Wage Funding Survey Reveals Inflation, Student Loans, Tight Housing Market and Elimination of Child Tax Credit Leading to Increased Financial Stress Among American Workers
BOSTON–(BUSINESS WIRE)–As the country swings from one crisis to another, more and more American workers are facing financial hardship, according to a survey by Salary Finance, the world’s leading provider of socially responsible financial products on the spot. of work. The elimination of COVID programs, such as the cancellation of student loans and the improved child tax credit, the high cost of property and record inflation compounded by the escalation of the war in Ukraine, are likely the causes. depths of the highest percentage of financial stress in Ukraine. the four years the company conducted the survey, which often leads to anxiety and depression.
According to “Inside the Wallets of Working Americans, the Fourth Annual Salary Finance Report,” 45% of American workers are experiencing financial hardship, up from 42% the previous two years. Workers are running out of money faster: One in five American workers are running out of money between paychecks. Of those experiencing financial hardship, almost 60% live paycheck to paycheque.
Although the survey found encouraging signs this year that workers have more work/life flexibility to better manage crises – work issues, health issues and relationship status have improved by year on year, indicating that companies are becoming more empathetic after crises. COVID – American workers are struggling to effectively manage their finances in these turbulent times:
Three-quarters said inflation had impacted their finances
More than two-thirds have no money set aside for emergencies
More than half have less cash in the past year than the year before
One in two people have no emergency savings and are worried about it
Four in 10 are not satisfied with their current level of savings
As financial stress worsens, its downstream impact also worsens. More financially stressed people are experiencing sleepless nights, distractions at work, difficult relationships with co-workers and mental health issues than in previous years. More than 80% of people suffering from financial stress suffer from anxiety and almost 60% suffer from depression. These mental health impacts affect all areas of life, including work.
“American workers are at a crossroads,” said Dan Macklin, CEO of Salary Finance. “Just as there is some optimism about declining COVID cases, we are watching the casualties of war in Europe and crippling inflation affecting us all around the world. Employers are proven to show more empathy for workers, but we need more. Employers need to put in place programs that prioritize work-life balance and put more emphasis on financial programs that allow employees to get out of debt and save money.
The drivers: inflation, student loans, the housing market and the end of the enhanced child tax credit
It is not difficult to identify why there is an increase in financial stress. American workers are facing a perfect storm of more money going out – and less money coming in.
Inflation hit a four-decade high in January 2022, impacting the price of fuel, energy, cars, housing and food. Seventy-six percent of American workers said inflation had impacted their finances over the past year. Moreover, an inflated and highly competitive housing market has shown no signs of slowing down. Last year saw the largest annual increase in housing costs in more than two decades. More than half of workers who don’t have a mortgage or own their home say it’s because they can’t afford to buy right now.
As inflation and the housing market rise, workers are also losing benefits born out of the pandemic. Nearly 60% of employees with student loan debt have taken advantage of the forbearance offered under the CARES Act legislation — and more than a third won’t be able to afford to resume repayments this spring.
Likewise, many working Americans depended on the improved child tax credit program. In the study, 59% of parents of school-age children said they had received the credit. Forty percent of them said the money helped them build their savings, and more than 20% said it helped them pay bills and regular payments.
The impact: depletion of savings, increased use of credit cards and cannibalization of retirement savings
The combination of factors that cause financial stress is staggering – and the impact is financially catastrophic for many working Americans. This includes:
- Lack of savings. Nearly 70% of American workers don’t have emergency savings — and nearly a third of employees also don’t have at least $1,000 in cash reserves or liquid savings.
- Increased reliance on credit cards. A third of credit cardholders surveyed have consistent credit card balances from month to month. Of these, more than 40% carry more than $3,000.
- Borrow from retirement savings. This year’s survey revealed a worrying increase in the number of employees who withdrew funds from their retirement savings in the past 12 months. In last year’s report, the number had fallen to less than 10% of employees, largely thanks to stimulus payments, available forbearance programs and the improved child tax credit. In this year’s survey, nearly 20% of employees surveyed had withdrawn money from their retirement savings.
Employer confidence is trending down – as companies struggle to retain talent
The number of employees who say they feel their employer cares about their well-being fell year-over-year, from 63% in 2021 to 57% in 2022. Among those experiencing financial stress , 52% believe that their employer cares about their well-being.
While not a significant drop, it comes at an inopportune time for employers facing the big quit. The majority – six in 10 – of employees looking to leave their jobs are financially stressed, requiring employers to recognize the problem and put financial wellness benefits in place to help them.
“More than ever, employees are focused on deleveraging and increasing their savings — and Salary Finance is helping them do just that,” Macklin said. “In a separate customer survey, three-quarters of employees using Salary Finance reported less financial stress; additionally, those with no emergency savings decreased from 78% to 38% and those with overdue bills decreased from 50% to 19%. These improvements show what can happen when companies learn about their employees’ financial stress and put the right programs in place to support them in their financial goals.
The report, which can be downloaded for free here, also includes information from the Motley Fool Foundation on barriers to building long-term wealth, and from Brella Insurance on health care costs and medical debt.
About Salary Financing
Salary Finance’s mission is to improve the financial health of American workers by providing access to socially responsible financial products in the workplace. When employees can access affordable credit, reduce bad debts, and increase their savings, they are happier and more productive at work, and more likely to achieve long-term financial stability. Employers benefit from improved retention and engagement at no additional cost. Our award-winning technology platform enables us to offer better inclusive financial products such as high interest savings accounts, access to affordable credit and personalized financial education. Salary Finance is a corporate partner of United Way Worldwide and works with over 600 of the world’s leading employers. Salary Finance is a founding member of the Conscious Capitalism Senior Leaders Network and a member of the American FinTech Council. To learn more, please visit www.salaryfinance.com/us.