Connecting state and local government leaders
“It’s not just the right thing for employers to do,” says the co-author of a new report. “It also makes good business sense.”
Workplace programs that help employees figure out how to better manage their own finances can have upsides for both employers and workers, yet these sorts of initiatives haven’t been widely adopted by local governments.
That’s according to new research from the Center for State and Local Government Excellence. The “financial literacy” programs can take on a variety of forms. They often cover retirement planning, but may delve into other areas—like saving for college or paying off debt.
“Right now, we know that there’s not a lot of local employers that are offering these financial literacy programs,” Rivka Liss-Levinson, a co-author of the report, said by phone on Tuesday. “But we also know that there can be huge benefits to offering the programs.”
“It’s not just the right thing for employers to do,” she added. “It also makes good business sense.”
As part of the SLGE study, researchers surveyed human resource officials about financial literacy training. Of 152 respondents, 26 percent said their local government offered a program to employees, while another 13 percent reported their jurisdiction is planning one.
Among the survey respondents who said their local government did not offer a program, 45 percent said the reason for this was that leadership had not identified it as a priority. While 50 percent said that no employee or age groups had asked for such an initiative.
Liss-Levinson said it’s difficult to make apples-to-apples comparisons about the prevalence of the programs in local government versus the private sector.
“What I can tell you is that 26 percent is just low. That’s not good,” Liss-Levinson added. “State and local governments, this just has not been a focus. But it should be.”
The report offers a number of reasons for why that is so.
One is that, in recent years, local governments around the U.S. have taken action to shift costs, risks and responsibilities tied to pensions and other benefits onto employees.
An example would be moving from “defined benefit” pension plans to plans with “401(k)-style” elements. Others include raising health care premiums or deductibles. Changes like these can leave workers with more decisions and expenses that can affect their financial security.
At the same time, the report from SLGE makes a case that financially secure workers tend to be better employees.
“When workers do not feel in control of their financial situation, they are more likely to become distracted in other areas of their lives, including work,” the report notes. One estimate it cites suggests nearly one-in-three workers have been distracted by their finances at work.
Improved job satisfaction, boosted productivity, higher retention rates, lower absenteeism, and reduced health insurance costs are some of the potential benefits that employers may be able to glean from investments in employee financial literacy, according to the report.
Liss-Levinson says even for smaller employers with budget or staff constraints, it’s a path worth considering.
The SLGE report includes a number of recommendations for practitioners who are looking to set up one of the programs.
A possible starting point for employers that are interested in doing so, Liss-Levinson said, could be asking employees what kinds of financial management issues they need some help with.
The report also devotes special attention to concerns about setting up programs that meet the needs of employees with lower levels of pay or education, or who speak English as a second language. And to how technology like mobile phones can be incorporated into the initiatives.
Bill Lucia is a Senior Reporter for Route Fifty and is based in Washington, D.C.