The last few years have seen a renewed focus on poverty, and especially on poverty for people who are in work.  Indeed, a commonly cited statistic suggests that almost half of American adults don’t have $400 spare to cover any emergency expenses.

While the finances of employees may seem like none of an employer’s business, new research from the University of Pittsburgh suggests it is perhaps something employers should pay attention to.

“Persistent worry about anything is bad for physical and psychological health, but more than that, financial worries can affect people’s abilities to do their jobs,” the researchers say.  “We depart from the usual focus on the motivational power of money to show that it can play a prominent role in people’s ability to perform at work.”

Stretched resources

The rationale shares many similarities with the scarcity theory espoused by Eldar Shafir and Sendhil Mullainathan in their recent book Scarcity: Why Having Too Little Means So Much, in which the economists argue that each of us has a finite amount of mental energy, and financial worries inevitably depletes that energy a considerable amount.  This in turn results in us making poorer decisions, which exacerbates our problems.

The research explored how this unfolds in a variety of workplace settings.  For instance, one experiment played out in the trucking industry, where there are obvious consequences of distraction and stretched resources.  Among over 1,000 short-haul drivers, the researchers discovered that financial stress was clearly linked with a greater risk of accident among those drivers.  Indeed, every incremental increase in the financial concern felt by the drivers corresponded with eight preventable accidents.

While this has evident safety-related consequences, the researchers were also able to translate it into dollars and cents, and believe it costs the firms they assessed around $1 million per year at least.

As such, the authors urge employers to provide employees with more support in managing their finances (although they fall short of advocating higher pay in itself!).  They nonetheless believe initiatives such as mortgage assistance or savings matching schemes could prove beneficial and popular with employees.

“Our findings suggest that companies have a significant stake in the financial wellbeing of their workforce and are well served by instituting practices that reduce employee financial precarity,” they conclude.