Thought Leadership

(Bank)xious: Financial Insecurity in the American Workforce

TL;DRMost American workers are living paycheck-to-paycheck, despite the majority working full-time hours at multiple jobs.

It’s no secret that financial insecurity is a crucial issue to many Americans. This election cycle has been dominated by discussion around income inequality, unemployment, and corporate influence on the political process. Across the ideological chasm that separates the United States’ major political parties, there’s one thing that most voters agree on: when it comes to money, American workers are being stretched to their limits.

American workers are grappling with severe financial insecurity, barely keeping afloat week to week. Click To Tweet

The financial strain of the American workforce might even be worse than it looks. Hyperwallet’s recent Payday in America report, which polled roughly 2,000 American W2 (employee) and 1099 (contract) workers on their financial habits around payday, revealed some troubling new statistics:

Hyperwallet_graph-04

The results showed that many American workers are grappling with severe financial insecurity, barely keeping afloat from week to week. Only one in four American workers say that a late paycheck wouldn’t have an effect on their daily lives. In contrast, roughly half of the respondents reported that they’d have to delay payment on important bills if their paycheck was delayed by just a few days. A third wouldn’t be able to buy essentials, like food and gasoline, or even pay their rent.

In 2016, American workers aren’t dreaming; they’re drowning. Click To Tweet

This reality is reflected where respondents are asked about having more than one job. While over half of American workers have at least two jobs, only one in ten do it to pursue a passion or personal goal. Out of the most common reasons for taking on secondary work, the top three relate to earning more money—and it’s not even close. Whether it’s nonessential spending, saving for the future, or simply paying for the necessities of today, many Americans feel that a secondary source of income is required to live comfortably.

In 2016, American workers aren’t dreaming; they’re drowning.

Pay Day in America Statistics

The Consequences of Financial Insecurity

A financially insecure workforce is bad for a lot of reasons: reduced discretionary consumer spending impacts regional and national economies; less money going to retirement savings places a larger financial burden on social services; high household debt creates economic instability. Beyond that, the stress associated with financial insecurity can have serious consequences to the health of individual workers.

Last year the American Psychological Association (APA) released the results of their annual Stress in America survey, part of a broader campaign to examine the causes and effects of stress throughout the country. Fittingly, the APA’s 2015 report was subtitled “Paying with Our Health,” alluding to the tremendous impact that financial insecurity is having on the physical and emotional wellbeing of Americans nationwide. According to the survey, amongst the top four sources of stress in the United States—which includes health concerns, family responsibilities, and work—the issue that keeps most Americans up at night is money.

That’s a big problem. The APA reports that individuals living with extreme financial stress are more likely to engage in sedentary or unhealthy behaviors (e.g., excessive television and computer use, alcohol consumption, smoking) as methods to cope with their situation than their lower-stress counterparts. Moreover, individuals who experience financial anxiety and don’t receive emotional support are more susceptible to stress-induced medical conditions like depression.

What Can We Do About It?

The Payday in America report shows that most American workers are living paycheck-to-paycheck, despite the majority working full-time hours at multiple jobs. This illustrates the importance of ensuring that workers receive their paycheck on-time, every time.

Freelancers and contractors consistently wait longer for payments than W2 workers. Click To Tweet

While traditional employees can count on receiving their earnings at regular intervals (e.g., the typical bi-monthly, direct-to-bank payment schedule), 1099 workers rarely see the same kind of regularity. Responses to the Payday in America survey revealed that freelancers and contractors consistently wait longer for payments than W2 workers: more than a quarter wait three to four business days for their payment to be processed, while nearly one in six don’t see their earnings for more than a week. The simple reality is that marketplace companies and gig platforms have struggled to implement a payout solution for their sellers and contractors than delivers the same speed and consistency of payments available to traditional employees.

Hyperwallet’s global payout platform is designed to resolve that very issue. With our worldwide financial network and end-to-end payout transparency, companies can ensure their independent workers receive their earnings when they’re meant to. And with multiple payout methods and a range of integrated support features, payees can choose the best way to receive their money. The end result is less time spent worrying about when funds are going to turn up, and  ultimately a happier and healthier independent workforce.

Looking Forward

While some degree of financial anxiety is a reality of modern life, the APA notes that money-related stress is much higher than healthy levels. As full-time employment opportunities become increasingly scarce and contract work goes mainstream, companies will need to adopt payout models that provide much-needed stability and transparency for their independent workforce. These improvements will contribute to a reduction in worker stress and dissatisfaction, ultimately enabling a higher level of economic confidence across the board.

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