As COVID financial crisis continues, eyes shift towards employers
The pandemic provides the perfect opportunity for employers to take this call to action from American workers seriously.
The COVID economic crisis has been particularly hard on lower-wage workers. Many of them, financially vulnerable prior to the pandemic, face worsened circumstances now. While unemployment remains a major issue for many Americans, the truth is that even for many who are employed, financial vulnerability is a real, everyday struggle.
This is nothing new, and while COVID has exacerbated the situation, it has also shone a light on the widespread financial insecurity that existed long before the pandemic. With every disruption there is an opportunity to create something that is new–and better serves us–than what we started with.
At this moment, as our political leaders fail to act and the freefall continues for millions of financially vulnerable Americans, employers have an opportunity. In moments of crisis, America responds across sectors. It’s time for employers to play a stronger role in employee financial security–not just for the benefit of workers, but for the benefit of their business and the economy at large.
Commonwealth’s national survey of working Americans, conducted prior to the crisis, indicated that a majority of them struggle with both short- and long-term financial security–even while working full-time. More than 80% of people indicated that financial insecurity was a major problem for Americans, and 65% said employers should be doing more to help.
Respondents across income levels pointed to the effects of financial security on nearly every aspect of life, saying that being financially secure would mean being able to meet financial goals (77%), improved mental health (69%) and the financial freedom to make choices that allow one to enjoy life (69%).
These circumstances have likely worsened in the past several months. Last spring, 43% of adults said they or someone in their household had lost a job or taken a pay cut due to the pandemic, and among lower-income adults, that number reached 52%. Those who were employed reported increased worry around whether they’d experience a pay cut or reduced benefits in the face of the crisis.
Employers sit in a unique position to provide tools and opportunities that enable employee financial security. We know from our decades of experience working with companies to innovate and enable financial security for lower- and moderate-income workers that when employees are offered the tools and opportunities to save, they do so.
The pandemic provides the perfect opportunity for employers to take this call to action from American workers seriously.
As the economic crisis shines a spotlight on widespread, pervasive financial insecurity and the financial fragility of the lower- and moderate-income workers who make up much of our essential worker pool, employers have both a moral and a business responsibility to address the issue.
Even while many employers are under enormous financial pressure themselves, this is the moment to examine ways to boost both short-term financial security and pathways to financial opportunity for their workers. In times of financial stress, it’s critical to focus on the most urgent, most important problems with the most long-term potential payoff–both for corporations and the people they employ.
Mercer estimates that American companies lose $250B a year in productivity due to worker anxiety. But we don’t need studies to tell us something we know at our core: When we are preoccupied with juggling our family finances, we are not free to be quality workers, parents, students and citizens.
As a society, we’ve accepted a chronic tax on our mental and physical well-being, a byproduct of a state where nearly all working people are worried about money, nearly all the time.
Strategies that enable employees to build emergency savings–a liquid reserve that they can use to weather emergency expenses or income volatility–are surprisingly simple and straightforward to offer.
Employers can provide tools and opportunities to save, such as split direct deposit, access to savings vehicles through their employee retirement plan or financial wellness platforms, or creative incentives, such as prize-linked savings–all of which our research has proven effective in increasing savings rates.
Innovative, forward-thinking employers can consider a new opportunity to automatically enroll their employees in emergency savings programs. New policy guidance from the Consumer Finance Protection Bureau recently opened a door to this new innovation.
Having an emergency cushion that one can build up and draw down as needed is the first step in eliminating the day-to-day financial stress most Americans are under. And research shows automatically enrolling workers into savings programs lifts participation rates and savings outcomes.
But it’s not enough.
The widespread economic devastation of COVID has demonstrated the urgency of making financial opportunity a priority as well – a focus on the long-term financial trajectory of workers, and the ways in which their employment fosters an ever stronger household financial balance sheet.
There’s much talk of a recovery and better days ahead. But a recovery means a return to 2019 and a financial situation that was untenable for a large portion of working Americans, leaving them financially fragile, vulnerable to another collapse, and without any pathway to opportunity.
What might it mean to decide recovery simply isn’t enough? It’s time to reset our expectations and imagine an economy where long-tenure employment offers pathways to financial security and increasing wealth for all.
Employers have an exciting opportunity–and an obligation–to play a role in these changes in a way that will also build a stronger workforce and overall economy. Taking action means playing a part in securing Americans’ financial futures.
Otherwise, we return to the status quo: a financial system that does not work for all–where the majority of people in it never feel secure–and all the negative implications of that reality for the businesses that employ them.
The leadership of employers is critically needed–and our research demonstrates, it’s expected.
There are real risks for firms that shirk their responsibilities, and real opportunities for those who prioritize a world in which their employers are empowered to build both short- and long-term financial security.
