Anyone who’s ever lived paycheck to paycheck knows the effect that chronic financial stress can have on your life: increased anxiety, loss of focus, inability to sleep, and even physical pain.
But the symptoms of financial stress also have a very measurable effect on employee productivity in the workplace, making it harder for employees to be their best selves. These effects have been studied and surveyed closely by many interested organizations, and the data shows a dramatic correlation.
According to a recent poll, roughly half of all Americans are worried about money, leading to an estimated $500 billion loss in American business revenue per year. This equates to roughly 2.5% of the U.S. GDP, a staggering amount of financial loss. This survey based on the responses of roughly 10,000 Americans demonstrates the real-life toll that financial stress has on employees throughout the country.
While the bulk of financially stressed employees make under $100,000 per year, there are actually many employees making far more than this who still constantly operate in a state of financial worry. According to the survey, 34% of Americans live paycheck to paycheck, and around a quarter of this percentage actually make more than $160,000 per year.
This poses an essential question: how closely are total wages and financial stress coordinated?
Wages and Financial Stress
While it’s true that most of the Americans who are significantly affected by financial stress don’t make six figures, plenty of wealthy Americans are affected as well. Close to 40% of Americans who make $100,000 or more a year have only around 3 months worth of savings. This points to a parallel crisis taking hold across the nation: an epidemic of economic illiteracy.
Julie Stich, International Foundation of Employee Benefit Plans (IFEBP)’s director of research stated that “nearly half of organizations rate their workforce as only a little bit or not at all financially savvy.” Many employees, even those who make a large amount of money don’t have the tools and knowledge to handle it correctly and become financially stable year over year. Chronic debt, poor management strategies, lack of investment savvy, and many other factors play into this problem, but it’s hard to say what employers can do to help fix it.
Even pre-pandemic, employees struggled to keep their finances in the black. 66% of repondants to a 2016 study done by the IFEBP said that they worried about debt, 60% stated that they were stressed about retirement, and 36% claimed that they struggled with paying for medical expenses. Things have only gotten worse since COVID-19 swept across the world, further stressing employees’ wallets and medical budgets.
The Impact of Financial Stress on Employers
Plenty of employers are aware of these situations but either don’t know how to help or don’t view it as part of their responsibility. Four out of five employers said that their employees’ financial stress was affecting their job performance either somewhat, very much or to an extreme degree. Employers also reported seeing an uptick in financial stress among what is known as “sandwich generations,” or middle aged adults with both young children and elderly parents whom they financially care for.
This stress manifests in different ways around the workplace: 76% of employers reported noticing an increased level of stress in their employees, 60% claimed that their employees had a harder time focusing and paying attention, and 34% experienced regular tardiness or absenteeism in their employees.
So what can employers do to help?
Some employers are already finding ways to help their employees become more financially secure, regardless of how much they might be paying them.
Roughly 49% of employers say that they offer some form of financial literacy education, ranging from investment and savings advice, to retirement planning education. However, most of these benefits come in a voluntary form, making it difficult to know how employees are taking advantage of these resources.
Some of these tools are as simple as free debt or investment projection calculators, but other offerings take valuable employee time and attention, such as voluntary classes. These tools aren’t all that useful to employers if they can’t get their workers to use them.
Experts claim that these efforts are most effective when employers take a tailored approach to develop programs that they think will fit well with their unique business. Some employers have begun to offer targeted courses to employees based on age and income, instead of simply offering a bland array of financial education classes.
Reducing Financial Stress by Providing Better Healthcare
Financial stress and healthcare stress often go hand-in-hand. As medical costs continue to rise across the U.S., more and more employees are stressed out about current and future medical expenses.
While it’s expensive to provide great healthcare to your employees, there’s a clear link between strong employee sponsored healthcare plans and lower levels of employee financial stress. After all, medical bills make up a large portion of household expenses, with the average American paying $12,500 each year.
Providing employees with a low stress way to pay for their outstanding medical expenses may help as well. Medical costs and high rates of debt are also linked, with over 23 million Americans currently residing in a state of medical debt. One solution is to offer your employees a way to pay for their medical costs interest-free.
medZero offers a novel solution that allows employees to pay out of pocket without racking up tens of thousands of dollars in interest. By helping your employees pay for their medical bills in a financially responsible way, employers can do the right thing, and regain some of the lost productivity that so many business owners have to face.
medZERO is unlocking a smarter way for employees to pay for care. Find out how.