- April 25, 2018
- by commonwealth
Recent years have seen human resource professionals and advocates focus on employee financial wellness. Employees’ financial wellness, the thought goes, is a critical element of their overall wellness and impacts their performance at work. At Commonwealth, we have been exploring how this trend impacts financially vulnerable, lower-wage workers.
Our new publication, Financial Security in the Workplace: Making It Work for Financially Vulnerable Workers, makes the case that there is a substantial opportunity for businesses to support the financial security of lower wage workers, both improving employees’ lives and driving business success. To do so effectively, they should design compensation and benefits policies and practices to address two of the key drivers of insecurity – inadequate liquid savings and uncertain and volatile income and expenses.
The financial challenges facing financially vulnerable people are well documented. It is also well established that financial anxiety increases as income declines and scarcity erodes cognitive resources, degrading concentration and performance. More recent research has shown the ramifications of these effects on business performance. In a recent study, researchers asked more than a thousand short-haul truck drivers at a large transportation firm about their financial resources and tracked drivers’ accident histories over the following eight months. The study concluded that financial anxiety so burdened drivers’ cognitive resources that it produced a clear increase in their risk of preventable accidents.
Financial vulnerability inhibits work. It decreases worker productivity, drives absenteeism, hampers customer service, and increases turnover. Although there is more work to do to fully understand the relationship between financial insecurity and work performance, it is a relationship validated by robust research. Therefore, employer strategies focused on enhancing worker financial security should improve the work performance of their employees.
While the arguments for financial security strategies are compelling, broader economic trends create a unique window of opportunity to ramp up these programs. Lower-wage workers have new leverage in a tight labor market. Financial security interventions can help improve recruiting and retention, which can represent a competitive advantage. As lower-wage workers are in increasing demand, programs to build financial security can spotlight a firm’s commitment to all its employees.
Many of the current financial wellness offerings are not designed to meet the basic need for financial security, especially those of lower wage workers. At Commonwealth, we have been exploring several ways in which employers might take straightforward, proven, and inexpensive steps to strengthen the financial security of their workforces and put them on the path to financial wellness.
Read more about this work in our paper, Financial Security in the Workplace: Making It Work for Financially Vulnerable Workers. You can also read part two of our series, Financial Security in the Workplace: Innovative Employer Strategies.
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