(Part 3 of 3)
We Can Do Better, and We Should
Employee financial wellness programs, of the kinds I described in my previous post, are a net good. But the U.S. can do better via partnerships among employers, nonprofits and government entities. We should have financial wellness for all Americans. Let’s think about how.
Don’t Hold Your Breath on UBI
There are some good and even powerful people working on the idea of a universal basic income (or UBI), which in theory would go a long way to improving the financial wellness of Americans. It may yet happen in the long run, though I remain skeptical that’ll be anytime soon. In a country that still won’t even change it’s highly expensive and dysfunctional healthcare system, UBI feels unlikely.
Hurry Up and Make Online Education Free
But other things are, I believe, more achieveable. One of those is a universal, free higher education program in the U.S. I’ve outlined an idea for this in a previous post.
It’s badly needed and will work better if employers are involved, able to incorporate their own online training and development courses into the offerings. This would give them a more direct pipeline to well-trained potential recruits.
Although my original proposal focused on online college education, it would not need to be limited to that. It could include trade schools as well, although trying to learn certain trades completely online isn’t feasible. There’s no replacement for hands-on learning in some fields.
Get with the Apprenticeship Program
This leads me to the idea of apprenticeship programs. We could, in part, crib from the very successful German apprenticeship programs, which include:
- an employer-integrated and supported system in which apprentices not only get practical experience but paychecks as well
- a well-strucured curriculum that truly prepares people for careers
- cerifications that talent acquistion professionals recognize
- accessibility by people who may not have stellar academic credentials but are willing and eager to learn
Figure Out How to Help Employees Save More
There are many possibilities here, but let’s point to an existing program as an example of how employers and the government can work together to increase employee financial well-being. The Secure Act 2.0 has already been passed into law. It seems like a worthy piece of legislation, though we’ll find out more once it goes into effective. Here are some of the features:
- Automatic enrollment in retirement savings programs. Starting in 2025, most organizations with 401(k) and 403(b) plans will be required to automatically enroll employees.
- Automatic enrollment of employees in emergency savings accounts, which are capped at $2,500 or less.
- Various other savings related features, such as making it easier for savers to get their tax credits, being able to roll over unused 529 (that is, college saving) plan money, allowing people who are 50 and older to make additional “catch-up contributions” to their retirement accounts, and more.
There are other ideas that could be enacted as well. For example, a surprising number of Americans do not have access to traditional banking services, which can make it difficult to save money or access credit. By promoting financial inclusion and expanding access to banking services, more Americans can improve their financial well-being.
Ensure More Affordable Childcare
Childcare can be brutally expensive for many families. If we can increase affordable access to childcare, families will have a lot more money in their pockets to spend and to save.
Some child care costs more than college, but young parents haven’t had the time to save up for it. What’s more, it’s super costly to businesses. When childcare arrangements break down for any reason, parents are forced to scramble, and this results in $4.4 billion due to lost productivity.
What we do know, though, is that lowering the cost of child care could have a huge impact on the financial well-being of families with young children.
President Biden’s budget for the current fiscal year includes “an investment of $600 billion in early care and education that would fund states to provide universal preschool for four-year-olds and subsidize high-quality child care from birth to age five for families earning up to $200,000.”
The goal is that the lowest income families would pay nothing out-of-pocket and most families would pay no more than $10 a day per child. But with a divided U.S. Congress, it seems unlikely this kind of proposal will go through for now.
Get with Your Community
There are, of course, other ways of supporting employee financial wellness that do not involve government or employers. For example, there are financial support groups, both formal and informal. Various formal groups try to help people improve their ability to save money, build credit, gain a greater level of financial literacy, etc. Then are more informal groups of friends or family members who can provide others with supportive networks and help them stay accountable.
Take a Look at Fintech
Some financial technology (fintech) companies offer new-fangled financial products and services, such as budgeting apps, online investment platforms, and digital banking services. I don’t use any fintech per se, but some people claim fintech’s latest apps and services are more affordable than the stuff coming from traditional financial services.
Caveat emptor, but they might be worth a try, especially for the younger employees they seem to be targeting.
Financial Wellness Has Become More Critical
As I write this, the media–both real and social–is rife with all kinds of economic doomsayers. Honestly, it’s wearing a bit thin. They’ve daily been predicting doom for a couple of years now.
Yes, they’ve often been wrong, but eventually we’ll get a honest-to-God recession. We always do. Maybe it’ll be a big ‘un, maybe it won’t.
Credit Card Debt Is Now High
But, to fair to the doomsayers, there are some bad signs. One of them is that, given inflation rates, more people are leaning on credit cards to afford necessities such as food and rent. In fact, total credit card debt rose to a record $930.6 billion at the end of 2022, an 18.5% spike from a year earlier, and the average balance rose to $5,805.
That all sounds pretty grim. But I should also note that delinquency rates on credit card are still pretty low by historical standards, something the doomsayers seldom mention.
Now, if people start losing their jobs in huge numbers, that could change pretty quickly. Till then, however, chill a bit, doomers.
Economic Indicators Are So-So
There are a lot of financial indicators you can look at to determine the health of an economy, such as:
- treasury yield curves (slightly inverted, not a great sign)
- unemployment rates, still very low (typically a good sign, unless you’re worried about an overheated, inflationary economy)
- GDP growth (predictions for the first quarter of 2023 are all over the place, from -.5% to +1.1%, depending on the source)
- then there are things like industrial production, durable good orders, and consumer spending, none of which look especially terrible right now
But a Lot of Consumers Are Really Hurting
So, the economic indicators are pretty mixed right now, though none look disastrous. But if you’re an American consumer, especially one in lower-income brackets, things are bleaker.
The Washington Post reports, “[T]he average lower-income family spends much more than it earns. These families live paycheck to paycheck and still can’t pay their bills; they typically bridge the gap between what they earn and what they spend with a combination of government benefits and loans.
Seeking Solutions, Not Scapegoats
These are great days for political demagogues, who focus on winding up frustrated people seeking someone to blame for their problems. These politicians seldom if ever have viable long-term solutions, but they are excellent at scapegoating and spreading outrage and fear, hoping to accrue power that way.
And that’s part of my fear of what will happen if we, as a nation, can’t ensure the financial wellness of employees. Because if they’re not well, then they’ll become ever more likely to vote in some despot who signals being a “strong leader.”
In the end, these dictatorial demagogues are the types of people who can set the nation back indefinitely in terms of civil liberties and basic morality. So, we want financially well Americans, especially working Americans, not just because providing such wellness is the right thing to do for them. But because it’s the right thing to do for all of us.