Higher prices, uneven wage growth, and record credit card debt are taking a toll on the financial health of many American workers. Among the hardest hit, however, are low-wage workers.
Indeed, a new — and unsettling — picture of the “low-wage” worker is just now emerging: They make up a full quarter of the workforce. They’re not necessarily young. They’re disproportionately women and minorities. And, importantly, they’re struggling with savings, adequate insurance coverage, and paying for essentials like housing and food.
Lower-wage workers are likely essential to the success of your company. But even the most dedicated employee can’t focus on work if they’re worrying about how they are going to pay the rent or, worse, an unexpected medical bill.
There’s a lot employers can do to alleviate some of this stress and build financial wellness among lower-wage workers — often with the financial benefits they already offer. In some cases, it might require some minor modifications and additions. Or, it might simply be a matter of better communication.
This is important because low-wage workers often assume financial well-being benefits are aimed at their higher-earning colleagues. They may not be taking advantage of your company’s great resources simply because they don’t think they are meant for them. At the same time, many employee benefits programs may indeed be designed for, or at least best communicated to, higher-level employees with more resources to work with.
Often with just a small amount of effort, HR pros can ensure that all staffers, regardless of their compensation level, can take advantage of the benefit programs designed to boost financial wellness. Leading employers realize that reaching out to low-income workers, who may most need financial health and resiliency support, is key to creating an equitable and sustainable workforce.
Understanding Your Low-Wage Worker
With so many misconceptions about who is in this segment of the labor force, the first step to improving the financial health of low-wage workers is knowing who to help.
A recent report by, WorkRise , a research-to-action network on jobs, workers, and mobility hosted by the Urban Institute and receiving support from groups like the Bill & Melinda Gates Foundation , the Mastercard Center for Inclusive Growth , the Walmart Foundation , and the AARP , amongst others, sheds light on demographic trends among lower-wage workers and provides a rare glimpse at the financial health of these employees. This data also offers insights into how best to integrate low-wage workers’ needs into your financial benefit packages. Let’s dive in.
One-Quarter of American Workers are Considered Low Wage
More than 30 million American workers (or about 25% of the workforce) are considered “low-wage.” WorkRise established the low-wage threshold as equal to two-thirds of the median wage of workers in their prime working years (ages 25–54). That equals $16.98 an hour, or for a person working full-time, about $35,000 a year.
Full-time workers in this group, who earn less than the average income in the U.S., are trying to pay bills of around $2,900 a month. When you consider that the average rent for an apartment in the U.S. is more than half that amount, then add in utilities, groceries, and other necessities, there is precious little left over for additional expenses or building emergency savings.
Low-Wage Workers May be Older Than You Think and Work in Many Industries
Many people expect low-wage workers to be students and young people just starting out in their careers. And, to some extent, that is true. However, WorkRise found that low-wage workers are almost as likely to be older as they are younger. Indeed, the average age for workers making the federal minimum wage is actually 35. The numbers show that many workers in their 50s are also low-wage earners.
Many of these low-wage workers also have to support families, with 43% of workers between ages 25 and 50 years raising children. Having a family comes with added expenses and responsibilities that can make pursuing more education — and job advancement — difficult.
Not surprisingly, low-wage workers are fairly concentrated in industries you would expect, including agriculture and food service, each hiring more than 50% of their workforce at low wages. The retail industry comes in at 43%. But other industries might be more surprising in their employment of a relatively high percentage of low-wage workers, including arts, entertainment and recreation (44.4%); real estate (31.7%); and healthcare (28%).
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Race, Ethnic, and Gender Disparities
The racial wage gap has been well-documented — Black and Latinx workers have long been relegated to lower-earning industries and jobs. Though white workers comprise the majority of the low-wage workforce (since they make up the largest group in the total labor force), Black and Latinx workers are significantly overrepresented. Consider that, over a lifetime, the average white man will earn $2.7 million, compared with $1.8 million for a Black man, $1.3 million for a Black woman, $2.0 million for a Latino man, and $1.1 million for a Latina woman.
Women, overall, comprise more than half of the low-wage workforce. The median hourly wage for women is more than $4 less than for men, with women earning 83 cents for every $1 earned by men. The gender gap becomes even more pronounced when you factor in race and ethnicity. Black women earn 62 cents and Latina women earn 54 cents for each dollar earned by white men.
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Low-Wage Workers Have Access to Fewer Benefits
Low-wage workers often suffer from a double-edged challenge. On top of everyday financial struggles, they often lack access to the type of benefits that could help them get ahead and become more financially secure.
Just a quarter of low-wage workers have a pension plan through their work compared to 47% for higher earners. There’s also a gap in access to health insurance: Only 57% of low-wage workers have employer-sponsored health insurance compared to 88% of higher earners.
Workers who earn less than the average American wage also tend to have less access to employer-sponsored financial well-being benefits — such as emergency savings plans, financial education and planning, 529 college savings programs, and debt counseling — than higher earners, even though they might need, and benefit from, them even more.
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How HR Pros Can Support Low-Wage Workers
Benefits managers are at the forefront of low-wage worker support. First is studying the possibility of raising and/or stabilizing wages among some employees. Analyzing comprehensive internal wage data and conducting employee financial wellness surveys can help HR pros understand which employee segments may be having trouble with bill paying, budgeting, unexpected expenses, and other financial wellness issues related to lower earnings.
In addition, there are many benefits programs — some you may already be offering — that can make a real difference in supporting low-wage workers and helping them face their unique financial challenges. Here’s a closer look.
Emergency Savings Programs
The pandemic highlighted the need for emergency savings for all employees. In response, many employers have begun offering payroll deduction emergency savings programs. Many of these new programs offer employer-matching funds to help get employees started.
If your benefits package lacks emergency savings support, consider offering one and leverage the most appropriate communication channels to target lower-wage workers and their families (remember that the ‘benefit decision-maker’ might be another household member and not the employee themselves). If your firm already offers such a program, ensure that communications reach low-wage employees and consider enhancing the matching funds your company provides.
The WageRise analysis showed that education significantly drove wage disparity. Indeed, with each additional educational achievement, workers projected lifetime earnings increase. For example, a worker with a bachelor’s degree earns 84% more over a lifetime than someone with just a high school diploma.
This indicates that employer-sponsored tuition reimbursement programs — especially those that cover some or all the cost of college courses or certificate programs — are more critical than ever. Examine your education reimbursement programs closely. Are they meeting the needs of your low-wage workers? Or simply offering yet another perk to high-level employees?
Student debt is frequently identified as one of the major obstacles to financial wellness among all workforce segments, including low-salaried employees. If some (or many) of your low-wage workers hold college degrees, the recent return to student loan repayment may be particularly tough.
Student loan repayment benefits can help. Employers can now provide up to $5,250 annually for an employee’s student loan repayment through 2025. These payments can be made directly to the employee or to the student loan carrier. Employees won’t pay income tax on contributions made by their employers toward educational assistance programs, yet the employer also gets a payroll tax exclusion on these funds. This change has encouraged many firms to start offering student loan repayment benefits.
Balancing Short- and Long-Term Financial Goals
With low-wage workers, short-term needs can stay front and center for a long time. That’s why it’s particularly important to help these workers understand long-term financial goals and help them find a balance between immediate needs and building financial security.
As mentioned above, many financial planning and counseling services can be, unwittingly or not, aimed at higher-earning employees. Review the financial counseling your firm offers with a critical eye to ensure the content includes help with budgeting, bill paying, debt management, and other programs geared to low-wage workers. This will help fill short-term needs and open the door for future planning. You want to ensure all employees can benefit from your programs.
To help young low-wage workers jump into retirement savings sooner, you might also consider taking advantage of the Secure Act 2.0 student loan match. The provision allows companies to match employees’ qualified student loan payments with contributions to their retirement accounts, including 401(k)s, 403(b)s, SIMPLE IRAs, and government 457(b) plans. To receive a match, employees simply need to certify annually that they have made qualified student loan payments and the amount of these payments.
Understanding the unique challenges low-wage workers face is the first step toward supporting these employees with benefits that can help guide them into future financial health.
SoFi at Work can help. We offer the platforms, tools, and educational resources that can help you support financial well-being among all segments of your workforce, including low-wage workers.
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