09 Dec 2021

What is the long-term impact of Covid-19 on young employees' financial wellbeing?

Coronavirus poses a threat to the current economic landscape. Alongside the danger to physical health, there is also a silent effect on mental and financial health, especially for younger employees. For younger members of the workforce, mental health and overall wellness has a critical role in their overall success and productivity.

The pandemic’s impact on the labor market cannot be overemphasized. In 2020, companies in the hardest hit sectors made millions of workers redundant, which in turn drove up the unemployment rate. The Organisation for Economic Co-operation and Development (OECD) reports that the average unemployment rate among mid-teens to late twenties stood at 11.5% in 2020 up from 8.6% in 2019. This further impacted young people, especially those in the labor market who were more likely to be in temporary employment.

Impact on financial wellbeing

Since the onset of the pandemic the pressure to keep up with financial commitments has been greater, and the growing concern over financial wellbeing has exacerbated waning mental wellbeing.

According to the Money and Pensions Service report Impacts of COVID-19 on financial wellbeing, anxiety about long-term finances and overall job security is on the rise which is impacting quality of life. Overdraft use has increased significantly, and people are having to rely more on credit cards which are running employees into debts, especially among millennials and Gen Z.

The pandemic has shed light on the importance of societal issues such as income inequality, and ensuring employees are housed in a safe environment. As young people were at a higher risk of unemployment, homelessness has been magnified, according to the OECD.

The report, which surveyed local councils, found that a staggering 78% reported an increase in youth homelessness from the onset of the pandemic to mid-2020, and 2.4% reported they had lost their home because they could no longer afford mortgage or rent. Young people from disadvantaged backgrounds or relegated communities such as LGBTI+ and young people with disabilities face additional challenges. Employers should be mindful that employees dealing with these stresses could have lower levels of performance at work and take steps to support them.

How can employers support their young employees?

Include employee financial health support in overall strategy: Companies need to take a hard look at their metrics and ensure that they are factoring in key performance indicators (KPIs) that also consider the financial wellbeing of their employees. A rethink of compensation packages could also be beneficial to help young employees make ends meet with bills.

Balance support with mental health awareness: In recent years, firms have integrated environmental, social and governance (ESG) matters into their core values. According to a Diligent report Institute report aligning people, pay and performance, companies are more likely to incorporate social metrics into their key performance indicators (KPIs). However, there is a missed opportunity on not including mental health into ESG strategies, especially as the pandemic has had an impact on loneliness, depression and anxiety.

The pandemic has disrupted the way employees work and businesses operate. Leadership teams had to act fast and adapt during these unprecedented times, integrating work from home protocols, shifting to solely virtual communications, and working remotely.

Companies can offer incentives to reinforce healthy habits like physical activities and hobbies to help them cope during these challenging times, and managers must be trained to monitor employee workload to avoid burnout and further stress.

This article was provided by Diligent