Why financial wellness programs must target lower-wage employees

When companies offer financial wellness programs to their employees, everyone benefits.

A review of financial wellness benefits by the Center for Social Development found that employer financial wellness programs improve productivity, employee engagement and commitment while reducing distraction and absenteeism. The organization also found that employees who use these programs learn from them, making positive financial behavior changes including saving more money and making more on-time payments.

An increasing number of employers are seeing this as a win-win situation and adding financial wellness programs. However, many of these programs focus on the needs of higher-income employees, without considering those of lower-wage earners.

In fact, the report Beyond the Next Paycheck found that many financial wellness programs focus on long-term goals such as saving money but don’t include short-term financial needs common with lower-income workers, like paying down debt or budgeting.

The haves and have-nots

According to many economists, the highly touted improving economy isn’t helping everyone. A recent study by the Urban Institute shows that although the economy is better than it was in 2014, the number of Americans struggling to pay monthly bills (40 percent) has remained unchanged.

These lower-wage workers haven’t benefited from the stock market or housing boom because they are unlikely to own either. Additionally, many have experienced the following:

●     Slow wage growth

●     Housing cost increases

●     Health care increases

●     Education cost increases

●     More credit card and personal loan debt

This population often lives paycheck to paycheck, managing to get by until a crisis occurs. Once this happens, they find themselves unable to meet their financial obligations and often do not recover.

Why is this happening?

There are many factors that contribute to some feeling great about the economy while others continue to struggle. The biggest is that although the 2008 recession ended 18 months after it began, the U.S. Federal Reserve found that nearly 50 percent of American households have not yet recovered and would find it difficult to handle any kind of financial crisis.

On the other hand, for those who are able to buy homes and make investments – typically older, wealthier and white – the effects of the recession are gone. They have been able to make up the losses as they see their stocks and home values rise.

Despite wage growth increases for the lowest-wage earners in the U.S., the growth isn’t fast enough to make up for the many years of struggling. In fact, the bottom half of the U.S. population has less wealth than it did 30 years ago. With half of all jobs paying less than $18.58 per hour, getting out of debt and saving money for future emergencies isn’t easy.

Because of the financial struggles in recent years, U.S. household debt has increased. The Federal Reserve states that the nation’s debt is $13.7 trillion and has increased for 19 consecutive quarters.

Much of the debt load falls on lower-wage earners, who, in the past year, are finding it more difficult to keep up. As a result, car loan and credit card delinquencies are rising.

What employers can do

If the financial wellness program you provide to your employees is not reaching those that need help the most, then neither you nor your employees will reap the benefits of having such a program available. When asked what financial topics they would like to learn about, lower-wage employees suggested these:

●     Budgeting

●     Student loans

●     Paying down debt

●     Saving for emergencies

●     Saving for large purchases like buying a home

As you seek to find the right financial wellness program, be sure to identify the needs of all your employees, not just those participating in the 401(k) plan. By choosing a program that helps all employees, whatever their income level or stage of life, you have the opportunity to provide much-needed financial education to everyone you employ, truly making your financial wellness program a benefit to all.

Kris Alban is executive vice president of iGrad, a San Diego-based company that provides interactive, personalized financial wellness solutions to employers, financial institutions, colleges and universities. Its Enrich Financial Wellness platform is used by more than 300 employers, banks and credit unions.