Benefits and Compensation

Working Parents Face Increased Financial Stress and Inadequate Benefits

The much-discussed Great Resignation has forced a refocusing in the conversation surrounding the needs of hourly workers. Faced with labor shortages, many employers are reassessing how their workers are treated, from hourly wage increases to financial incentives like signing bonuses, down to the benefits offered to hourly employees.

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For the most financially precarious, however, the Great Resignation isn’t within the realm of possibility. Of the more than 73 million hourly workers in the US, 28% are parents. The financial implications of leaving a job while providing for a family can keep essential workers trapped in less-than-ideal employment circumstances in order to keep food on the table.

A recent survey of 1,000 hourly workers conducted by Wakefield Research in collaboration with Even has uncovered some unsettling truths about the conditions facing hourly workers: financial stress, disconnects between worker needs and the benefits they’re offered, disparities in the benefits offered to different classes of workers, and more. The ramifications of these findings could be dire for employers looking to navigate the present labor shortage if they don’t act quickly; and that’s to say nothing of the worsening financial circumstances of essential workers—and specifically working parents—if urgent action isn’t taken.

How the Current Employment Landscape is Failing Essential Workers

The Covid-19 pandemic laid bare many of the longstanding issues facing hourly employment in the US. Many workers are caught in inflexible schedules for minimum wage pay and threadbare benefits; and when the pandemic hit, risk of exposure or simply a desire to shift career paths caused workers to walk out in droves.

Working mothers—both salaried and hourly—faced increased challenges during the pandemic. Closure of childcare facilities put added stress on mothers, 1.6 million of whom left the workforce, according to the Department of Labor. What’s more, 58% of working mothers felt that their mental health suffered as a result of the pandemic.

These starling labor statistics fail to grapple with how truly financially stressed essential workers are, and how current benefits packages fail to address those stresses.

According to the Wakefield survey, a startling 87% of respondents noted that they felt some level of financial stress, with one in five expressing that their stress level was significant. What’s more, 63% of workers are at least somewhat concerned about getting into or out of a debt cycle. Due to this financial stress, essential workers have taken to making inadvisable financial decisions just to make ends meet. Some of these decisions include overdrafting their accounts (31%) and borrowing money from friends and family to pay bills (36%). About one in five have taken extreme measures like maxing out their credit cards (23%), turning to a food bank for groceries (22%), or taking a payday loan (21%).

The survey also revealed a striking disparity in the benefits offered to ensure financial stability for hourly workers. For an hourly employee living paycheck to paycheck, the prospect of a 401k—traditionally thought of as the baseline benefit for salaried employees—seems remote at best. When a working mother is concerned about having immediate liquidity to put food on the table for her children, or gas in her car, or affording the growing cost of childcare—a figure that now averages $1,300 per month per child—the concept of savings seems unattainable. As a result, more than a quarter of hourly employees (26%) feel their offered benefits are better suited for salaried employees, and 50% of those with benefits at large U.S. companies say their current package doesn’t fit their financial needs.

This disconnect between worker needs and the benefits offered results in many benefits going unclaimed. Nearly two-thirds (65%) of hourly workers don’t take advantage of the financial benefits offered to them. What’s more, about one in four hourly workers with benefits packages say they don’t use all their benefits because they need to keep as much money in their paycheck as possible (25%) or their financial situation limits them from using their benefits (23%).

These numbers are even more severe for working parents. According to the survey, while 60% of non-parents don’t use all of their financial benefits, more than 70% of parents leave benefits unclaimed.

Adapting Benefits to the Needs of Hourly Workers

The truth is, hourly workers demand more from employers. The rise in gig economy jobs has transformed how essential workers see employment; work is now seen as something flexible and transparent. The latency associated with two-week pay periods and the rigid scheduling structure of many hourly jobs is unappealing to the current labor force.

For many hourly workers, and particularly for working parents, a lack of transparency, access, and consistency in wages makes financial freedom all but impossible. When one paycheck is $500 and the next is $900, it’s difficult to budget, especially when bills come in irregular cycles that may not align with pay periods. And that’s to say nothing of unexpected expenses. A medical emergency is disastrous for an hourly worker living paycheck to paycheck without a rainy-day fund set aside.

One key benefit employers can offer to help address workers’ immediate needs is earned wage access. By removing the barriers that keep employees from their wages, it affords workers a clearer picture of their financial outlook to budget and save. What’s more, this benefit should be covered by the employer at no cost to the employee. And workers agree: nearly three in four (73%) hourly employees say their company should offer and pay for benefits that allow them to access their paycheck early.

Schedule flexibility is also a key benefit employers can offer workers that would make a huge difference; especially for working parents. With many hourly employees struggling to find childcare or adequate transportation to and from their job, rigidity in scheduling can equate to lost hours of work, necessary income, and could even put their job in jeopardy.

By approaching the benefits offered to hourly employees with empathy and transparency, employers can make a real difference in the lives of their workers. Meeting employees where they are and removing the barriers that keep them from their earned wages can be a critical first step towards financial freedom and enable better savings habits that can have critical, long-term impact.

David Baga is the CEO of Even, a financial benefits platform.