Despite steady incomes, low- and moderate-wage earners often face financial setbacks due to short-term liquidity issues. Their tight budgets typically cover only essentials, leaving little room for unexpected expenses like medical emergencies or home repairs, as well as predictable but irregular costs like school fees. With minimal savings and limited access to affordable credit, these households frequently struggle to smooth their spending when faced with sudden financial shocks. They bridge these gaps by relying on costly informal loans, social networks, or liquidating assets. In more severe cases, families may cut back on essentials like food, healthcare, or utility payments to make ends meet. The stress from these financial constraints can deepen debt burdens and strain both mental and physical well-being.
Gender disparities further complicate the picture. In India, women are more likely than men to worry about routine expenses, such as their children’s school fees (Demirgüç-Kunt et al., 2022). They also face greater challenges in accessing emergency funds, often depending on unreliable family support. Savings-locked- in self-help groups or informal chit funds[1]—popular among women—are often inaccessible in times of need. Understanding the magnitude of these liquidity issues and the coping strategies used by workers is crucial. High-frequency surveys conducted at different times of the year provide valuable insights into how workers manage their finances, the seasonality in liquidity issues, and the impact of liquidity shortages on borrowing and spending.
In a recent study, we examined the impact of earned wage access for women workers in a garment factory in rural Karnataka. In the first 10 months of the project (October 2023 to July 2024), we surveyed 834 workers[2] at the end of their pay cycle. To reduce survey fatigue, we used a rotating panel design where each worker was interviewed a maximum of three times. When asked if they found it difficult to make ends meet, 22.8% of the women reported struggling, though the figure fluctuated between 16% in May 2024 and 36% in October 2023. One worker shared her experience:
“My spouse hasn’t worked for two months, and I’ve had to manage household expenses with just my salary. I cut down on vegetables and missed my regular doctor’s checkup. I even canceled plans to visit my family because I didn’t have the money.”
Another worker said, “I canceled a family trip and skipped buying new glasses. I’ve lost sleep for the past few days, worrying about money.”
Figure 1
Going by workers’ accounts, workers reduce their expenditures or defer payments to cope with liquidity shortages. On average, 27.2% of respondents reported reducing or foregoing some expenses altogether during the survey month. The average amount of foregone or reduced expenditure is INR 2,298 (median INR 1,720)[3]. More than half of these cuts were on food—for instance, workers bought smaller quantities of meat and vegetables or skipped them entirely. Other areas affected included children’s school expenses (14.6%), mobile phone recharges (15.3%), family events and travel (10.68%), loan payments (8.2%), and medical costs (7.5%).
Some workers also borrow small interest-free loans to tide over their liquidity crunch. On an average 17% of the women workers report borrowing for their usual monthly expenses or unplanned emergencies. They mostly borrow from family and friends (86%) and coworkers (9.5%) between paychecks and repay these loans once their next paycheck arrives. Around 12% of the workers had to borrow as well as reduce their expenditure to make ends meet in any given month.
In summary, it is evident from our monthly surveys on financial stress with low-income women workers that nearly one in four workers are vulnerable to short-term liquidity issues. Understanding their coping strategies and offering more accessible financial products in the formal sector could alleviate their financial stress and improve their overall financial resilience. Enhanced financial inclusion and improved financial management skills, especially for women, could ensure that fewer households are forced to choose between essential needs and unexpected financial shocks.
