Study finds: Consumer debt is secretly weighing on the American workplace
SAN MATEO, California., March 9, 2022 /PRNewswire/ — After more than two years of battling the COVID-19 pandemic, many workers across the country are struggling with their personal finances, and debt in particular. A new study from the non-profit organization Financial Health Network and sponsored by Freedom Financial Network shows that debt impairs productivity and employee retention and that debt-related financial wellness benefits offered by employers are relatively rare.
“From increased levels of stress to impaired productivity at work, the far-reaching impact of personal debt on workers’ lives is both appalling and worrying,” he said Sean Fox, President of Freedom Debt Relief and Chief Revenue Officer of parent company Freedom Financial Network. “Today, the financial health services that many employers offer are primarily focused on the future financial situation of workers, such as literacy needs.”
Debt affects physical health and job performance
The Financial Health Network surveyed US consumers who work full-time in medium- and large-sized companies with 500 or more employees, a cohort that represented nearly 48% of all private sector employees at the end of 2021. according to the Bureau of Labor Statistics. The study, Help employees manage debt: Design debt-related benefits to meet employees’ needs and preferences, found that 63% of these workers have unsecured debt in the form of credit card, medical, or personal loans. The study focuses on this subgroup of workers.
Among those with unsecured debt, 65% said debt stress is affecting their physical health. Additionally, nearly half (47%) of respondents said they were unable to pay all of their bills on time at least once in the last 12 months. A third (32%) said they or someone in their household had struggled to pay medical bills in the past year — with half of respondents saying they had to cut back on basic needs like food and clothing to pay medical bills to be able to
Other important findings:
- Almost half (47%) of the respondents with $25,000 or more in unsecured debt said they worried about being able to afford groceries.
- 34% of employees with over $25,000 in debt and 24% of those with less than $10,000 in debt reported that someone in their household stopped a medication or took less than prescribed because they could not afford it.
- 32% of all respondents stated that they had problems paying their rent or mortgage.
The challenges many consumers face when dealing with debt often extend to the workplace, with nearly 40% of respondents with unsecured debt having missed at least a day of work in the last 12 months due to debt-related stress or issues. Additionally, 50% of those in debt spent an average of one hour a week at work dealing with debt-related issues — the equivalent of a full week of lost productivity over the course of a year.
Financial wellness benefits are largely absent from the American workplace
The Financial Health Network surveyed respondents about their access to 13 types of debt-related financial wellness services, including general financial education and tools; Personal advice; employer-sponsored financial assistance; and payroll, loans, debt consolidation, or other debt relief products. Overall, the study found that access to these benefits is extremely limited. To make matters worse, employees who would benefit most from financial wellness benefits, such as B. Employees with higher overall debt and debt-related stress, as well as lower-income employees, have the least access to these programs:
- None of the 13 types of financial wellness services discussed in the study were available to the majority of respondents
- 1 in 5 respondents said they did not have access to the financial wellness benefits addressed in the study
- 31% of respondents with annual income over $150,000 had access to debt consolidation loans or other forms of debt relief, compared to just 9% of those earning less than $50,000 per year.
“While benefits, which can help employees address debt and manage their finances, are relatively uncommon in the workplace, these programs and tools can significantly improve employee productivity and retention,” Fox explained.
For example, a majority of respondents believe that debt-related financial wellness benefits are part of the workplace. The study also found that 62% of respondents said they would be more likely to stay in a job that offers useful debt-related benefits.
The study identified key points employers can use to design more effective benefit plans:
- Debt affects employee use of retirement accounts. Employees with higher levels of unsecured debt were more likely to withdraw money from retirement accounts. Employers should be aware that traditional workplace retirement accounts may be less relevant to employees whose debt obligations cause them to struggle with day-to-day needs.
- There are discrepancies between service needs and access. Workers with higher levels of total debt, workers with lower incomes, and female white-collar workers were more likely to say they did not have access to debt-related benefits, although they reported higher levels of debt stress — indicating a mismatch between benefits and those they most need require .
- Gender and income play a role. Women were significantly less likely to report having used debt-related benefits when employers offered them. Those with higher levels of debt reported having less access to debt-related benefits. Those who make less than $100,000 were much less likely to report that their employer offered debt-related benefits.
“Impressively, we found that at least 40% of respondents who do not have debt-related benefits say they would be more or very likely to use them if their employer offered them,” Fox said. “By tailoring debt-related benefits to employee needs and preferences, organizations can leverage these underused tools, achieve measurable results and help employees move forward in creating a better financial future.”
Download the full report, Help employees manage debt: Design debt-related benefits to meet employees’ needs and preferences
About Freedom Financial Network
Freedom Financial Network is a leading digital personal finance company. We do what traditional banks don’t do: put people first. Our solutions help everyday people get on and stay on the path to a brighter financial future with innovative technology and personalized support. Leveraging proprietary data and analytics, our solutions are tailored to each step of a consumer’s financial journey and include personal loans (FreedomPlus), home equity loans (loan), help with debt (Freedom Debt Relief) and even financial instruments and education (bills.com). Freedom Financial Network employs more than 2,300 dedicated employees California, Arizona and Texas and is recognized as Best place to work.
For information on career opportunities at Freedom Financial Network, please visit: https://jobs.freedomfinancialnetwork.com/
SOURCE Freedom Financial Network