The last time unemployment rates were as low as their present levels, Queen were topping the charts with Bohemian Rhapsody, and the world was being introduced to the very first Inspector Morse novel. But while unemployment may be at its lowest rate since 1975, even if you’re in work you may still be feeling the pinch financially.
Inflation is currently outstripping wages growth, meaning the spending power of pay is falling away. Real pay growth, once it’s been adjusted for inflation, is at its lowest for two years.
According to the Office for National Statistics, total pay in January 2017 was 1.7% higher than in the January 2016. But inflation stood at 1.8%, neutralising the effect of many pay rises and making life even harder for anyone who hasn’t received an increase.
There were more bleak findings recently from the Resolution Foundation. Its analysis showed that, while some industries have seen reasonable increases in pay rates, in others there has been little or no movement. Some professions have seen earnings remain almost flat for the last 15 years.
Analysts are also predicting that inflation could be as high as 3% by the end of 2017. Under current circumstances, it’s very unlikely that wage growth will match that.
Add that to steeper prices in supermarkets as a result of the weakened pound as well as warnings of higher gas and electricity prices, and it’s no surprise that many households are finding themselves with significantly less spending power.
What does this mean for individuals at work? Neyber’s 2016 research, The DNA of Financial Wellbeing showed that 64% of employees already borrow to meet basic financial needs, with 37% using credit cards and 8% going to payday lenders to do so.
As pressure ramps up on everyone’s pay, people who are struggling to make ends meet could find themselves with an even greater need to borrow. Even employees who have just about managed to date may start to find themselves with shortfalls, particularly when unexpected expenses appear out of the blue.
As such, employers need to find ways of helping their staff make their pay go further. Employee benefits such as health cash plans and salary exchange benefits where applicable can help, as can supporting staff with a financial wellbeing programme. A huge 70% of employees worry about their finances according to our research, resulting not only in stress, anxiety and lost sleep, but also in falling productivity at work.
Our research also showed that over 50% of staff would like access to affordable loans, attractive savings and financial awareness programmes as an employee benefit. The economic signs suggest that, as prices go up and pay remains relatively static, those benefits will become even more valuable. With 67% of employees believing that their employer doesn’t care about their financial wellbeing, giving employees access to an ethical and affordable means of borrowing money through work not only boosts staff peace of mind, but also make it clear that their employer really is committed to supporting them through the tough times ahead.