In 2018 a thinktank called the Resolution Foundation published a fascinating report on pay volatility in the UK. Their findings remain relevant today, may be even more so given the economic fallout from COVID-19.
The research was based on anonymised month-to-month data from seven million Lloyds Banking Group bank accounts. It found that while some volatility in pay can be positive for workers, they also arise from unwanted changes in hours and shift patterns.
Around two in five workers (40%) experience ‘persistent volatility’, with significant changes in monthly pay at least six times a year. The average monthly decrease was -20%, more than a typical monthly grocery bill of £250.
The report also found that almost 80% of low-paid workers (earning around £10,000) experienced pay volatility; for higher-paid workers (earning around £35,000) this figure was 66%.
Pay volatility can put pressure on the household’s ability to pay regular bills or build up their savings. It noted that 40% of low-to-middle income families find it difficult to save more than £10 a month.
The report’s lead analyst concluded: “Much of Britain – from our bills to our welfare state – is built around a steady monthly pay cheque. But our research shows this is not the reality of working life for many of us. This volatility is a particular challenge for low-paid workers; who are less likely to have savings to fall back on when their pay packets shrink and yet are more likely to have big falls in monthly pay.”
This is the problem we at SteadyPay are helping to solve. Our credit service is designed to protect workers from the downside of pay volatility. By topping up pay when it falls below the worker’s average pay, we smooth out income. This provides the regularity and predictability of pay that is needed to manage everyday expenses with confidence.