By Kathryn Mayer
Research conducted over the past several months found that although inflation has recently abated, employees’ financial wellness is still suffering. Now, new research goes even further with its main finding: Financial wellness is at an all-time low.
That’s according to Bank of America’s (BoA’s) annual Workplace Benefits Report, which surveyed more than 1,300 employees and nearly 800 employers during the first half of this year. Over the first six months of 2023, the impact of inflation and economic uncertainty contributed to increased financial stress, resulting in financial wellness among employees dropping to 42 percent—the lowest rate since BoA research began in 2010. It’s even lower for women: Just 38 percent of female employees reported feeling financially well, compared with 55 percent last year.
Two-thirds (67 percent) of employees said they believe the cost of living is outpacing growth in their salary or wages, compared with 58 percent in February 2022. “American workers continue to feel stressed about their finances and are concerned about keeping up with the cost of living,” said Lorna Sabbia, head of retirement and personal wealth solutions at BoA. Charles Lattimer, chief innovation and growth officer at FinFit, a Virginia Beach, Va.-based financial wellness firm, said he’s not surprised that “employee morale regarding their finances is currently at an unprecedented low.
“As we emerged from the pandemic, Americans amassed record levels of personal savings. However, these reserves have now nearly depleted,” he said. “The erosion of this financial safety net, coupled with other market pressures, is amplifying financial stress.” However, the swift decline, he said, is undoubtedly alarming. “Financial stress not only hampers employee focus and efficiency, leading to increased absenteeism and accidents at work, but also exacerbates health concerns like mental disorders, diabetes and addictive behaviors,” Lattimer said.
BoA’s findings are no outlier, either: MetLife earlier this year showed a significant decline in overall employee holistic health in the past year—now hovering around 40 percent of employees who report feeling holistically healthy, with mental health and financial health on a decline over the past several years. Nearly half (48 percent) of the employees surveyed by MetLife cited financial concerns—up from 31 percent in 2022—as the cause of their poorer mental health.
And scores of recent reports have found that high costs of living are having a significant impact on employees’ financial well-being, with data finding that inflation is having a bigger impact this year than last, even though the BLS Consumer Price Index shows inflation has significantly slowed in the past year.
Financial services firm Voya, for instance, recently found that a majority (79 percent) of working Americans strongly or somewhat agree that they are worried their workplace benefits will cost them more this open enrollment season because of inflation. That’s an increase from 66 percent in June 2022, when inflation was at its peak. And Charles Schwab in August found that 62 percent of workers see inflation as an obstacle to saving for a comfortable retirement, a big jump from 45 percent last year.
Even though headline inflation has dropped from its red-hot pace, insiders said it doesn’t feel that way for most employees, with the compounding impacts of rising costs over time and still-high prices for many products having caught up to workers in a big way. “While inflation has moderated, many individuals are still experiencing strain from elevated prices,” Nate Black, vice president of health solutions product development at Voya, told SHRM Online last month.
Employees are not only feeling financially unwell, they’re also acting on those feelings. The BoA report found that fewer employees are prioritizing long-term retirement savings (31 percent—down from 45 percent in 2022) as a growing number are focusing on short-term financial needs, including paying off credit card debt (16 percent, compared with 11 percent in 2022) and saving for the unexpected (13 percent, compared with 8 percent in 2022). Nearly half of employees (45 percent) said they are not saving specifically for health care, while confidence in managing health care costs has decreased (16 percent, compared with 27 percent in 2022).
What About Employer Support?
With financial well-being hitting a new low, employees are looking for help from their employer. BoA research found that employees continue to look for support from their employers, with most employees (76 percent) and employers (96 percent) agreeing that employers are responsible for employee financial wellness. However, only 2 in 5 employers currently offer financial wellness programs, the report found.
Principal Financial Group, in its newly released 2023 Global Financial Inclusion Index, found that employer support of employees’ financial issues has dipped year-over-year.
That may be because employers are concerned about their own economic situations, including fears of a recession occurring as early as later this year, and are wary of investing more dollars into benefits programs and higher salaries. Despite the news on employee financial wellness, there is a glimmer of good news from the report: More than half (56 percent) of employees said they remain cautiously optimistic about their financial well-being over the next two to three years. And the finding that employees are keen to get some help from their employers creates an opportunity for employers looking to attract and retain talent in a tight labor market.
“Companies that show a sense of urgency for their workforce by offering financial wellness programs and resources that support employees’ immediate needs and overall well-being will continue to stand out as employers of choice,” Sabbia said.