Over 3 out of 4 employees currently live paycheck to paycheck in the United States—a staggering increase of 6% in the last two years, according to a survey from PayrollOrg. Despite inflation cooling off from its 9.1% peak in 2022, it’s clear that living expenses continue to rise.
A Bankrate survey found that 60% of respondents reported their income hadn’t kept pace with these rising costs through 2023. Due to various factors, not every business is able to increase its compensation packages. But, that doesn’t mean it can afford to let its employees face this financial stress alone.
In this blog, we'll dig deeper into the issue of living paycheck to paycheck to understand:
Before we dive into it, it’s important to understand what the term actually means.
“Living paycheck to paycheck” refers to a financial situation in which a person or family’s income only covers essential expenses, such as housing, utilities, and groceries. While they might have a small amount of extra cash for savings or “nonessential spending,” a missed paycheck or an unexpected expense could have disastrous consequences.
But what’s causing this economic hardship?
According to a Forbes survey, nearly half of all respondents reported an increase in monthly expenses without a proportionate increase in wages. Coming in second place, just over 46% cited a “lack of budgeting and financial planning.” In addition to those unexpected yet regular expenses for things like medical bills and car payments, employees often don’t have enough cash left over for savings, let alone discretionary spending.
The problem is clear, but what solution can employers provide?