New analysis from Principal® reveals employer support for financial inclusion differs by job sector
The U.S. is the second most financially inclusive market, according to the 2022 Global Financial Inclusion Index (Index) – driven largely by the financial system and employers’ support of individuals. However, a new U.S.-focused analysis of the Index, sponsored by Principal Financial Group® and conducted by the Centre for Economics and Business Research (Cebr), reveals an opportunity for employers to provide greater financial inclusion and support for their employees.
The Index ranks 42 global markets on three pillars of financial inclusion – government, financial system, and employer support – using data across public and survey-based sources. The analysis ranked the U.S. first out of the 42 markets in the financial system pillar and second within the employer support pillar, driven largely by its enablement of small and medium enterprise (SME) growth and success.
“U.S. employers are critical in helping their employees access the resources necessary to make well-informed financial decisions,” said Chris Littlefield, president of Retirement and Income Solutions at Principal®. “We must recognize and appreciate the role employers play in fostering financial inclusion within our communities and, as an industry, continue to do everything we can to help more businesses support the financial needs of their employees, now and into the future.”
Opportunity for more consistent employer support across industries
When analyzing U.S. employer data by industry, opportunities were identified to enable more access to financial resources such as guidance, insurance benefits, retirement contributions, and pay initiatives (i.e. method of payment, access to interest-free loans on salary, etc.).
Across six broad industry classifications within the U.S., professional sectors with typically higher wages (i.e. finance, insurance, real estate, and information management) were found to provide employees with more consistent support and tools to enable financial inclusion. This can generally be compared to industries such as retail and hospitality that often employ more informal workers and tend to have lower wages.
“The importance of this analysis is the insight it offers employers to know where they stand in comparison to their industry and to consider how they can best support their employees with access to savings, financial education, and financial well-being programs,” Littlefield said. “We’re focused on helping employers become more intentional with solutions to meet the needs of their employees, including underserved individuals and part-time workers, while also advocating for the use of auto features in plans to increase participation and contribution rates.”
| Broad U.S. Industry Classification | Employer support score1 | Provision of guidance and support2 | Employee pension/retirement contributions3 | Employee insurance schemes4 | Employer pay initiatives5 |
|---|---|---|---|---|---|
|
Finance, Insurance, and Real Estate Services |
83.3 |
95.0 |
99.9 |
59.7 |
61.8 |
|
Information Management Services |
81.4 |
87.0 |
87.1 |
67.1 |
78.5 |
|
Construction |
65.5 |
90.9 |
36.7 |
89.0 |
74.2 |
|
Production – Inclusive of Agriculture, Manufacturing, Mining & Forestry, and Utilities |
56.4 |
59.6 |
57.9 |
69.5 |
37.1 |
|
Health and Education Services |
28.9 |
45.6 |
26.8 |
36.6 |
8.6 |
|
Other Services – Inclusive of Leisure & Hospitality, Management, Personal Services, Professional/Scientific/Technical Services, Retail Trade, Transportation, and Wholesale Trade |
8.1 |
0.0 |
13.9 |
4.8 |
8.1 |
Table 1: Employer support scores in the U.S. by sector from the 2022 Global Financial Inclusion Index
U.S. employers’ support of financial inclusion is often associated with size
The Index uncovers a clear association between business size and the financial support employers provide to their employees. Specifically, large businesses score considerably higher than small businesses on the level of support they offer to the workforce via financial guidance, insurance, pension contributions, and pay initiatives, for example.
There are various reasons why large businesses can provide greater support than small businesses, who may lack dedicated resources and tend to overestimate the cost of benefits6. Small businesses could benefit from additional support in offering these solutions to their employees, whether from the government or through the financial services system at large.
“There’s a need to better equip small businesses with the right information and tools to enable greater financial security for their employees,” said Amy Friedrich, president of U.S. Insurance Solutions at Principal. “These businesses fight hard for top talent, and to retain that talent, have realized the importance of providing holistic benefits offerings. With greater education around benefits costs and the variety of offerings that exist, many are realizing they don’t always have to cut benefits to reduce budgets7.”
| Employer Size | Employer support score | Provision of guidance and support | Employee pension/retirement contributions | Employee insurance schemes | Employer pay initiatives |
|---|---|---|---|---|---|
|
More than 1000 employees |
90.8 |
98.6 |
87.2 |
90.7 |
90.3 |
|
501–1000 employees |
86.5 |
96.8 |
82.9 |
82.0 |
88.0 |
|
101–500 employees |
70.4 |
84.2 |
49.9 |
90.1 |
78.0 |
|
11–100 employees |
65.4 |
64.4 |
81.5 |
58.3 |
41.1 |
|
2–10 employees |
4.0 |
0.0 |
9.9 |
0.0 |
0.0 |
Table 2: Employer support scores in the U.S. by business size from the 2022 Global Financial Inclusion Index
U.S. employers are critical drivers of financial inclusion
Despite inconsistencies, when compared to other markets in the Index, the U.S. generally earns high marks across the four underlying indicators measured within the employer pillar – providing employees guidance and support around retirement contributions (first overall), pay (fourth overall), insurance protection (fifth overall), and financial issues (sixth overall). These support pillars help increase employee access to the solutions they need to enable long-term financial security.
“As an organization with thousands of small to midsized businesses, we're focused on how we can further support employers with relevant financial education as well as meaningful tools and solutions to make a difference in the financial lives and futures of employees,” said Friedrich. “Achieving financial inclusion will require the right balance between employer, financial, and government systems’ support both in the U.S. and around the globe.”
See the U.S. market results from the Global Financial Inclusion Index here.
To read the full report, please click here.
Learn more about the Global Financial Inclusion Index methodology here.