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Why 80% of US Employees Have Problematic Debt

American companies have an emerging but unfamiliar problem: Many of their employees are in serious debt.

When a chief executive lies awake at night and worries about company issues, debt-ridden employees wouldn’t normally make that list.

It has now.

According to the 2022 Workplace Wellness Survey by the Employee Benefit Research Institute, “most employees are concerned about their household’s financial well-being, and most employees describe their level of debt as a problem.”

Employees also say that their employers “have a responsibility to ensure they are physically, emotionally and financially well," but less than half "rate their employer’s efforts highly in these areas.”

The report noted that 3 of every 5 (60%) staffers are at least moderately concerned about their households' financial well-being, up from 49% in 2021. 

Fully 4 of every 5 (80%) of employees describe their level of debt as a “problem.”

Additionally, about half of employees are concerned about their emotional (50%) and physical (48%) well-being.

Employers Are Obligated, Employees Say

The report noted that 77% of employees say their employers have a responsibility to ensure staffers are mentally healthy and emotionally well.

Two-thirds (66%) say it’s their employers' responsibility to ensure employees are financially secure and well, the study said.

Critics may say employees who are paid a decent wage should look after their own financial health, but forward-thinking companies should feel differently, some business experts say.

“In recent years, key metrics like job satisfaction, benefits satisfaction, and ratings of work/life balance have remained fairly consistent,” said Lisa Greenwald, CEO of Greenwald Research in Washington. 

“It’s important to note the declines measured this year in overall benefits satisfaction and in ratings of work-life balance, which contrast with stable job satisfaction," she said. In addition, more employees say remote work has improved their well-being. 

So the declines in overall satisfaction and work-life balance "underscore the need for employers to ramp up well-being efforts,” she said.

Need for Financial Savvy

According to the research institute's study, U.S. workers are beset with debt in high-risk areas like credit cards, health-care expenses, and student loans, among other household financial concerns.

Financial professionals say a little education could go a long way to solve some of those employee-debt problems.

“Addressing financial literacy is critical to managing money,” said BrightPlan Chief Marketing Officer Neha Mirchandani.

The San Jose, Calif., firm's 2022 Wellness Barometer Survey showed only 13% of employees were able to answer four out of five basic financial-literacy questions. That's a bigger and more common issue for people than previously thought.

“A person struggling with financial anxiety can’t become financially secure if they don’t understand what they need to do to get there, and this starts with building up their financial literacy,” Mirchandani said.

Those with higher financial literacy are more likely to make ends meet than those with lower financial literacy.

According to the BrightPlan study, smarter financial consumers spend less than their income, set aside emergency funds; and understand their retirement-savings needs. “The higher a person’s financial literacy, the less likely they are to experience financial anxiety,” Mirchandani added.

Should Employers Do More to Educate Staff?

Does that mean employers should take on a larger role in educating employees on money management issues at the very least?

“Philosophically, you could argue that employers have a role in employee financial security, but in reality it is the personal responsibility of the employee to stay financially secure,” said John Shrewsbury, financial adviser and co-owner of GenWealth Financial Advisors, Bryant, Ark. 

“It’s not the employer’s responsibility if one of their employees went out and paid too much for a house or a car, or ran up their credit cards.”

Shrewsbury does say employers can play a role by providing employees with financial education, which includes not only helping them understand their 401(k) plans but providing some personal financial education.

“A financially stable employee is a better employee than one who has money problems,” Shrewsbury said. 

“Employers can provide that education at scale, which can give employees the impetus to correct some financial mistakes and get on a better track.”

“But at the end of the day, it’s the employee who must take the action and follow through on the advice.”