Since this week has consisted of much of the same editing and presentation preparation as last week, I thought I would take the time here to give my thoughts on what the best pay frequency is, considering the many different benefits and drawbacks of more and less frequent pay. This is not a subject I address in too much detail in my paper as my goal is less to propose specific policy changes and more to present and analyze the vast array of research already available on the topic so that the reader may make their own conclusions given a specific set of circumstances. I would also like to note that there is not such thing as an “ideal” pay frequency. Different frequencies will work best for different industries, companies, programs, and workers. My aim here is just to suggest which frequency I believe strikes the best balance.
With all of those disclaimers out of the way, my selection would, perhaps unsurprisingly, be bi-weekly pay. Bi-weekly is the most common pay frequency among American private workers, although weekly pay is also common, particularly among lower wage workers (Burgess, 2014, para. 10). Both constitute compromises relative to the daily and monthly pay extremes. However, the reason that I believe bi-weekly pay reigns supreme, assuming we are talking about all workers and not just lower income ones, is that many of the benefits of more frequent pay, such as more smoothed personal and aggregate consumption and more motivation for workers already start to appear when switching to bi-weekly pay. The drawbacks of more frequent pay – chiefly more discretionary spending/feelings of perceived wealth and greater transaction costs for both firms and individuals – however, are not as severe as for weekly pay. Both bi-weekly and weekly pay also have the added benefit of resulting in an extra paychecks every few months, something that many workers end of using for purchases that they otherwise would have put off. Bi-weekly pay also helps to encourage good savings practices to a greater extent than weekly pay without forcing present and perceptually biased employees from engaging in too much long-term planning.
Burgess, M. (2014). How Frequently Do Private Businesses Pay Workers? https://www.bls.gov/opub/btn/volume-3/how-frequently-do-private-businesses-pay workers.htm#:~: text=Results,pay%20frequencies%20are% 20 less %20common.