Despite an improved economy and rising employment, the picture is far from rosy for the average low- to moderate-income worker. Wages have stagnated or fallen. One in four jobs pays a low-wage of less than $23,283 a year and often lacks benefits such as health insurance, retirement accounts and paid sick leave.
For these workers, steady employment does not translate into financial security. Even families with solid middle class incomes struggle to save for a more prosperous future. A remarkable 44 percent of U.S. households are "liquid asset poor," meaning they don't have enough savings to live at the poverty level for just three months if faced with a job loss or other emergency, according to research by my organization, the Corporation for Enterprise Development (CFED). One in five of these families earns $56,111 to $91,356 annually.
These households face a level of financial stress that not only stifles their financial futures, but can also affect job performance. Stress -- especially financial stress -- has long been associated with diminished worker productivity, including more missed days of work. One study found that 15 percent of workers face so much financial stress that their productivity suffers. Significant links have also been found between financial stress and personal and work satisfaction.
Employers can't afford to ignore this problem. Helping workers better manage their finances and save more effectively should be part of any comprehensive work benefits package.
The workplace is an ideal setting for addressing financial challenges since many employees already meet with human resource or finance personnel to discuss personal finance matters such as direct deposit, retirement benefits and health insurance.
A survey by the Society for Human Resource Management found that a little more than half of employers do offer at least some type of financial education to those on their payroll. But employers need to do more than provide a few lunch-hour financial education sessions to workers.
Research consistently shows that programs focused solely on financial literacy rarely lead to behavioral changes. Instead, workplace financial wellness programs should build financial knowledge while providing the services and resources employees need to effectively navigate their financial lives. These programs need to help workers become financially capable, not simply more financially literate.
Offering employees the services of a financial coach is a good place to start. Coaches assist clients in changing their financial behaviors and taking small steps to improve finances. For example, a state-sponsored program in Delaware called $tand By Me is used by employers to offer customized financial coaching that meets the needs of individual workers. Results show significant payoffs for employees, including reduced debt and improved credit scores among participants. Employers who have made a financial coach available report increased job retention and happier employees.
Workplace-based financial capability programs can also play an important role in connecting workers with appropriate and affordable financial products. This includes helping consumers gain access to bank accounts, non-predatory loans and retirement savings accounts. The State Employee Credit Union in North Carolina, for instance, offers short-term loans with low interest rates to state employees as alternatives to predatory payday loans. This allows employees to cover unexpected costs without being charged exorbitant fees and interest rates that trap them in a cycle of debt.
Finally, employers should connect workers to programs that encourage savings. According to the U.S. Financial Diaries just 7% of households are able to meet their emergency savings goals. Programs like myRA, which is administered by the U.S. Department of Treasury, allow employees to automatically contribute to a savings account through payroll deductions. Although the accounts are primarily for retirement savings, contributions can be withdrawn at any time without penalties.
Offering financial capability services to workers should not be seen as a substitute for quality jobs that provide a livable wage. Instead, they should be part of a comprehensive package of workplace benefits that provide employees with the tools they need to succeed financially and become more effective on the job.