Employee Debt Hurting Job Performance, Study Finds

<i> From Reuters</i>

One cherished “freedom” most American workers will not be celebrating this Fourth of July holiday weekend is freedom from debt.

“The American work force is falling into debt so deep that it is affecting not only their savings for retirement but job performance as well,” an authority on financial education said.

“Employees with money problems"--and that’s most of us, according to professor Thomas Garman of Virginia Polytechnic Institute--"are like sharks in the workplace swimming around taking bites out of the bottom line.”

“We’re finally asking the question, ‘Do money matters mess people up at work?’ ” Garman said. “The answer is ‘Yes! Yes! Yes!’ ”


According to the Federal Reserve’s latest figures, total consumer debt in April exceeded $1.3 trillion.

As the Economic Policy Institute in Washington noted, average household debt levels in 1997 were “well above those in 1983,” or 84.8% of personal income.

Employers who think this is not their issue might be interested in Garman’s research at the National Institute for Personal Finance Employee Education at VPI. By his count, employees waste 24 hours a month on the job grappling with their money woes.

Garman’s research also showed that:


* 54% of the work force worries about their debt.

* 53% are dissatisfied with their financial condition.

* 34% rate their financial stress as “high” to “extreme.”

* 33% concede their money worries hamper job performance.


Such workers, Garman said, are less productive, “get sick more often, lose more time from work and force up employers’ health-care costs.”

What little financial wisdom employers impart usually relates to their company retirement plans. Thus, while those employed by Fortune 1,000 firms having such plans get some financial information, workers employed by smaller firms usually do not.

Rennie Gabriel, president of Financial Coach Inc. of Sherman Oaks and a certified financial planner, said employers do an “abysmal job” of financial planning for two reasons: “They don’t know the information so they can’t pass on what they don’t know,” and, “They’re afraid of getting sued.”

“It’s absurd, but if an employee gets bad information on financial management, he can claim the employer was responsible,” Gabriel said.


As employers’ efforts have been less than successful, 50 million workers are not saving for retirement in a 401(K) plan, and among those who do, 70% “have less than $10,000 in their portfolio.”

Paying the bills is tougher as real wages for many workers have stagnated in recent years. In its “The State of Working America” report for 1998-99, the Economic Policy Institute noted that the hourly wages of four out of five male workers were lower in 1997 than in 1989.

This decline “adds to the pressure on workers and their families,” Garman said.

Although not every employer can raise wages, those who at least offer financial education to employees have the potential to get a $400-a-year boost in productivity in return, Garman said.


There is much that employers can do to promote financial education.

To begin with, Garman said, they can recognize that “workers with money problems can be identified, helped and turned into profit centers.”

Garman suggested that employers take the following steps:

* Start a retirement program for workers. About 75% of the largest employers have one. But 80% of companies with 100 or fewer workers don’t.


* Implement a financial education program. Only about 20% of all employers have them, and these often are “narrowly focused on 401(k) plans,” Garman said.

* Talk to employees about budgeting, money management and consumer protection, as well as retirement. “It’s less expensive to educate their workers on money matters than to put in matching funds. All the research shows that,” Garman said.

* Urge workers to use their pretax reimbursement accounts for health- and dependent-care expenses. The plans offer employees free money to use for retirement savings.

Garman said that if a worker puts $2,000 a year into a reimbursement account, “the employer immediately saves $153.”