13 Oct 2017

Austerity blues: how the financial climate is impacting employees

It can hard to be positive about the state of the economy sometimes what with Brexit, the elections in Germany and many more global events creating uncertainty and affecting currency values, global trade, interest rates, employment, and the rights of people to live and work where they please.

As an employer, manager or HR professional, it's important that you're able to support your staff through difficult times as much as you can. To do this well, it's essential to understand the problems your employees are facing as much of this uncertainty - no matter how far away - will impact them.

What does austerity mean?

Although Theresa May's government has clearly stated there will be no additional austerity cuts, it doesn't mean that any of the cuts already in place are going anywhere. Whatever the news says, austerity is still a problem and one that is taking its toll on the UK's workers.

Austerity means cuts to services combined with reduced tax increases, all to help reduce the UK's financial deficit. However, rather than cutting the deficit, Oxfam states that the impacts have been "economic stagnation, the rising cost of living, cuts to social security and public services, falling incomes, and rising unemployment have combined to create a deeply damaging situation in which millions are struggling to make ends meet."

How can employers help?

The key is a shift away from direct financial support, and towards lifestyle benefits. This can seem daunting - after all, if an employee is struggling financially, they're bound to see cold, hard cash as the most important kind of recognition for their efforts.

However, moving towards offering lifestyle benefits that can help employees save money, really makes the most sense. Rather than providing them with money - which can incur costs - you can offer savings that far outweigh what a raise would have actually added to that payslip. Childcare, access to counselling, and assistance with day-to-day costs, such as transport, can all help provide that all-important safety net.

This can also be combined with simple changes in company culture. Show your employees that they are valued by focusing on improving communication between management and staff, particularly when it comes to that all-important pat on the back.

But how is it really affecting them?

Unemployment

The economic turmoil of the past decade has been rising unemployment - and although unemployment rates are at a record low, a great deal of this has been attributed to a rise in self-employment and zero-hour contracts. Hundreds of thousands of public sector jobs have been cut, with new jobs being increasingly temporary, rather than permanent positions. Households that once had two adults in full-time employment may now be on much more shaky ground - including the partners of your workforce.

Wages

Despite having the fifth-largest economy in the world, wages in the UK fell by 10.4% between 2007 and 2015.

Every twist and turn in the Brexit process seems to impact the value of the pound, with companies from nearly every sector looking to raise prices to cope. From food and tech to cycling, prices are going up - and that's just a handful that have come out in the past few months. According to the Telegraph, the poorest 8.3 million families in the UK are predicted to lose an average of £470 a year by 2020 because of these price rises.

Benefits

Many people in work rely on benefits to support their wages - whether high rents mean they need housing benefits, or low wages mean they need working tax credits. In-work benefits have been slashed under government austerity policies, leaving lots of people without a safety net.

Health

The impacts of low wages don't just affect a person's pocket power either. Guidance from Oxfam suggests that workers on low wages experience higher stress, low self-esteem, a tendency toward unhealthy behaviours (such as smoking) and worse health overall.

Uncertainty causes stress. And stress is a leading cause of ill health. Figures from the Health and Safety Executive (HSE) tell a sad story. In 2015/16, "stress accounted for 37% of all work related ill health cases and 45% of all working days lost due to ill health."

Research from the OECD has found that the economy can affect health in three major ways, but it's important to note that these effects aren't universally negative:

The stress mechanism - employment uncertainty can cause increased stress, but for those with stressful jobs, becoming unemployed can actually reduce stress-induced illness.
The effect budgeting mechanism - when people have less money, they're less likely to eat healthily, go to the gym, or spend money on things like over the counter medicines. Which obviously isn't great - however, it may also lead to spending less on alcohol, tobacco and drugs.
The frustration-aggression mechanism - a feeling of unfair loss can lead to an increase in "incidences of violence". However, it may also be the case that people are less likely to engage in antisocial behaviours to avoid losing out on job opportunities.

So, these are the problems your employees may be facing, particularly those on lower incomes. Stress, financial uncertainty, falling job security, and less support from the government. What you do is going to make a big difference.

For more advice, read our eBook on Maximising Employee Rewards in the Current Economic Climate.

This article was provided by Sodexo.