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Canadians are stressed about their finances, and it’s having an impact on their productivity, but experts warn increasing wages won’t be enough to ease economic concerns.

According to a recent survey conducted by human resources software provider Ceridian, in partnership with the Financial Wellness Lab of Canada, North American workers are reporting the highest levels of financial stress since the 2008 recession.

The study found 61 per cent of respondents are more worried about their finances than they were a year ago. Furthermore, 82 per cent of those who are feeling stressed say those concerns are affecting workplace productivity, with nearly a quarter spending an hour or more distracted by money problems. Based on Canada’s average hourly wage, that amounts to nearly $50-billion a year in lost productivity alone.

“When people are distracted and are not able to achieve their financial goals, that has very clear downstream impacts on lost productivity, absenteeism, turnover, that have real hard costs for employers,” says Seth Ross, the general manager of Dayforce Wallet and consumer services at Ceridian. Dayforce Wallet gives employees access to earnings for work completed before payday, which Mr. Ross says can reduce reliance on high-interest debt products such as payday loans.

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Mr. Ross adds that rising interest rates, inflation and recession fears are to blame for heightened financial stress, and the study points to how those macroeconomic factors are hitting home for workers. For example, more than half of those surveyed say they’ve had to tap into their emergency savings to cover necessities, 81 per cent have cut back on discretionary spending, and 78 per cent are looking for ways to increase their income to make ends meet.

Earning more money might seem like the obvious solution to easing financial concerns, but the research found little correlation between earnings and economic anxiety.

“It does seem to follow logically that higher wages would reduce financial stress,” says Mr. Ross. “What’s interesting is financial stress is not purely a low-income challenge – there is a lot of financial stress at all levels of the socioeconomic strata – so I don’t believe it’s purely solved by simply paying people more.”

Raising wages, Mr. Ross adds, would also contribute to inflation, as higher earnings would be reflected in higher prices. Instead, employers that want to minimize productivity lost to financial stress need to find more creative ways to address it.

The findings echo those of another study conducted this summer by the National Payroll Institute, which similarly found that 72 per cent of working Canadians spent at least some of their work day dealing with personal finance matters, with one in five admitting it was having a negative impact on their job performance. The total cost of that lost productivity, according to the study, was $40-billion a year, up from $16-billion in 2019.

“That represents approximately 2 per cent of Canada’s GDP,” says National Payroll Institute president Peter Tzanetakis, adding that all indicators suggest the situation has only worsened since the survey was conducted in June and July.

For Canadian businesses looking to minimize those effects, understanding the size and scale of the problem is often the first challenge, as many keep their personal finance struggles to themselves. The National Payroll Institute’s Financial Fitness Evaluator offers one way to diagnose the problem. The free online tool surveys employees about their finances and gives employers an anonymized report.

“It gives business leaders the ability to track and scale the urgency of the problem within their organization,” says Mr. Tzanetakis.

He says that understanding the degree to which employees are stressed can help determine how much intervention is necessary and which solutions will have the greatest impact.

“For example, encouraging better savings habits by implementing automatic savings programs administered by payroll and offering employer matching,” Mr. Tzanetakis says. “Other things that employers can do to support financial wellness include providing certain types of financial counselling services to employees, and advice around budgeting.”

While financial education can be beneficial, it won’t necessarily move the needle on employee financial stress, warns Matt Davison, the director of the Financial Wellness Lab at Western University. He says understanding strong financial habits doesn’t always encourage people to follow them, just as knowing the benefits of diet and exercise doesn’t necessarily change eating and workout habits.

“What we actually find is that people who are financially knowledgeable don’t necessarily make better financial choices than people who are less knowledgeable,” he says. “As people’s income increases their lifestyle increases to match, and at the end of the day they may have more fun and have more things, but their chequing account is no better off with a pay raise.”

Prof. Davison says educating staff about how to make smarter decisions is a positive step toward reducing financial anxiety and minimizing productivity losses, but such efforts are more effective when coupled with more tangible interventions. Giving staff the option to automatically put a small amount of their earnings into an emergency fund, for example, can go a long way in easing financial stress in difficult economic times, regardless of income.

Prof. Davison, however, also warns that there is only so much employers can do to encourage better saving, spending and borrowing habits.

“It’s a tough line for an employer, because you don’t want to come across as paternalistic, so it shouldn’t be compulsory,” he says.

Prof. Davison says it’s up to each individual to determine how they’re going to spend their earnings, and in difficult economic times those who haven’t maintained strong financial habits are ultimately going to be in distress.

“Everybody thinks that the solution is to make more money, but the solution is actually really boring: It’s to spend less than you earn,” he said. “A lot more of it is temperament than knowledge.”