I get it—we’re all short on time, and you can’t always watch the videos and webinars you want to. But, I don’t want you to miss out on this great conversation I had with Matt Bahl (VP, Workplace Market Lead at Financial Health Network) Shelly Steward (Director, Future of Work Initiative at Aspen Institute Economic Opportunities Program), and Nneka Ukpai (Head of Financial Innovation at Better) on September 28, 2022, during our live panel: Building Sustainable Financial Futures: Closing the Access Gap for Non-Standard Workers.
Here’s a summary, in case you missed it.
What’s in a Name? Defining the Non-Standard Workforce
Before we began the discussion, I defined what we mean when we talk about the non-standard workforce. It’s a reality that this workforce is big, and growing: we're talking about a third of all Americans defined as non-standard workers. As Shelly Steward of the Aspen Institute pointed out, “Non-standard work is not one type of work or one type of job. And it includes actually an incredibly broad range of different work experiences. So it's defined against a specific model: that long-term full-time direct hire W-2 employment. And “non-standard” is a catch-all category for really everything else.”
Challenges of the Non-Standard Workforce
Steward kicked things off by naming a few of the main challenges this workforce faces, such as income instability and inability to access employer-sponsored benefits. Many public programs and private benefits are structured around “traditional,” full-time W- 2 employment, which prevents those working outside of this paradigm from accessing these key benefits - a need which is magnified by the income volatility they experience.
Matt Bahl, of the Financial Health Network, sees how these challenges are impacting employers in profound ways, as they become increasingly aware of the role of non-standard workers and evaluating their relationships with them. The pandemic and the corresponding labor crunch have accelerated the reliance on non-standard workers, Bahl said. “Having done this for 15+ years, [this] was the first time where [I’m seeing] HR executives and other corporate leaders really thinking about non-standard workers as part of the company portfolio and apparatus.”
Bahl also noted that it’s hard for non-standard workers to understand what financial health benefits they’re missing out on. It goes beyond retirement plans or health insurance, he said. “Access to things like some of the payroll-collateralized lending solutions—solutions that rely upon alternative underwriting mechanisms to provide folks with access to liquidity, and capital that can be more easily captured through employer payroll systems. And so there's a whole ecosystem that’s built up around this that really disadvantages non-standard workers and their financial lives.”
What’s Alternative Data, and How Can it be Leveraged to Provide Greater Financial Access?
Nneka Ukpai from Better joined the discussion by discussing alternative data and the pitfalls of a traditional FICO credit score when underwriting loans, asserting that traditional determinants of creditworthiness are, in part, to blame for many of the access gaps we see today.
“It’s just a fact that people do not live and work, and earn and save, in the same manner that they did in the 1950s, and the 1960s, and the 1970s, when a lot of these frameworks were created. And so in my view, looking at alternative data is critically important,” Ukpai said.
Some lenders go so far as to ask whether an applicant has been employed with the same employer for a certain amount of time, Ukpai said. “I know why they have to de-risk their lending products. But how might we look at other forms of data to supplement this [very] antiquated model for determining someone's credit worthiness? … If we look at their cash flow history and their accounts, if we see that their income has not dropped below a certain threshold for a certain amount of time, [it] doesn't really matter whether or not that income is coming from one employer versus four.” This is crucial when it comes to non-standard workers, who often work across multiple work arrangements and employers.
By aggregating alternative data, you get an opportunity for a more comprehensive view of a person and of their behavioral patterns today, Ukpai said. “We need to make a turn towards common sense underwriting; there's no shortage of data out there. Mortgage and insurance have been slow to adapt to this evolving environment. But the good news is, we're starting to see a lot more tech integrations; we're starting to see a lot more API integrations, and it's giving us a more comprehensive picture of borrowers in order to enable us to make smarter and faster, and most importantly, more equitable lending decisions.”
The Liquidity Challenge
Bahl shared that, surprisingly, there are more payday loan stores in the country than McDonald’s or Starbucks! Many people in low-paying jobs are one car repair, broken water heater, or medical emergency away from “calamity” and employers are looking for innovative ways to get their employees greater access to liquidity, so they can avoid predatory systems, Bahl explained.
“Access to liquidity has been a real focus for employers, especially coming out of the pandemic. And I think that, of course, relies upon thinking more agilely and creatively about how do you provide folks with access to non-predatory systems to provide short-term liquidity? [...] how do you get folks on a path towards those bigger term investments that require capital that underpin wealth building?”
Because of the barriers lenders face when attempting to verify 1099 workers’ income, these workers often have to rely on payday loan businesses rather than traditional bank loans, when they may in fact be credit-worthy. In fact, half of 1099 workers report being denied access to essential financial services, and 1 in 5 of those workers cite the inability to verify their current income. User-friendly, user-permissioned technology can help shift some of these dynamics and increase equity and access. Learn more about our income verification solution for non-standard workers, the Income Passport, here.
Leveling the Playing Field
With inflation at historic highs, more and more people rely on gig work to supplement their income, and we don’t see that trend reversing anytime soon. Each panelist considered what tangible things could be done to level the playing field.
“Empathy is a prerequisite for equity,” Ukpai began. She suggested government-sponsored entities (GSEs) in the mortgage industry could make strides to be more inclusive. She would like to see credit agencies tracking consistent payments as an indicator of an ability to pay back a loan. And, she would love to see diversified credit modeling. “Finally, I would love to see increased innovation and collaboration. I see it quite a bit now, with tech companies in particular, being more proactive about requesting sandboxes from regulators and sort of being able to proverbially play in the sandbox with their collaboration and also, oversight. I think that the more we can do that, the better all of this ecosystem will be,” she said.
Steward added that policy solutions must raise the floor for all types of work, and policymakers must design systems to be inclusive, especially of those most likely to be left out by historical injustices.
The Future of Non-Standard Work
At the start of the discussion, I pointed out that the non-standard workforce is growing, with predictions that 50% of all workers will earn some type of 1099 income by 2025. Ukpai, Bahl, and Steward all weighed in about the future of the non-standard workforce to close the discussion.
“I see non-standard work as the future of work, period,” Ukpai said. “Younger millennials, Gen Z, they're non-conformist. I think that the older generation is sort of in denial about the fact that people do not want to return to traditional W-2 full-time jobs. You see this [Great Resignation] happening very proudly across LinkedIn, with younger people turning intentionally, to more gig work, more freelance work, and taking control over their time and their lives.” According to Ukpai, financial institutions who embrace that, providing access earlier than other financial institutions, will engender loyalty and win the future.
“The future depends on the decisions that people make today,” Steward said. “If people in all sectors and in all roles commit to it, we can work towards a future where all jobs are good jobs that provide economic stability, that provide a chance for mobility, that provide equity, respect, and a voice.” She stressed we don’t need to label this work as “non-standard” or “other.” All ways of working should provide a decent standard of living, dignity, and pathways to a brighter future. “I don't want there to be more non-standard work, I want there to be more good work,” Steward said in closing. (We at Steady agree - we just signed on to the Good Jobs Statement).
Bahl concluded that a combination of action from policymakers and the private sector is needed for the greatest chance of successful outcomes for non-standard workers. We need to move quickly, nimbly, and agiley, he said. “That's going to require a really big cross-section of stakeholders to bring that to life.”
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For even more insights from our panelists, be sure to watch the full video by clicking the button below.
