Consumer Debt Exacts a Hidden Toll on the American Workplace, Study Finds

• Workers grappling with financial struggles like unsecured debt experience high levels of stress and other challenges that are increasingly affecting their job performance. Companies can improve employee productivity, recruitment and retention by offering comprehensive financial health benefits that address present-day challenges with debt and personal finances, according to a Financial Health Network Study sponsored by Freedom Financial Network.

After more than two years of contending with the COVID-19 pandemic, many workers throughout the country are struggling with their personal finances, and debt in particular. A new study by the nonprofit Financial Health Network and sponsored by Freedom Financial Network reveals that debt affects productivity and employee retention, and that debt-related financial wellness benefits offered by employers are relatively uncommon.

“From heightened levels of stress to impaired workplace productivity, the far-reaching effects of personal debt on workers’ lives are both startling and concerning,” said Sean Fox, president of Freedom Debt Relief and chief revenue officer of its parent company, Freedom Financial Network. “Today, the financial health benefits many employers offer primarily focus on workers’ future financial situation, such as planning for retirement. Meanwhile, benefits programs often miss the mark when it comes to helping employees address their present-day financial wellness, or even financial literacy, needs.”

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Debt Impacts Physical Health and Job Performance

Financial Health Network surveyed U.S. consumers who work full time at medium and large companies with 500 or more employees, a cohort that accounted for nearly 48% of all private-sector workers at the end of 2021, according to the Bureau of Labor Statistics. The study, Helping Employees Manage Debt: Designing Debt-Related Benefits to Match Employee Needs and Preferences, found that 63% of these workers have unsecured debt in the form of credit card, medical or personal loan balances. It is this subset of workers that the study focuses on.

Among those with unsecured debt, 65% reported that debt stress impacts their physical health. In addition, almost half (47%) of respondents said they were unable to pay all their bills on time at least once in the past 12 months. A third (32%) said that they or someone in their household had trouble paying medical bills in the last year — with half of respondents saying they had to reduce spending on basic needs such as food and clothing to pay medical bills.

Other Key Findings:

• Nearly half (47%) of respondents with $25,000 or more in unsecured debt said they worry about whether they can afford groceries.
  
  
• 34% of employees with over $25,000 in debt and 24% of those with less than $10,000 in debt reported someone in their household stopped taking a medication or took less than prescribed because they couldn’t afford it.
  
  
• 32% of all respondents said they had trouble paying their rent or mortgage.

The challenges many consumers face dealing with debt often extend to the workplace, as nearly 40% of respondents with unsecured debt missed at least one day of work in the last 12 months due to debt-related stress or issues. Furthermore, 50% of those with debt spent an average of one hour per week at work dealing with debt-related issues the equivalent of one whole week of lost productivity over the course of a year.

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Financial Wellness Benefits are Largely Absent from the American Workplace

Financial Health Network asked respondents about their access to 13 types of debt-related financial wellness benefits, including general purpose financial education and tools; personalized advice; employer-funded financial assistance; and payroll advances, loans, debt consolidation or other debt relief products. Overall, the study found access to these benefits is extremely limited. To make matters worse, employees who would get the most out of financial wellness benefits, such as those with higher total debt and debt-related stress, as well as those with lower incomes, have the least amount of access to these programs:

• None of the 13 types of financial wellness benefits covered in the study were available to a majority of respondents
  
  
• 1 in 5 respondents said they don’t have access to any of the financial wellness benefits addressed in the study
  
  
• 31% of respondents with annual incomes over $150,000 had access to debt consolidation loans or other forms of debt relief, compared to only 9% of those making less than $50,000 per year.

“While benefits that can help employees address debt and manage their finances are relatively uncommon in the workplace, these programs and tools can significantly improve worker productivity and retention,” explained Fox.

For example, a majority of respondents believe debt-related financial wellness benefits belong in the workplace. The study also found 62% of respondents reported they would be more likely to stay at a job that offered useful debt-related benefits.

The study identified key points that employers can use to design more effective benefits plans:

• Debt affects employees’ use of retirement savings accounts. Employees with higher levels of unsecured debt were more likely to withdraw money from retirement accounts. Employers should understand that traditional workplace retirement savings accounts may be less relevant to employees whose debt obligations are causing them to struggle with day-to-day needs.
  
  
• Discrepancies exist between benefit need and access. Workers with higher total debt, lower-income employees, and female employees were more likely to say they don’t have access to debt-related benefits, despite reporting higher levels of debt stress — indicating a mismatch between benefits and those who need them most.
  
  
• Gender and income play a role. Women were significantly less likely to report using debt-related benefits when employers offered them. Those with higher debt reported less access to debt-related benefits. Those making less than $100,000 were much less likely to report that their employer offered debt-related benefits.

“Impressively, we saw that at least 40% of respondents who do not have debt-related benefits say they would be somewhat or very likely to use them if offered by their employer,” said Fox. “By tailoring debt-related benefits to employee needs and preferences, businesses can leverage these underutilized tools, obtain measurable results, and help employees move forward in creating better financial futures.”

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