Semi-monthly vs Monthly wage

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My professor gave us a home-task to prove why receiving semi-monthly wage is better than receiving wage once in a month. We are supposed to find an economical explanation, he said there is even some mathematical equation. The answer that people respond to incentives and receiving wage more often induces people to work is not correct for this task. I couldn't find any other possible answer. Please help, I am absolutely confused

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Type: Question • Score: 2 • Views: 480 • Replies: 2

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@Jgz,

You can make more money on your savings.

Pay for everything by credit card.
Put first half wage straight into high interest account.
Pay credit card off at the end of the month, when other half wage is received.

Basically, you make two weeks interest on money each month, that you wouldn't be able to do if you were paid only at the end of the month.

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@Jgz,

Think in terms of liquidity. You cannot spend assets or assets in arrears. These must be turned into money on hand in order to use them. Money coming to you at the end of the month helps little to pay a demand on the 20th of the month.

The previous poster noted the difference relative to investments.

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Semi-monthly vs Monthly wage

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