Money’s the matter
March 10, 2009 by Bill MeltzerPosted in: Compensation, Employee Assistance Programs (EAPs), In this week's e-newsletter, Latest News & Views
Do you know the fastest-growing reason for EAP use since 2003?
It isn’t for substance abuse or depression. Actually, it’s financial in nature. Over the last five years, there’s been a reported 69% jump in employee EAP use related to personal financial concerns. The trend is not all that surprising in this era of salary freezes, high deductibles and cost-sharing of benefits premiums.
Statistics show that, for the first time since the Great Depression, the average American has negative savings — in other words, debt exceeds income — in a typical month. Many employees are racking up high credit card debt, make the problem worse.
Troubling trends
Here are some ominous numbers from a recent employee survey:
- 27% of respondents said they were “one major setback away from financial disaster”
- 22% say they were “worse off than last year, with less take-home income and more debt”
- 40% say their employer is “insensitive to their employees’ financial needs,” and
- only 6% said they felt comfortable with their current financial situation and ability to manage their debts.
The majority of personal-finance related EAP use arises from concerns over debt management, household refinancing and/or failed investments.
March 17th, 2009 at 11:28 am
I have worked in the EAP field since 1975 and the increase in financial problems began to manifest themselves about 1995-1996. Until that time, when I would look at end of the year statistics and what problems made up our top five, financial was never there. In 1996, it was number 4 on the list for the first time. Since 1997-1998, financial problems have consistently been the number one or number two problem, each year, through 2008.
At a previous EAP, that I managed, we even had funds set up to help employees at one of our major companies. These funds consisted of a small loan fund, at zero percent interest, and a charity fund to help with items like rent, food, gas, utilities and car repairs.
Finally, I find it interesting that payday loans weren’t mentioned as a major statistic. They have been a major contributor to much debt and brought a lot of people to our offices over the years.
March 19th, 2009 at 9:42 am
Could any of these financial woes be because people do not live within their means? They drive high-in vehicles, buy houses they can’t afford, plus they buy all the toys like boats, all terrain vehicles, and motorcycles. Then they want to complain their employer doesn’t pay them a decent wage when they find themselves in debt.
March 19th, 2009 at 1:25 pm
While I think part of the problem may be, at least in some cases, what Debbi mentioned (people not living within their means), I think there are a lot of other contributing factors involved. The cost of living has exceeded the rate of raises for many individuals, underlying mental health issues sometimes cause unhealthy or less than smart decision making, employees are contributing more to medical insurance and paying more out of pocket for medical care, people have lost jobs and have been unable to find something that is comparable…if they can find anything at all…just to mention a few issues. What used to be adequate just doesn’t quite pay all the bills any more, so saving is out of the question. Additionally, many people have had their life savings, including their 401(k), wiped out during a crisis and recovering is very difficult. If you have been lucky enough not to go through some kind of financial crisis in the last 5 to 10 years, you have been lucky indeed. And until you have it happen to you and have to deal with the fallout, it’s easy to point fingers and dismiss the problem as being the “fault” of the person experiencing the crisis. But that’s not necessarily reality.
I’m not really surprised by what this article says other than to say I thought stress and depression would be pretty high on the list of reasons to access an EAP and I’m wondering where they currently fall per the statistics. I’m also wondering if the financial issues people are experiencing could be keeping them from obtaining help they need with other major issues. Or are the results more related to the remaining stigma of obtaining counseling for a mental health issue? I continually encourage our employees to use the EAP when they are going through any kind of a crisis situation, but I find that most of the time, they don’t take advantage of this benefit. I would like to better understand why so I could do a better job of assisting them when they need a helping hand.
Sorry I got a bit off topic, but this article caused me to think. Thanks!
March 19th, 2009 at 2:19 pm
I promote the usage of our EAP to employees on a continuous basis and I agree that the usage for financial problems has increased significantly. I’m assuming that if this is causing other medical issues they are seeking assistance for these at the same time. Statistics have to be categorized and if the primary driver is the financial issues, that’s where they will be categorized.
Debbie is making an assumption that people in a financial crisis are living beyond means, but as R.B. states there are other contributing factors. Look at our economy — people are suffering job loss, companies trying to stay afloat are reducing work hours and/or decreasing salaries, benefits provided by employers have changed and employees are paying more for their share of the premium, wage increases aren’t keeping up with the cost of benefits, . . . . just to name a few. As a result very few people have the ability to actually set aside 3-6 months of their salary in savings, just in case their is a job loss (as financial planners recommend). If you are a victim of a layoff or plant closure, unemployment will by no means cover your monthly bills — basic necessities yes but not much more. It’s not unusual for people to be unemployed for 6-12 months these days. Creditors will work with you for a few months, but not much longer. Once a person finds a job it may not be at the same rate of pay, which makes it that much harder to recover from the period of unemployment. It takes alot to move past this . . . . . years.
March 20th, 2009 at 2:30 pm
D. Smith is right in part, but now that people are not buying these toys, the econ is sliding into the tank. We always hear about the lessons of the Great Depression and the impact it had on the spending and saving habits of the generation that lived through it. I wonder how America will be affected by the lessons we are being forced to learn.
March 25th, 2009 at 4:29 pm
This will be my second comment, but, as R.B. says above, all your comments made me think about the stats as they evolved since 1995. Before I start, I also want to say that everyone of you, Debbi, RB, Jodie and HB made valid comments about the reasons for this issue. At least they are valid based on my years of EAP experience.
There were a few things I might add. Many of the people we assisted since 2000 have been average paid or lower paid employees. The higher each person was on the pay scale, the easier it was for them to adapt to all kinds of changing situations. Lower paid people couldn’t react as well when major changes took place.
Referencing some of the above, many people have quit saving for a rainy day. Having served on the Board of a Credit Union, I have seen national statistics stating that less then 10% of our citizens have a savings account above $500 and something like 85% have no savings at all. Such information doesn’t bode well for those hard times people will face.
Most people have no concept of living on a budget and maintaining it. Credit has been easy and a major growing concern for a great many years, under both political parties. Of course we have been hammered by television and other media advertising, for heaven knows how long, “why wait,” get it today on credit. Buy now, pay later.
Out of control credit issues were one of the things that frequently walked into our EAP office. Closely associated with that issue were people who ran to payday loan groups, that charged 200-400% interest, to get money to pay off debts they couldn’t pay in the first place. It was a merry-go-round and kept the garnishments flowing to HR departments.
On the big toys, homes were our biggest issue for all salary classes. Even highly paid executives often way over spent on a home or got highjacked by an adjustable rate mortgages. I have talked with weeping VPs who were losing high priced homes or condos and looking at living with a friend or parent. I know a highly paid technical worker who ended up living in his van, in his parents driveway, after he lost his home in the recent mortgage crisis.
Probably the most frequent issue, about homes, is when you have a working couple and one of them is spending their entire income on a home mortgage. Then one of the couple would lose their job and have to take a major cut in income or be off for months. Needless to say, we saw many folks facing bankruptcy over the home, because of these issue.
My personal opinion, having worked in this field since 1975 and assisting somewhere around 345 companies in six states, is that this financial issue is universal amongst workers. I think it will grow and will require a lot of changes in the mindsets of people about how to effectively manage their money in the future. Companies and HR will be confronted with these issues for a long time to come. We may have to relearn the lessons of the Great Depression, as HB states in his comment.
Finally, RB mentioned thinking stress and depression would always be high on the list of major issues going to EAP and they are there. Probably always in the top five with variance from year to year. However, any major upset will cause stress and in many cases depression, so you could almost say they are always there.
Thanks for listening to my ramblings a second time.
March 26th, 2009 at 2:34 pm
Lets not forget that home prices were artificially driven up by investors and speculators for years … as were stock prices … all the while middle-class and lower-class incomes have stayed flat or declined relative to inflation.
While all this is going on, businesses ply for more and more of people’s disposable income on the next must have technical gadget that does absolutely nothing to truly add to the value of our lives. Shame on us for buying into this garbage, but more shame on all those whose excess greed has had the greatest impact on world finance crumbling down around us.
March 26th, 2009 at 5:49 pm
Just to compare apples to apples, during the Great Depression there were no EAP’s available to anyone, much less counseling. The obvious solutions were to either live with it or commit suicide. There are many common things with both events; people lost jobs, couldn’t afford to go to the doctor, couldn’t afford to keep up their homes or pay rent, etc. A lot of that was through no fault of their own, the economy just tanked and the money was not there anymore. I’m sure there was major stress and depression; I had a great great-uncle who committed suicide because he lost everything he owned. His wife, however lived through the painful aftermath and did not die insolvent but with a drastically reduced lifestyle. It was not his fault; investments just fell apart and so did the economy. There is a saying that those who do not learn from history are doomed to fail (something like that). Obviously we did not learn or those who are supposed to regulate these things did not learn or adapt.