piggy bank money stress

Money Stress Creates Work Mess

Editor’s note:  I love thinking, talking and writing about how money messes with our heads. Heck, I wrote two books about it.  It’s fascinating.  I don’t think money is “the root of all evil” – money is actually great, it’s allowed modern society to flourish – but it sure can contribute to some bad outcomes. Especially when we’re stressed about money and our future. 

This article – and the study upon which it’s based – shifts the argument for providing financial security from a moral, social and, in some cases, satirical one (winkto a business one.  Having workers with financial stress hurts the bottom line. That’s not a campaign slogan, it’s science.

As Bob says below, “the study makes a fresh business case for treating employees well – but it's not as simple as a pay raises.”  Providing financial predictability, flexibility, education and, probably, buying all my books (no, Jeff, bad!) also helps alleviate financial precarity and improves the lives of individuals and organizations alike. 


Could money trouble at home lead to serious mistakes at work?  New research connecting financial worries with trucker accidents offers some of the first data linking job performance and financial stress. The study makes a fresh business case for treating employees well – but it's not as simple as a pay raises.

When Jirs Meuris arrived in Pittsburgh to pursue his Ph.D. in Organizational Behavior, he expected the work to be challenging. He didn't expect personal finance worries to get in the way.  But his wife had trouble finding a job in their new city, and suddenly, the young couple was struggling.  

"We went from a two-income house to a one-income house, with that one income being a grad student," Meuris said.

The financial stress was distracting and threatened his work, so Meuris did what smart scholars do: He started researching.

Meuris quickly learned he wasn't alone. Like many American workers today, he was suffering from precarity – a sense of financial precariousness, living month-to-month, unsure how the bills will get paid. It quickly became obvious that worries about money could indeed impact his work. So he dug deeper to study the workplace consequences of precarity.

"When I started my Ph.D., this was not what I was going to do.  But a lot of the things I wrote about at the beginning were experience-based," Meuris said. "When I was doing my Ph.D. I knew there was a light at the end of the tunnel. But there are a lot of people who don’t have that light. That was for me the driving force. I asked, ‘Is there anyone out there looking at this?’ What I found is that there wasn't really that much conversation going on.” 

Eventually, he switched focus and wrote a dissertation titled, in part, "Employee finances as a barrier to work performance."

“People don't have savings, and they have so much debt… are companies affected by these trends? I thought that was an area relevant to me and an important conversation to have,” he said.


The Price of Precarity

Meuris is now assistant professor in the Management and Human Resources Department at the University of Wisconsin-Madison.  Earlier this year, he published the truck driver study with Professor Carrie Leana of the University of Pittsburgh. Research for "The Price of Financial Precarity: Organizational Costs of Employees’ Financial Concerns” demonstrates that drivers who were stressed about their bills at home did indeed take those worries out on the road. Perhaps more important, Meuris was able to set a price tag on that financial stress. 

Meuris was able to set a price tag on that financial stress.

“Financial precarity came out as significant predictor of accident rate,” he said. 

Each standard deviation of increased driver precarity was linked to about a half-percentage point increase in likelihood of a preventable accident. In dollars and sense, that's a huge increase. Each accident costs the trucking company more than $100,000. At the average-sized truck-driving firm studied, Meuris estimated an annual $1.3 million in preventable costs from accidents linked to precarity.

It makes sense. After years of public campaigns about texting and driving, and gruesome evidence of links between smartphone use and accidents, there's little question about the danger of distracted driving. What's more distracting than not being able to pay the bills?

"Drivers who worry more about their financial situation are more cognitively taxed and, as a result, are more dangerous on the road," Meuris and Leana write. "People who are worried about their financial situation have less cognitive capacity available to them, which subsequently spills over into their work performance."

People who are worried about their financial situation have less cognitive capacity, which subsequently spills over into work performance.

The problem is potentially widespread. A Creditcards.com survey found that 65% of Americans say they lose sleep over money worries. Studies show that roughly one quarter of Americans have no emergency savings at all; another one-quarter have less than the recommended minimum three months’ living expenses.  


What creates financial precarity?

There's a lot more to it than money. In fact, truckers Meuris studied appeared to be solidly middle-class, earning between $50,000-$70,000, many living in relatively inexpensive areas. A feeling of precarity seems to have more to with the size of someone's bank account than the size of their paycheck, Meuris thinks.

“What I found was one of biggest drivers (of stress) was not having savings,” he said. “Income, it's really not the most important driver. It's really about your about safety net.” Workers who are one illness, or missed bonus, or auto repair bill away from missing a mortgage payment suffer far more stress than those who are more prepared for the unexpected. Emergency savings are key, Meuris said.

That leaves a lot of opportunities for companies to help take workers off the financial ledge without simply throwing more money at the problem. Meuris’ follow-up research is examining the impact of automated emergency savings accounts on workers.

Other research on precarity has started to pile up recently, much of it coming to similar conclusions. In their book The Financial Diaries, Jonathan Morduch and Rachel Schneider argue that variable income and expenses have more to do with economic insecurity and precarity than annual salary. The authors asked about 200 families to track every penny coming in and out for a year, and found that for a stunning 5 out of 12 months, incomes could vary more than 25%. Income swings hit hourly workers hard, but even full-timers increasingly rely on bonuses and commissions, leaving them wondering month to month if they'll be able to pay the bills. This creates a set of "part-time poor," Morduch says. Even workers whose annual incomes are solidly middle class would qualify for government aid a few months out of the year.


Variable income and expenses have more to do with economic insecurity and precarity than annual salary. 

“This is creating a lot of anxiety and uncertainty that is impossible to see in the usual data,” Morduch said in an interview. About five months out of each year, incomes “weren’t even close” to average.

"We need to think about the safety net in a different way,” he said. “A lot of families end up at the poverty line for a few months, even though they are not near it on an annual basis."

Morduch sees some of the same issues as Meuris. For a group of workers without significant savings, income swings are far more perilous. Morduch calls the problem a lack of "slack." They have no margin for error.

He thinks the problem is better described as a lack of liquidity – just surviving until the next paycheck -- than insolvency, or a hopeless difference between income and expenses.

“Families we got to know -- they think a lot about liquidity,” he said.

Another trend that contributes to precarity is variable work schedules, an issue that's recently attracted much attention – and some local legislation.  A recent study found that three-quarters of workers at large retailers get less than two weeks' notice about their schedules. That screws with sleep schedules, financial planning and critically, child care arrangements. Not surprisingly, there is a link between schedule instability and income instability – two thirds of workers in this group said their incomes vary week to week. 

Researchers Daniel Schneider and Kristen Harknett call this "temporal instability" or precarious scheduling practices. In a working paper, "Consequences of Routine Work Schedule Instability for Worker Health and Wellbeing," the two argue that unpredictable work schedules are an even bigger source of anxiety, and precarity, than money.

"While low wages are also associated with these outcomes, unstable and un-predictable schedules are much more strongly associated," their report says. Technological leaps that make it easier for companies to optimize “efficient husbandry” of workers have exacerbated the unpredictability.

Predictability matters so much to workers that one study found a set of employees were willing to take a 20% cut to wages in exchange for a job that provided one week of advance notice of work schedules.

"We find consistent negative links between variable work schedules and important aspects of worker wellbeing such as sleep quality and feelings of distress or happiness," Schneider and Harknett found.

There are a lot of opportunities for companies to help take workers off the financial ledge without simply throwing more money at the problem.


Is anyone trying to fix it?

Corporations are aware of the issue, and some creative solutions are already being offered. The issue of workers facing cash shortfalls is so common that some management columns tell bosses what to do when their employees ask to borrow money. Some firms, including Walmart, offer workers the chance to access pay before payday – an inexpensive in-house substitute for payday lending products.

How effective are these solutions? That’s hard to say. Establishing additional scientific links between financial stress and workplace performance isn’t going to be easy, Meuris warns. Unlike other workplace wellness research – such as the link between encouraging flu shots and a drop in sick days – productivity lost to precarity is very difficult to quantify. So is precarity itself. 

Productivity lost to precarity is very difficult to quantify. So is precarity itself. 


"Precarity is more of a feeling," he points out.  “If all you have is data, objective numbers, you still don’t know the driving force, which is how workers feel.”

The various and specific contributing factors – like variable work schedules – suggest a lot of avenues and opportunities for companies.  After Starbucks’ scheduling practice of “clopenings” – workers leave the store late at night and are expected to arrive early the next morning – was shared in The New York Times, the firm said it would end the practice and give workers more notice. Walmart pledged more regular schedules in 2016. Cities from New York to Seattle have passed advanced scheduling laws, also called predictive scheduling laws. These generally require two week scheduling notice, or a “penalty” paid to the worker of 2-4 hours.

While the laws can be hard for employers to accommodate, there is at least some evidence it’s worth the trouble. An experiment conducted at The Gap linked two-week scheduling notice with a 7% increase in productivity.

“An impressive number in an industry in which companies work hard to achieve increases of 1-2%,” write report authors Joan C. Williams Saravanan Kesavan and Lisa McCorkell in their Harvard Business Review article about the study.

So trading some of that “efficient husbandry” of worker time in exchange for worker sanity is one simple step back from the edge of precarity – and it might pay for itself. So is a return to predictable paychecks, rather than commission-based, bonus-dependent pay. 

The various and specific contributing factors suggest a lot of avenues and opportunities for companies.   

Of course, more pay might help, too. But as Meuris says often, the issue is more complex than that. He’s continuing to study precarity in different contexts, at the moment researching the impact of money stress on college students and their studies. But again, it’s not the size of the college debt as much as concern about the ability to repay.

“Surveys usually ask, ’How much debt”’ But what's really driving precarity is that feeling. ‘Do you feel like you can handle the financial burden of college? Or your debt?’ That’s usually not captured,” he said.


What else can be done?

When he talks with companies about improving their workers’ financial stress, Meuris focuses on dealing with these feelings of precarity, and why doing so might improve their bottom line.

“When I work with companies I think they are trying to do the right thing. It’s not that they aren't sensitive to these kinds of issues, not that we are telling them something they don't know about,” Meuris said. “I’m telling them there’s additional considerations they can think about when making HR decisions that allow people to focus on their work when they are at work.”

This is something we should be paying a lot more attention to. There’s a strong business case for it.

Often, when companies set compensation levels, they employ a strict calculation concerning what the labor environment requires. But salary isn’t only about attracting workers, motivating them, or retaining them. There’s also the real-life issue or, “Can they live on what you are paying?” In some situations, it might make sense to pay above-market salaries in order to get better work. It also might make sense to offer more predictable bonuses, or simply some training in effective budgeting.

“My work is to show this is an important consideration. I'm trying to show this is in the company’s best interest. Precarity is affecting your business outcome,” Meuris said. “There is a realization at companies that financial stress among employees isn't a good thing… This is something we should be paying a lot more attention to. There’s a strong business case for it.”


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