Hourly Employees Need Reliable Schedules: Can Behavioral Science Help Companies Deliver?

We talk a lot about how Americans don’t have enough savings. Bankrate reports that over 60 percent of the populace could not come up with $1,000. And the Federal Reserve estimates that more than 40 percent wouldn’t be able to cover an unexpected $400 expense. Despite the varying numbers, the message is clear: Americans need more money.

More money would definitely help, given the number of working Americans with low or middle income. But financial health is more than just the absolute paycheck amount. A quick look into the lives of hourly workers (almost 60 percent of the workforce) reveals that there is also a lot of financial unhappiness buried in another place: people’s work schedule.

According to a brief from the Aspen Institute’s Expanding Prosperity Impact Collaborative (EPIC), 32 percent of low- or middle-income households experienced income volatility over the previous six months. The most commonly cited reason was an irregular work schedule. An irregular work schedule can be broken down into two components: variability and notice. In our online survey of 560 hourly workers on Amazon’s Mechanical Turk (MTurk; respondents were Americans, working at least part time, ages 18-73, 48 percent male), 44 percent reported that their schedule varied week to week. In addition to the variability, employees received little notice about schedule changes. Nationally, 40 percent of employees, and 47 percent of part time hourly workers, learn when they will be working less than one week in advance.

A quick look into the lives of hourly workers—almost 60 percent of the workforce—reveals that there is also a lot of financial unhappiness buried in people’s work schedule.

To figure out how much this really matters to workers, we quantified in dollars the tradeoff between mobility and stability. Would people take a pay cut (lower economic mobility) in exchange for a consistent schedule with a dependable paycheck (higher stability)? We ran another study and asked 500 MTurk participants (non-retired Americans, ages 18-75, 51 percent male, 47 percent hourly workers) to imagine that they had a job with a highly variable schedule—60 hours of work some weeks and no work others, with little notice—but that they could take a pay cut to switch to a consistent job. In the hypothetical scenario, participants said they were willing to give up an average of $9,900 (23 percent of their yearly income) to switch to a consistent job, holding total work hours constant.

We then narrowed the sample and asked just the the hourly workers who currently have a job with a variable schedule if they would take a pay cut to even out their income. The results were still substantial: On average, they were willing to give up $4,680, or 12 percent of average yearly income. Although we were not surprised that people prefer consistent work schedules, we were surprised at the magnitude of the preference.

Why are people so averse to fluctuating work schedules?

Lumpy cashflow: Variable schedules cause income to fluctuate, which can make it difficult for people to pay for all of their expenses. The JPMorgan Chase Institute analyzed millions of transactions and found that income and consumption do not move in tandem. When hours go down it’s quite possible expenses will rocket up. In a follow-up MTurk study of 1,300 participants (non-retired Americans, ages 18-73, 48 percent male, 41 percent hourly workers), 74 percent reported that it’s much more frustrating to be assigned fewer hours than the minimum they requested versus more hours than their maximum. This is in part because when workers are underscheduled, they worry about not earning enough money to pay their bills.

Psychological aversion to uncertainty: Behavioral research shows that we tend to avoid uncertain events in favor of less optimal but guaranteed outcomes. In multiple experiments, Pfeffer and Hardisty found that participants tended to choose a guaranteed future gain or loss rather than an uncertain immediate gain or loss of the same expected value. This finding was reversible. People chose guaranteed immediate gains and losses over uncertain future gains and losses. Humans don’t like uncertainty, regardless of time scale. Similarly, people are averse to working a job with an uncertain paycheck, even if it offers more income over the course of a year.

Why do employers give these highly variable, low-notice schedules?

Do employers not care about their employees? Are they prioritizing business results over employee needs? At Common Cents we’re investigating another option: Scheduling optimally takes time and effort, especially for small businesses. There is friction in collecting your employees’ preferences, modifying the schedule, and then notifying employees two weeks in advance. It’s possible that small business owners are a lot like the rest of us—they procrastinate until last minute, take the path of least resistance, and are influenced by the software and systems that facilitate decision making. If this is the case, the spotlight needs to be directed at more than just the employer—we need to intervene within the small business scheduling software.

It’s possible that small business owners are a lot like the rest of us—they procrastinate until last minute, take the path of least resistance, and are influenced by the software and systems that facilitate decision making.

PCmag and Business.com, popular software review sites, list features by which employers can compare scheduling software. Noticeably missing are features that would promote schedule consistency and longer notice times. While most scheduling software collects time-off preferences, they don’t go far enough to help employers easily publish optimal, consistent schedules in advance.

Good news—innovation is possible. After backlash in 2013 for poor scheduling practices, Walmart has blazed a new path with features such as “fixed schedules,” which allow workers to have the same shifts for up to 6 months. Lyft has started providing hourly and weekly earnings guarantees to help with income predictability, given certain requirements are met.

However, the top 25 employers in the United States employ less than 10 percent of the 80 million hourly workers. And while some states and cities, like New York and Seattle, are advancing policies that support predictive scheduling, national policies for worker rights lag behind. This means most employees rely on off-the-shelf scheduling software to determine their work-life balance (or lack thereof).

We’re hoping to help solve this problem. Common Cents Lab is partnering with Homebase, a company that creates employee scheduling software for businesses. We plan to test the impact of collecting more employee preferences, feeding employee preferences back to the employer at the right time, and nudging employers to give employees more notice. These features are in design mode, with results expected in late 2018. Together, we hope that with a more consistent number of hours and increased notice time, we can reduce employee uncertainty while increasing job satisfaction and happiness.