"I work all night, I work all day to pay the bills I have to pay
Ain't it sad?
And still there never seems to be a single penny left for me
That's too bad
In my dreams I have a plan"
Money Money Money by ABBA (click here for the song)
Photo by Micheile Henderson on Unsplash
This morning I was discussing with a client her frustration over her team’s lack of compliance with simple administrative aspects of their jobs, like leave forms, pretty cash etc. When I probed to ask what was going on for her team she sighed and said. “They are disgruntled from reading about the executive team pay outs…And their pay has gone down.. they are stressed and demoralised.. Perhaps they are having a little protest???”
Do the employed experience financial strain?
“Nationally one in three adult men and one in two adult women do not understand key basic financial literacy concepts such as interest rates, inflation and risk diversification.”
Preston
Do not assume that because someone is on a ‘good salary’ they don’t have financial difficulties. The following circumstances could impact anyone:
Addictions: gambling; alcohol; drugs; or excessive shopping
Health bills
Keeping up with the Jones’s (or the Kardashian’s)
Domestic violence (especially financial abuse)
Financially supporting relatives who are in debt, or are overseas
Assuming that variable pay (bonus, commissions etc) are a certainty
Greed
Failed risky investments
Decline in general household income due to partner/spouse job loss or other factors
Credit card debt
Unmanageable general financial debt
New mortgage
The gender gap in superannuation
Providing financial support to dependent children
Financial literacy is important determinant of quality of life, wealth accumulation, planning for retirement, superannuation savings, women’s economic empowerment and domestic violence. A recent study found that only 45% adults in Australia are financially illiterate.
What is the impact of financial strain?
“financial strain is the strongest mediating factor between unemployment and ill health”
The large body of research into financial strain, dates back to 1928, when Marie Jahoda studied the impact of unemployment on psychological wellbeing. Consistent with contemporary research she concluded that the majority of unemployed have compromised mental health. A recent meta-analysis found that unemployment is associated with greater incidence of suicide, the greatest risk occurring in the first five years.
Recently researchers have looked that the are emotional and social impacts of financial strain amongst the employed. Financial problems can lead to difficulties in other areas of life such as health and relationships. When people are constantly worrying about money, it detracts from their concentration at work. A recent study found that alleviating financial concerns boosts worker moral, improves planning and focus, productivity, and reduces mistakes.
What can you do?
“If we want employees to fulfil our company’s mission and innovate and effectively deliver services, we simply can’t have them worrying how they’ll make ends meet every month or how they’ll cover the long-term needs of their families.”
Dan Schulman
In 2019 PayPal decided to measure the net disposable income of all their employees, the amount of money they have left each month after covering taxes and essential living expenses. Ideally, they believed that all employees should be able to save 20% of their pay. They implemented 4 initiatives: reducing health care costs; reviewed salaries, offered shares, and provided financial literacy education to enable them to reach their goal.
An interesting aspect of the unemployment literature is impact of social support. Regular readers would be aware of the benefits of social support on wellbeing (click here for my blog on relationships and wellbeing and here for my blog on social support during times of change). Researchers have repeatedly found that perceived availability and satisfaction with general social support reduces impact of financial strain.
Finally, if your staff are experiencing distress and encourage them to get help from a trusted Financial planner and a Clinical psychologist.(click here for my blog on asking for help)
So what is my client's plan? There is a lot of turmoil in her organisation, and in her sector. increasing regulation. Never the less she can control the culture within her part of the business and foster psychological safety. She has some influence over salaries and she can encourage her employees to improve their financial literacy. To begin this slow process, she is meeting individually with each of her team to see what’s going on for them. When I catch up next with my client it will be interesting to hear about the impact of these conversations.
References: Baron, J.N. (2013). Empathy wages?: Gratitude and gift exchange in employment relationships. Research in Organizational Behavior, 33, pp.113–134. Balkin T (1999) Impact of Unemployment On The Psychological Wellbeing Of Migrants And Non-Migrants (unpublished master’s thesis) Duberstein, P.R., Conwell, Y., Conner, K.R., Eberly, S. And Caine, E.D. (2004). Suicide At 50 years of age and older: perceived physical illness, family discord and financial strain. Psychological Medicine, 34(1), pp.137–146. Grant. A. (11/5/21) Why it Pays more to Pay More: Transcript, WorkLife www.ted.com. (n.d.). Why it Pays more to Pay More: Transcript. [online] Available at: https://www.ted.com/podcasts/worklife/why-it-pays-more-to-pay-more-transcript open.spotify.com. (n.d.). Why it Pays to Raise Pay. [online] Available at: https://open.spotify.com/episode/4KN4psnx1erdbHFCdBSDof?si=GO_HbMRhTROHnchE6XT_jg Gregory, M. (2018). The Psychology of Money. [online] PsychHelp. Available at: https://www.psychhelp.com.au/the-psychology-of-money/. Kaur, S., Mullainathan, S., Oh, S. and Schilbach, F. (2021). Do Financial Concerns Make Workers Less Productive? [online] www.nber.org. Available at: http://www.nber.org/papers/w28338 [Accessed 19 May 2021]. McLeod, S. (2010). SRRS - Stressful Life Events and Daily Hassles | Simply Psychology. [online] Simplypsychology.org. Available at: https://www.simplypsychology.org/SRRS.html. Milner, A., Page, A. and LaMontagne, A.D. (2013). Long-Term Unemployment and Suicide: A Systematic Review and Meta-Analysis. PLoS ONE, 8(1), p.e51333. Preston, A. (2020). Financial Literacy in Australia: Insights from HILDA Data. [online] . Available at: https://www.financialcapability.gov.au/files/financial-literacy-in-australia-insights-from-hilda-data.pdf. Sarason, I.G., Levine, H.M., Basham, R.B. and Sarason, B.R. (1983). Assessing social support: The Social Support Questionnaire. Journal of Personality and Social Psychology, 44(1), pp.127–139. ideas.ted.com. (2020). How can you ensure your workers are not just surviving — but thriving? A CEO shares a new approach. [online] Available at: https://ideas.ted.com/how-can-you-ensure-your-workers-are-not-just-surviving-but-thriving-a-ceo-shares-a-new-approach/. www.aipm.com.au. (n.d.). Can Australia Close the Gender Gap on Superannuation? [online] Available at: https://www.aipm.com.au/blog/articles/can-australia-close-the-gender-gap-on-superannuati [Accessed 11 May 2021].