As businesses focus on attracting and retaining top talent, a common trend has emerged across the labor pool that companies need to recognize. Employees are increasingly concerned about their personal financial situations — a trend that’s as old as time, but one that’s jumped even further to the forefront since the pandemic.

Stress over personal financial well-being affects daily work productivity. It’s a lose/lose situation for employees and employers alike. But as we understand more about financial health and employees in the workplace, it’s become clear — not all of the labor market experiences financial wellness in the same way. The ability to manage expenses, build wealth, and prepare for and recover from financial setbacks is sharply divided between ethnic and racial subsets of employees.

Financial equity across ethnic and racial populations of employees significantly boosts productivity.¹

But financial health doesn’t just happen on its own. In many instances, financial education appears to be an afterthought. Starting from grade school, only 22 states currently require high school students to complete a personal finance course.²

No wonder 89 percent of Americans believe a lack of financial literacy leads to lack of job opportunities, unemployment and wealth inequality.³

However, employers are beginning to fill this gap. More and more companies are offering robust financial wellness programs — which is creating a win- win situation for both employers and employees. And increasingly, they are adding components to workplace programs that address ethnic and racial financial equity.

Ethnic and racial wealth inequities have significant consequences to employers

Ethnic and racial wealth inequities in the U.S. take their toll on all aspects of American life, from social/welfare costs, mental health, housing and neighborhood resources, to political and social marginalization. And these inequities have an enormous impact for employers and the workplace.

Ethnic and racial wealth inequities weaken the economy

Lower incomes due to ethnic and racial inequities lead to lower spending power and dampen the economy, such that employers have smaller markets to sell their goods and services. The impact is significant. A study by McKinsey & Company⁴ estimates that the dampening effect of ethnic and racial wealth disparities will cost the U.S. economy between $1 trillion and $1.5 trillion between 2019 and 2028. In other words, were we to decrease ethnic and racial wealth inequities, the real GDP could be 4 to 6 percent higher by 2028.

Ethnic and racial groups have far fewer cost-secure American households

% of total

West Health-Gallup, June, 2022

Lack of employment diversity hinders innovation and the diversity of customer bases

Employees representing ethnic and racial diversity in research and development allows for product and service innovations that consider diverse customers and markets that may otherwise be overlooked. According to a study by UNC Pembroke, in a global economy, “companies need employees who understand all of the markets they currently serve or aspire to serve. These markets may be geographic, or they be market populations or segments such as a particular ethnicity in a certain country. A workforce that mirrors its customer base has fewer barriers and more built-in advantages to plan and execute effective business strategies and communications.”⁵

Lack of a commitment to racial and wealth equity makes recruiting difficult

Many employers sincerely want to improve diversity, equity and inclusion in all levels of employment. Yet they may face significant barriers, many unintended, such as:

• Limited outreach
• Biased job descriptions
• Unconscious hiring bias
• Poor training/education programs
• Lack of diversity within leadership positions

Undiversified workplaces can become self-perpetuating through unconscious biases. These factors combine to make recruitment costly and difficult.

The business case for ethnic and racial financial wellness programs at the workplace

There is a strong business case for employers to combat social inequities by instituting financial wellness programs that benefit all employees, including ethnic and racial employment groups.

Financial wellness attracts diverse talent

Workers worried about inflation and facing employment and wage discrimination based on race and ethnicity are attracted to employers that offer financial wellness benefits. A 2023 PNC financial wellness survey indicates 80 percent of respondents would seek out and stay longer with an employer that offered more financial wellness benefits. And 96 percent of employers from the same survey say financial wellness benefits improve retention.⁶

The survey found that employees equate financial education and counseling with four other financial priorities where they look to employers for help: emergency savings accounts, debt consolidation, equity compensation and retirement fund matching.

Financial wellness boosts employee engagement, productivity and retention

In 2023, PwC’s Employee Financial Wellness Survey found that 57 percent of employees say finances are the top cause of stress in their lives.⁷

The PwC survey found that financially stressed employees:

• Are twice as likely to look for a new job (36 percent who are financially stressed vs. 18% who are not)
• Would move to an employer that cared more about their financial wellness (73 percent)
• Want help with their personal finances (74 percent)
• Are distracted from being productive

However, there is a silver lining. Employers are now feeling a stronger sense of responsibility for their employees’ financial well-being. According to a 2022 Bank of America study, 97 percent of employers feel responsible for their employees’ financial wellness — up from just 41 percent in 2013.⁸

This commitment by employers to employee financial wellness is recognizing — and addressing — disparities among employees by ethnicity and race. 74 percent of employers believe diversity and inclusion programs, such as financial wellness, are important for retaining talent.⁸

With more companies investing in financial wellness programs for employees, success stories are emerging every day. In addition, workplace financial wellness programs are becoming more robust and addressing a range of broad topics to help employees save for retirement, plan for health care costs, budget, save for college and manage their debt.⁹

Businesses that have incorporated financial well-being into their employee benefits package are seeing positive results — from higher retention rates and reduced absenteeism to increased benefit participation and better overall plan health. Moreover, eight in 10 employers believe financial wellness programs “create more productive, loyal, satisfied and engaged employees,” and are modifying wellness programs to address employees’ evolving needs.⁹

Five employer strategies for achieving ethnic and racial financial equity

Financial education programs in the workplace are a critical component for achieving ethnic and racial financial equity. And efforts to achieve ethnic and racial financial equity have paybacks for the employee and employer. The employee enjoys better financial stability and is more productive; the employer sees greater retention and an enhanced ability to attract top talent.

But ethnic and racial financial education is just one part of a broader goal to achieve ethnic and racial financial equity.

Why choose financial wellness?

Employers can make a difference by offering financial wellness programs designed to serve all employees regardless of their ethnicity, race or financial situation.¹⁵ Employees across the country are reaping positive benefits from these programs — they’re creating lasting behavior changes and becoming less stressed and more confident about their personal finances.

As more companies compete to attract the best candidates, robust financial wellness benefits can also help fortify corporate employee benefits packages, and in turn attract and retain quality employees.