Learning & Development

5 Economic Markers of Weakening Financial Wellness in the U.S. and How Benefits Leaders Can Help

Seventy percent of Americans report living paycheck to paycheck, per a survey conducted by OnePoll and AmeriLife. The signs can be hard to recognize; even if you don’t see it, there’s a good chance this struggle is shared by most of the employees in your workplace.

And there are growing signs throughout the economy that working families are entering an especially difficult period, making it likely this rate will rise even higher.

As financial stress heightens, the more it will begin to impact employees’ work and health. In fact, financial stress is tied to more sick days, as well as worsening productivity and performance.

As financial stress heightens, it will begin to impact employees’ work and health even more. In fact, financial stress is tied to more sick days, as well as worsening productivity and performance.

1. The Savings Rate Has Sunk Dramatically

According to the U.S. Bureau of Economic Analysis, the national rate at which households saved skyrocketed in 2021, both for the financially comfortable and for many of the financially distressed. This was due to two factors: extraordinary cash support from the government in the form of stimulus payments, increased unemployment payments, and more and pandemic restrictions’ impact on consumption—for example, fewer travel and entertainment options meant less discretionary spending.

Of course, this increased savings wasn’t enough to turn us into a nation of financially healthy households overnight. But it did provide greater financial shock absorbers.

Unfortunately, that progress was short-lived. With government support dried up, the savings rate is now lower than it’s been since the Great Recession ended in 2009. People are already feeling the effects, and this will have an increasing impact on the workforce as life’s emergencies reverse pandemic savings gains.

With this backdrop, benefits leaders should consider ways to make an impact here, from protecting families from healthcare cost surprises that deplete savings to making it easy for employees to contribute money from their paychecks to emergency savings accounts.

2. Delinquencies Are on the Rise

The delinquency rate, or the rate at which borrowers aren’t paying their debts, is a key indicator of how much financial stress families are enduring.

It’s on the rise for important categories of debts: The Board of Governors of the Federal Reserve System found credit card delinquencies held by commercial banks have been rising steadily since late 2021, and industry is warning of concerns across the board, from auto lending to personal loans.

With less savings to dip into, delinquencies will continue to be an increasing concern for many employees.

To address this, benefits leaders should point employees in the direction of alternative resources available to them, including local community and federal support such as utility and housing assistance programs.

3. Credit Card Debt Is on the Rise, Especially for Low-Income Renters

Credit card debt is another good indicator of financial stress because credit cards are often used to weather economic setbacks or, more concerningly, as a crutch to support an unsustainable mismatch between income and spending.

Per the Board of Governors of the Federal Reserve System, credit card debt has been on the rise for 2 years, especially for the most financially distressed workers. In particular, the Consumer Financial Protection Bureau says low-income renters have seen credit card debt rise much faster than inflation, starting in mid-2021.

Rising credit card debt also spells trouble for the future: The greater the balances carried, the higher the monthly portion of the paycheck that needs to go to servicing debt. This has the potential to kick off a vicious cycle of ever-increasing debt.

Employees need not only personalized, holistic support to create a workable plan to get out of debt but also lower-interest loans linked to their paycheck. These loans can be offered at lower rates given this paycheck connection. It’s critical for employers to offer access to these in an unbiased way that will get employees to the best option for them, not direct to lenders that are motivated to write more loans.

4. Evictions Are Up

Evictions in the United States were unusually low during the pandemic due to emergency measures, yet the U.S. Census Bureau Household Pulse Survey still found that 9.2 million Americans were dealing with housing insecurity in 2021—an incredible stressor that not only hurts productivity but also drives healthcare costs higher.

Since then, evictions have been on their way up, with the Eviction Lab warning of a return to high pre-pandemic levels.

Evictions speak to not just short-term, temporary financial struggles but also a longer-term period of financial instability for rising numbers of individuals and families.

In addition to the previously mentioned solutions, benefits leaders should also work with their financial benefits providers to point employees in the direction of rent assistance programs and the many other ways to put money in their pockets should they find themselves struggling to keep up with the fast approaching risk of eviction or foreclosure.

5. Mainstream Credit Is Getting Harder to Come By

Another way to understand financial stress is to look at the tightness of credit standards. One measure of credit standards is the net percentage of U.S. banks that report they are tightening their credit standards. Since 2022, this net percentage of loan officers reporting tightening credit standards has been rising in key areas like auto, credit cards, and consumer loans.

When credit standards are loose, more families can get access to credit to weather setbacks. But when credit standards tighten, there are fewer options to deal with financial setbacks—and frontline workers are especially vulnerable. The first to be rejected by mainstream lenders, these workers are stuck between a rock and a hard place, navigating choices like postponing medical care, getting evicted, or taking out dangerous payday loans with extremely high interest rates that risk trapping borrowers in a never-ending debt spiral.

To help mitigate the issue, business leaders should consider benefits such as emergency employee relief funds and paycheck-linked loans that employees can apply for in times of need. These funds can be a huge help for numerous situations and, per the findings of PwC’s 2023 Employee Financial Wellness Survey, have the added bonus of increased employee loyalty and productivity due to the decrease in financial stress.

The Bottom Line

Employee financial stress reportedly cost companies more than $40 billion in lost productivity in 2022, and this doesn’t include the much larger impact on employer healthcare costs and turnover. Now more than ever, it’s critical for employers to revisit their financial benefits to meet not just the needs of the already well off but also the needs of the historically underserved majority of Americans. And, as the above markers evolve and potentially worsen, benefits leaders should keep holistic employee financial wellness top of mind, continuing to evaluate their current programs and what benefits will make the most impact.

Tom Spann is CEO and cofounder of Brightside, an employee benefits solution, as well as creator of the financial care benefits category. Before that, he was the cofounder of Accolade, a pioneering healthcare navigation company.

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