2 in 5 U.S. employees struggle to meet basic needs as financial wellbeing deteriorates

Facing significant financial pressures, 43% of U.S. employees indicate they are having difficulty paying for one or more basic needs, such as healthy food, housing and healthcare. At the same time, three in 10 are struggling financially, living paycheck to paycheck and finding it difficult to control their spending. These and other findings from our 2022 Global Benefits Attitude Survey underscore the range of financial challenges confronting employees and the far-reaching impact of these challenges on overall employee wellbeing, performance and personal health/lifestyle choices.

Uptick in employees living paycheck to paycheck

The financial wellbeing of many employees has deteriorated since the start of the pandemic, with 41% of full-time employees self-reporting as living paycheck to paycheck, up from 38% in 2019. Among those earning $100,000 or more a year, the number of persons living paycheck to paycheck doubled from 18% in 2019 to 36% this year, the biggest increase of any income group. But the largest percentage of employees struggling to make ends meet is found among those earning less than $50,000 a year, with over half of employees (52%) in this group living paycheck to paycheck.

Overall an employee living paycheck to paycheck is more likely to be a single parent (53%), someone earning less than $50,000 a year (52%) or someone younger (47% were born after 1980) (Figure 1).

Salary: 36% $100,000 or more, 52% less than $50,000; Health:Very good 37%, Fair or poor 57%; Family status: Couple – no kids 24%, Single – no kids 33%, Couple – parents 43%, Single – parent 53%; Ethnicity: Asian 25%, White 41%, Hispanic 44%, Black or African American 46%

Figure 1. Which employees are living paycheck to paycheck?

Alarmingly, roughly six in 10 employees (57%) in fair or poor health are living paycheck to paycheck. In addition, when compared with other employees, those living paycheck to paycheck have worse outcomes across a number of critical areas:

• Emotional and social wellbeing. Employees in this group tend to have higher levels of anxiety (59% versus 26%) and are more likely to be lonely (29% versus 9%) than those not living paycheck to paycheck.
• Retention and performance. Those living paycheck to paycheck tend to feel stuck in their jobs and pose greater retention risks. They are more likely to have actively searched for a new job in the past three months (37% versus 21%) and are more likely to move to a new employer for a 5% pay raise (48% versus 29%).
  
  Moreover, employees living paycheck to paycheck who struggle to control their spending are absent from work twice as many days as those not living in this way.
• Lifestyle choices and behaviors. Employees living paycheck to paycheck are more inclined to make lifestyle choices such as avoiding or delaying medical care in the past year (48% versus 24%) and having poor eating habits (38% versus 16%). And only a third (34%) exercise regularly compared with 44% of employees not living paycheck to paycheck who exercise on a consistent basis.
  
  These employees are also more prone to engaging in addictive behaviors, including smoking (31% versus 12%), drinking too much (16% versus 6%) and abusing drugs (15% versus 3%).

Financial shocks

Among the factors contributing to low financial wellbeing are financial shocks that roughly half of all employees (49%) have experienced. The most common shock involves a significant medical expense (31%) followed by working hours cut (23%), fraud (15%) and impact of divorce (13%).

Employees suffering these shocks are more likely to make decisions that may undermine their long-term financial security — for example, by taking out a home equity loan or a loan from an employer retirement plan, being unable to pay bills or taking a salary advance (Figure 2).

Retirement – Taken a loan from your employer retirement plan (e.g. 401k plan): 9% - No financial shock, 26% - Financial shock; Bills – was unable to pay my mortgage/rent, utility bills, etc.: 8% - No financial shock, 36% - Financial shock; Salary advance – taken a salary in advance (accessed wages before payday): 5% - No financial shock, 28% - Financial shock

Figure 2. Financial shocks are linked to other financial decisions that may undermine long-term financial security

While significant medical expense is the most common financial shock across all salary levels, higher-income employees are more likely to experience financial shocks due to fraud or divorce.

Deferring care and suffering the consequences

Our findings also showed a connection between healthcare affordability and deferred care.

Two in five employees deferred care during the past year. This may have involved a delayed or cancelled procedure/appointment or treatment (28%), failure to fill a prescription recommended by a doctor (17%), or a healthcare provider delaying or cancelling an appointment (20%). Cost is a key reason why employees delayed care, with a quarter indicating they simply couldn’t afford the care.

Difficulty affording healthcare is linked to longer waits for in-person consultations as well as deferred care. Roughly a third of those who found it difficult or very difficult to afford healthcare waited three months or more for an in-person primary care physician appointment in comparison with 16% of those who didn’t find it difficult, and more than three-fifths had care deferred as opposed to a third of those without difficulties affording healthcare.

Additionally, difficulty affording healthcare and deferred care are associated with negative health outcomes. In general, one-third of respondents (33%) who had care deferred or cancelled either by themselves or by a provider reported that their health suffered. Of the healthcare users who found it very difficult to afford care, roughly three in five (58%) say their health has suffered due to delayed or cancelled medical treatment.

Virtual care often serves as a substitute for in-person medical consultations among employees who delayed care. In fact, seven in 10 of those who had to wait for three months or more and had care deferred used virtual care to see a primary care physician.

How can employers help?

Start with the following measures to help employees improve their financial wellbeing:

1. Support employees’ financial resilience and management of day-to-day finances.
• One in five employees (21%) want employers to focus on helping them manage their day-to-day finances by prioritizing the following areas (among the top four):
  • Access to savings and investment options directly from their pay: 39%
  • Discounts/subsidies: 37%
  • Flexibility to use retirement contributions for other needs: 36%
  • Access to services to manage debt: 32%
• Evaluate healthcare affordability across all workforce segments. Assess how changes to plan design or delivery could make healthcare more affordable. Determine how to expand the use of virtual care to better manage costs.
  
  Focus on ways to engage employees and improve overall financial literacy, including by offering a holistic view of compensation and benefits. This involves providing information designed to help employees better understand all of the programs offered, the cost through payroll deductions, and the value of these programs given employees’ personal needs and life stages.
2. Identify steps to integrate retirement strategies with efforts supporting your employees’ day-to-day financial resilience.
• Employees want employers to make retirement their top priority; therefore, employers should consider their workforce’s unique needs relative to retirement savings and consider how plan design, engagement strategies and financial resilience support can help employees.
• The top three reasons employees cited for under-saving for retirement were debt, saving for other priorities and lack of affordability. By integrating financial resilience tactics such as financial counseling, access to liquidity or debt management services into your retirement strategy, employees may be better positioned to balance near-term financial priorities with long-term retirement savings.
  
  Regarding financial counseling resources, employers might consider providing access to financial advisors. Almost half of employees (45%) prefer help from an advisor with their retirement savings rather than help with day-to-day finances. Moreover, roughly two in five employees (37%) would trust an advisor recommended by their employer more than one they found on their own.
3. Consider how to connect financial wellbeing with the broader employee experience and boost engagement.
   • Financial apps and tools. Roughly half of all employees (46%) believe financial apps and online tools should be a core part of their employer’s benefits. Employers have an important role to play in promoting the use of financial apps, as two in five employees say they trust financial apps and tools suggested by their employer. This figure rises to 47% for regular financial app users and 61% for employees in organizations with a high wellbeing culture. Employees who take action to improve their financial wellbeing and use financial apps report larger improvements than those who don’t use apps.
   • Decision support. Personalize decision support to add relevance and clarity to key financial benefit decisions, such as retirement savings and investing, healthcare enrollment and voluntary benefit selection.
   • Financial education. A quarter of employees say that enhanced financial education would most help them manage their day-to-day finances.

Our findings show that employees with financial issues value the resources that their employers provide. By helping improve the financial wellbeing of their employees, employers are also likely to have a positive impact on employees’ overall wellbeing and their attitude toward their employer. In turn, these efforts will better position an organization to retain current employees and meet the challenges ahead.