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Despite Falling Inflation, Most Workers Still Living Paycheck to Paycheck

Paycheck in an envelope

Inflation may have cooled from its red-hot pace, but employees aren’t feeling much reprieve.

On the heels of several reports finding that employees are still suffering from high costs of living and are feeling financially fragile, a new LendingClub report finds that more than 6 in 10 workers (62 percent) say they are living paycheck to paycheck. That’s virtually unchanged from a year ago.

The bank’s survey of 3,252 U.S. consumers conducted from Nov. 6 to Nov. 22 found that among income brackets, 77 percent of consumers earning less than $50,000 annually were living paycheck to paycheck, as were 67 percent of those earning between $50,000 and $100,000 and 45 percent of consumers earning more than $100,000.

SHRM Online gathered additional news on the topic.

Holiday Spending May Worsen Situation

The LendingClub report comes on the heels of other data finding that employees’ financial situations will likely further worsen as a result of holiday spending. The National Retail Federation estimated that holiday spending from Nov. 1 through Dec. 31 will grow between 3 percent and 4 percent over last year, to a record total of $957.3 billion to $966.6 billion. And nearly all (96 percent) shoppers said they expect to overspend this season, a TD Bank survey found.

Half of consumers plan to take on more debt to cover those holiday expenses, according to another report by Ally Bank, while only 23 percent have a plan to pay it off within one to two months.

Paying off the debt may prove difficult, especially considering high interest rates, Sarah Foster, a Bankrate analyst, told CNBC.

“Credit card financing rates have hovered at the highest levels ever recorded since last fall, meaning carrying a balance could cost a heavy price,” she said.


Employee Financial Wellness Drops to New Low

While numerous reports in 2023 found that employees have dealt with financial difficulties, an October Bank of America (BoA) report went even further with its main finding: Employee financial wellness is at an all-time low.

Over the first six months of 2023, the impact of inflation and economic uncertainty contributed to increased financial stress, resulting in financial wellness among employees dropping to 42 percent—the lowest rate since BoA research began in 2010. It’s even lower for women: Just 38 percent of female employees reported feeling financially well, compared with 55 percent last year.

Two-thirds (67 percent) of employees said they believe the cost of living is outpacing growth in their salary or wages, compared with 58 percent in February 2022.

“American workers continue to feel stressed about their finances and are concerned about keeping up with the cost of living,” said Lorna Sabbia, head of retirement and personal wealth solutions at BoA.

Charles Lattimer, chief innovation and growth officer at FinFit, a Virginia Beach, Va.-based financial wellness firm, said he’s not surprised that employee morale regarding their finances is currently at an unprecedented low. “As we emerged from the pandemic, Americans amassed record levels of personal savings. However, these reserves have now nearly depleted,” he said. “The erosion of this financial safety net, coupled with other market pressures, is amplifying financial stress.”

He said the swift decline in savings is undoubtedly alarming.

“Financial stress not only hampers employee focus and efficiency, leading to increased absenteeism and accidents at work, but also exacerbates health concerns like mental disorders, diabetes and addictive behaviors,” Lattimer said.

(SHRM Online)

Credit Card Debt Hits Record High

Compounding the problem of financial fragility: Credit card debt hit a record high this year.

Americans now owe a record $1.08 trillion on their credit cards, according to the Federal Reserve Bank of New York. Credit card balances jumped by $154 billion year over year, notching the largest increase since 1999, the New York Fed found.

Credit card delinquency rates also rose across the board, according to the New York Fed. That was especially the case among millennials—or borrowers between the ages of 30 and 39—who are also burdened by high levels of student loan debt.


‘Healthy’ Pay Raises on Tap for 2024

In some good news for employees who are living paycheck to paycheck, the majority of employers say they are planning to hand out competitive pay bumps in 2024. That’s largely in an effort to combat some of the financial strain employees are feeling.

U.S. employers are planning an overall average salary increase of 4 percent for 2024, according to the latest Salary Budget Planning Survey by consulting firm WTW, which surveyed more than 33,000 employers in December. Though down from the actual average increase of 4.4 percent in 2023, the numbers remain well above the 3.1 percent salary increase budget in 2021 and years prior. Meanwhile, Mercer’s U.S. Compensation Planning Survey 2023 November edition, also released in December, finds a slightly more modest average salary hike of 3.8 percent in 2024 and an average merit boost of 3.5 percent.

“We are seeing healthy salary increases forecasted for 2024,” said Hatti Johannsson, research director of reward, data and intelligence at WTW. “Though economic uncertainty looms, employers are looking to remain competitive for talent, and pay is a key factor.”

More than half of employers (55 percent) surveyed by WTW cited inflationary pressures as the primary reason behind higher salary budgets.

(SHRM Online)


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