US Workers Slash Savings, Struggle with Financial Concerns Amid Inflation

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Inflation and fears of entering a recession have taken their toll on America’s workforce. Based on a new survey by Morgan Stanley, 62% of employees have decreased their contributions to savings. In addition, 31% slashed their contributions to their 401 (k) plans, 26% cut back on paying debts, and 25% reduced their contributions to long-term savings. This affirms that it’s not just the number of opportunities presented by the country’s strong job market that’s fueling the Great Resignation. Ailing financial health has led people to find higher-paying jobs.

Financial stress has also affected employee performance at work and the workers’ personal lives, with 71% of workers admitting to this. As a result, 60% devote more time to rereading and evaluating their financial benefits, which could influence their decision to stay or leave their current jobs. This, according to 84% of HR leaders, has caused members of the workforce to ask for financial benefits not offered by their companies.

In response, companies have handed out raises. A recent survey by Bankrate reveals that 48% of employees received a salary increase this year. Many of these raises come from performance-based rewards (36%), cost of living increases (31%), and promotions (16%).

However, 55% report that their wages haven’t kept up with the rise in the prices of consumer goods and services. The situation puts both employers and employees in a bind since companies also have to deal with diminishing returns given that consumers are more hesitant to part with their money amid high inflation and the Federal Reserve’s aggressive interest rate hikes.

Dealing with Financial Concerns

Recent HR software statistics show that 96% of HR leaders believe companies haven’t done enough to help the workforce make the most out of their financial benefits, with 89% of workers in agreement. Employees raise their concerns over financial difficulties often, according to 40% of HR leaders. But solutions don’t always come their way.

The leading financial concerns of employees are hardships in settling debts (45%), the country’s financial crisis (44%), spending emergency savings (38%), the inability to manage finances (36%), and the lack of emergency savings (34%). It’s been harder for them to deal with these considering that the prices of food, rent, shelter, and medical care have all gone up as of last month based on US Bureau of Labor Statistics data.

As such, employees have been requesting more financial benefits besides higher wages. The leading ones cited by employees include access to a financial advisor (52%), goal-based retirement investment planning (48%), and retirement planning solutions (46%). HR leaders, on the other hand, have a different list of benefits requested from companies. These include goal-based retirement investment planning (47%), retirement planning solutions (43%), and retirement planning workshops (40%).

Clear communication between the workforce and management should alleviate some of the concerns mentioned earlier. But the Morgan Stanley survey indicates that 47% of employees have not thought of or are not sure if they are allowed to communicate with their employers regarding their financial issues, much less ask for assistance. Companies need to assure employees that the workplace is a safe space for these dialogues and will not be a source of further issues.

As for the ability of employers to compensate their employees better, it’s also a challenging concern. After all, the US economy continues to plunge, the buying power of consumers has been significantly reduced, and foreign exchange rates have created headwinds. The remainder of this year could be rough unless economic conditions improve.