, report from the Federal Reserve found that about a third of adults would not be able to cover a $400 unanticipated expense without borrowing or selling something.
Timing and Amounts of Cash Inflows Matter
While nearly all live paycheck to paycheck, a few of the employees have shared with me what they’d love to save for: to reduce a granddaughter’s reliance on student loans; to open a head shop; to buy a home after renting their entire lives; to cover health expenses; and to not have to borrow money from my brother. That is, like most Americans, they want financial stability and upward mobility—exactly what more savings can achieve.
As savings experts Deborah Winshel and Timothy Flacke remark in their “The Future of Building Wealth” essay (PDF): “For millions of families focused on making ends meet each week, the possibility of wealth feels not just beyond reach but also utterly disconnected from the reality of their financial lives. To make wealth possible for everyone, we must begin by addressing their most pressing, persistent financial need today—managing volatility—with the most versatile, effective, efficient and dignified tool possible: emergency savings.”
Two other savings experts and “The Future of Building Wealth” contributors, Jonathan Morduch and Rachel Schneider, argue that both the amount and timing of cash inflows (PDF) matter.
“Receiving $100 for 50 weeks is not the same as receiving $5,000 at once,” they wrote in their essay, adding later, “The right amount of money at the right time can make a big difference for people, especially for working families without much financial slack.”
Ideas for Emergency Savings
There’s no shortage of ideas for building savings and wealth, as the Aspen Institute reports and my colleague Ana Hernández Kent and I recently discussed. Specific, evidence-based ideas on how and when to accumulate emergency savings abound, too. Ideas where policymakers could play a role might include adding modest tax incentives for emergency savings, as Winshel and Flacke mention in their essay, as well as strengthening the safety net (PDF) that would make emergency savings less necessary.
As I think about the workers I’ve come to know at my family’s restaurant, I have formed a few ideas that, along with higher compensation, hold potential for generating liquid or emergency savings:
- Integrating an automatic payroll set-aside into employee savings accounts (PDF)
- Making it easier for employees to save some of their federal and state tax refunds (PDF), as Stephen Roll and Michal Grinstein-Weiss demonstrate in their “The Future of Building Wealth” essay
- Integrating tech platforms into employees’ lives to support their financial stability: A number of platforms exist for this purpose, including Canary, which uses an employee relief fund called Grant Circle to deliver cash when and how needed, and Even, which automatically saves a portion of paychecks when they are higher so that savings are available when paychecks are lower
I don’t have much credibility with David on how to run his business, but maybe—with his workers on my side—he will integrate that automatic savings component into his payroll system? Or perhaps he’ll find a nonprofit tax adviser who could help his employees save a little at tax time? Indeed, if I can help his employees become more financially secure and productive, I might even get promoted beyond busboy.
This blog explains everyday economics, explores consumer topics and answers Fed FAQs. It also spotlights the people and programs that make the St. Louis Fed central to America’s economy. Views expressed are not necessarily those of the St. Louis Fed or Federal Reserve System.