PayPal CEO shocked by financial stress in workforce
Dan Schulman, president and CEO of PayPal, admits that he willingly surveyed the financial technology company’s employees about their financial health, in part, because he thought PayPal was doing well in that arena.
Schulman said PayPal made it a policy to base wages on market rates or higher. So he thought workers would be in good shape.
The shocker? About half of PayPal’s workers said they were experiencing financial stress, he told a virtual meeting of the Detroit Economic Club on Wednesday.
Some PayPal employees were choosing between food or paying health insurance.
Some employees at the digital payments company, he said, struggled so much from paycheck to paycheck that they had to borrow between checks to cover their expenses.
Some employees couldn’t cover their bills each month, according to that 2018 survey, even though the fintech’s pay scale was based on market trends.
PayPal executives talk a lot lately about how profit and purpose are not mutually exclusive. Stakeholder capitalism, Schulman said, involves considering the needs of employees, customers, the community and regulators, as well as shareholders.
The pandemic, of course, only showed how fragile the financial picture was for millions of households across the country.
PayPal, which did its survey before the COVID-19 crisis hit, has put a focus on a key metric called “Net Disposable Income” or the money you have after paying taxes and living expenses.
While we all can adjust our expenses to try to live within our means, the reality is there is only so much you can do when it comes to many big bills, such as health care, transportation, housing and taxes.
The more money you have after expenses, the more financially secure you feel and the less likely you are to fear picking up the phone because you dread calls from debt collectors.
Schulman noted that many entry level employees, including those at the company call center, had an net disposable income in the 4% to 6% range, leaving little room for emergencies or long-term savings.
PayPal, based in San Jose, California, set a goal of 20% by year end or early next year. PayPal had expected its minimum net disposable income among hourly and entry-level workers to hit 16% early this year. Schulman said it’s around 18% now.
As part of its effort, PayPal lowered the cost of health care benefits for employees, made every employee a stockholder, raised wages and offered new financial learning and counseling programs.
“We all should know what the financial health of our workers are,” Schulman said.
It may not be enough for companies to simply pay the going rate in a given market.
“For a large portion of the population, the market isn’t working for them,” he said.
We’re living in a time when CEO pay has been skyrocketing while workers take to the streets to get a few dollars more an hour.
Many CEOs in the financial services industry did very well in 2020, especially as stock prices rallied.
PayPal awarded Schulman company shares worth $31.3 million in April after a run-up in stock price triggered a pay out of one-third of a special performance-based share package that Schulman was granted in 2018, according to a report in the Wall Street Journal.
At the same time, banks and financial service companies have been repeatedly criticized in recent years for low wage scales for tellers, workers at call centers and others.
Several studies showed shocking disparities
Due to low earnings, bank tellers and their families receive an annual average of $105 million in food stamp benefits and $250 million from Earned Income Tax Credit payments, according to a 2014 report by the University of California Berkeley Labor Center.
The median wage for a U.S. bank teller was $11.82 per hour based on 2011 data, according to that report.
A 2013 study showed pay so low that one-third of bank tellers had to rely on public assistance like food stamps and Medicaid health care coverage to make ends meet, according to the Committee for Better Banks.
Wages have been going up, given the outcry.
Bank of America said Tuesday that it is raising the minimum hourly wage it pays employees to $25 by the year 2025. In March 2020, the company raised its U.S. minimum wage to $20 per hour.
“In the last four years, Bank of America raised the minimum hourly wage to $15; in 2019 it rose to $17 and in 2020, to $20 — one year ahead of schedule,” according to the bank’s press release.
While stimulus checks from the federal government — and expanded programs like the Child Tax Credit — are helpful to many families, many employers will clearly be under more pressure to boost wages and benefits for workers, too, as the country gears up to reopen more fully.
Schulman made other interesting observations
About working remotely
He too has been working from home for months on end during the pandemic. “It’s a bit like ‘Groundhog Day’ every single day for me,” he told Steve Grigorian, president and CEO of the Detroit Economic Club, who was moderating the virtual event.
PayPal’s U.S. workforce may go back into the office around September or October, he said.
But he does not expect everyone to come back five days a week in the office. Maybe it could be something closer, Schulman said, to three days in the office and two days remotely.
“We ought to not be dogmatic in the way we come back,” he said.
PayPal expects to review how things are going every three months or so and see what revisions might need to be made.
PayPal has hired more than 5,000 workers, he said, during the pandemic who have never been to the office and never met their bosses.
‘Never Stand Still’ podcast
Schulman has a podcast called “Never Stand Still” where he chats with other leaders and executives about business, innovation and entrepreneurship. And he typically asks how others get back up and move forward.
His own advice?
Schulman practices Krav Maga, or “contact combat” in Hebrew, and says he’s learned that it’s all about controlling one’s emotions and reactions to the many situations that we cannot control.
Even though you’re exhausted, he said, it’s all about getting back up on your own. Too many times we expect others to come and help us. But that’s often not realistic.
“Once you get into the ring,” Schulman said, “no one is going to come and help you.”
Source: Detroit Free Press