Some 67% of employees believe that their cost of living is outpacing their growth in wages, according to a new Bank of America study.
The number of employees stressed about their purchasing power relative to their earnings leapt up nine percentage since February 2022, when it was 58%, the bank said in releasing the survey today.
“American workers continue to feel stressed about their finances and are concerned about keeping up with the cost of living,” Lorna Sabbia, BofA’s head of retirement and personal wealth solutions, said in a statement.
That puts the spotlight on employers, she said. “Companies who show a sense of urgency for their workforce by offering financial wellness programs and resources which support employees’ immediate needs and overall well-being will continue to stand out as employers’ of choice,” Sabbia said.
With inflation at 40-year highs despite 11 interest rate hikes by the Federal Reserve Board since March 2022, the rising price of goods and services is accelerating employees’ economic stress and uncertainty, the survey of 1,300 workers found.
As a result, employees’ sense of financial wellness has dropped to 42%, the lowest rate since the study’s launch in 2010, BofA reported. Still, 56% of employees remain “cautiously optimistic about their financial well-being over the next two to three years,” the bank said.
But the stress is taking a toll on employees’ savings priorities, with more employees reporting they are prioritizing their short-term financial needs over retirement this year.
“Fewer employees are prioritizing long-term retirement savings (31%, down from 45% in 2022) as a growing number are focusing on short-term financial needs, including paying off credit card debt (16% vs. 11% in 2022) and saving for the unexpected (13% vs. 8% in 2022),” BofA said in the report.
Employees reported they look for support from their employers, with most employees (76%) and employers (96%) agreeing that employers are responsible for employee financial wellness. However, only 40% of employers currently offer financial wellness programs, BofA said.
Women in particular are suffering from financial stress, with only 38% of women reporting they feel financially fit, down from 55% in 2022 for a five-year low.
Some 54% of women report they won’t be able to make ends meet due to inflation, compared to 32% of men. Overall, 39% of women say they have had to look for additional employment to make ends meet, compared to 17% of men, the bank said.
Employers also tend to underestimate the financial stress of cargiving on their workforce, BofA found. More than half of employees (56%) identify as caregivers, while employers believe that only 35% of their workforce are caregivers.
While employers report lower employee attrition rates this year compared to 2022, filling vacancies and staffing new positions continues to be a challenge, the bank said. “Nearly one-third of employees (32%) say they switched jobs or considered leaving their company in the past year, with the top reasons including burnout (53%), size of pay increases (44%), and work-life balance (41%)," the bank said.
More employers plan to offer workplace flexibility in the next three years, according to the survey. Right now, more than half of employers currently have an in-person work model (55%), followed by hybrid/mix (39%) and fully remote (6%) models. “However, in the next three years, more employers plan to shift to hybrid/mix (47%) and remote (17%) models, while fewer (36%) plan to maintain a fully in-person model,” BoA said.