Financial Equity and Inclusion Should Be Part of Your DEI Programs
Companies today are laser-focused on diversity, equity, and inclusion (DEI) as human resources departments strive to ensure that every employee in the workforce is treated fairly and feels welcome. But a critical piece that’s often left out of HR and C-suite discussions is financial equity and inclusion.
At a basic level, financial equity and inclusion means ensuring that all individuals have equal access to financial services and professional opportunities that can help them generate greater wealth. Wealth gaps currently exist among people of different races, genders, and abilities, which create financial inequity.
Companies, especially those with large workforces, have discovered that some of their employees lack access to the financial products and services that most Americans take for granted, including bank accounts, which makes it difficult for them to show credit history, obtain loans and insurance, and save money for emergencies.
Today, 50% to 78% of working Americans are earning just enough money to pay their bills, and missing a paycheck means some bills simply don’t get paid, resulting in late fees or overdrafts that just put them further in debt. In addition, 22% of American adults are either unbanked or underbanked, according to a 2019 Federal Reserve report, meaning they have no bank account and/or they rely on alternative financial services, such as check-cashing services or money orders to pay bills.
Looking for ways to increase financial equity and inclusion in the workplace is a trend that fits the C-level’s requirements for environmental, social, and governance (ESG) programs and increases employee engagement.
Employees Expect More From Employers
A cornerstone of creating an equitable society is ensuring that individuals have equal access to financial services and professional opportunities and, in turn, to wealth. Covid-19 changed the way people work, from primarily in-office to home-based and hybrid arrangements; and today’s Covid-stressed workforce has expressed the need for more than just a paycheck from employers. Many employers are beginning to respond with financial wellness tools and programs.
One of the ways that companies are working toward greater financial equity and inclusion is by taking a comprehensive look at their benefits packages and considering financial literacy resources and early access to pay as means to meet their employees’ needs. Unlike traditional financial wellness tools, on-demand pay can be considered more of a financial inclusion benefit that empowers employees with greater choices and opportunities.
Bridging Wealth Gaps, Creating a Culture of Belonging
DEI programs can change the profile of a company’s workforce. If executed correctly, they should encourage inclusivity among varied ethnicities, cultures, income levels, and gender identities, and they should also foster financial equity and inclusion.
By demonstrating a higher level of concern for employees, companies can help to strengthen the employee-employer bond and create a more mutually beneficial relationship. Employers can demonstrate a commitment to financial equity and inclusion by:
Giving employees access to basic financial education and wellness tools
Financial illiteracy causes stress and anxiety in the workplace, affecting productivity, absenteeism, mental health, and employee engagement. By providing access to financial advice, counseling, and education on topics such as saving for retirement, budgeting, planning for college costs, and ways to reduce debt, employers are taking a more holistic approach to employee wellness. In turn, employers reap the benefits of having more satisfied and productive employees who stay longer in their jobs because they perceive that their employer genuinely cares about their financial future.
Providing access to real-time pay, which helps to close generational wealth gaps
A 2019 study conducted by the Federal Reserve revealed that median family wealth for a white family was $188,200, while median family wealth for a Black family was $24,100. This gap, which results in an inability to affordably save, invest, and insure, creates an economic disadvantage for many Black families in terms of building wealth, and it has been perpetuated through generations. Access to real-time pay can help underserved populations break the paycheck-to-paycheck cycle and open the door to opportunities to save and to take advantage of traditional banking products and services.
Addressing gender and racial pay equity
Like it or not, pay inequity still exists for women and people of color, with women earning $.82 for every dollar a man makes. Identifying and addressing gender or racial pay gaps can improve employee welfare, increase consumer spending, and further stimulate the economy. It can also result in more widespread financial equity and inclusion, inside and outside the work environment.
Financial equity and inclusion are often overlooked in discussions about diversity, equity, and inclusion. But by helping employees to be more financially independent, removing barriers to saving, and providing financial wellness resources, companies have the potential to play a greater role in fostering financial equity and inclusion.
Learn how DailyPay can help increase financial equity and inclusion in your organization’s workforce.