How Does the Cost-of-living Crisis Affect the Workplace?
The past three years have seen events, such as a global pandemic and the infamous Russian invasion of Ukraine, which have had a huge negative impact on the global economy. Today, our world is grappling with an unprecedented economic challenge as the cost-of-living skyrockets. From soaring rental costs to surging electricity rates and rampant inflation, employees are feeling the strain of making ends meet. To say that this global crisis is just a financial one is an understatement; it is also having a profound impact on the mental well-being of employers and employees. Employee’s well-being, productivity, and overall job satisfaction are affected. Employers are directly affected by a decline in their staff’s productivity and an increase in absenteeism due to the pressures that come with increased living expenses.
Employee Well-being
Financial stress is a leading cause of anxiety, and the current cost-of-living crisis is exacerbating these issues for many employees. As petrol, food, rental, electricity costs increase, and salaries stay the same, the average person’s disposable income shrinks. Financial worries can, thus, affect an employee’s concentration and work ethic. One example of financial stress affecting employee’s productivity is seen through DebtBusters’ Money Stress Tracker’s online poll in 2023 where 35 000 participants from South Africa claimed that 78% of them are stressed about their finances which is affecting their personal lives and mental well-being. This is an increase from the 70% in 2022 which was a dreadful year that saw the direct aftermath of the pandemic.
Effects on Productivity
The stress associated with the cost-of-living crisis could have a negative impact on employees’ productivity. Financial stress could prove to be distracting which could result in a lack of productivity, more mistakes at work and overall decline in business efficiency levels. Another recent study by the National Bureau of Economic Research discovered that a 10% increase in an employee’s debt would lead to a 0.7% decrease in their productivity. With that said, the cost-of-living crisis could possibly have a substantial negative impact on business performance and profits.
Job Satisfaction Decline
As living expenses soar and salaries stay the same, employees struggle to meet their expenses. This could lead to unsatisfied employees whose income is unable to keep up with inflation. This financial dissatisfaction could make employees feel underappreciated in the workplace, leading to habitual absenteeism and overall decline in optimism.
Strategies for Employers
To overcome the cost-of-living crisis and its after-effects, employers should provide support to their employees through means of communication, wellness programs, salary reviews, suitable work arrangements, increase in employee appreciation and most importantly, provide access to mental health support related to financial stress.
These are six key strategies business owners could implement in the workplace:
- Open and Safe Communication: Employers should allow for open and supportive work environments where employees could feel comfortable enough to discuss their financial worries.
- Financial Wellness Programs: Employers could set up financial wellness programs that offer the tools needed to succeed with budgeting, saving and debt management. In addition, employers could also provide their workers with access to financial and debt counselling to help them tackle their financial concerns.
- Salary Reviews and Adjustments: Employers should make it their responsibility to perform salary reviews on a regular basis and ensure that their employees’ salaries are realistically aligned with current inflation.
- Flexible Work Arrangements: Employers could contribute to stress relief by offering their employees with comfortable work arrangements, such as allowing remote work or flexible hours in order to reduce commuting and petrol expenses.
- Increase in Employee Appreciation: Employers should strive to recognize their individual employees and practise rewarding them accordingly for their achievements which would ultimately lead to an increase in morale and a sense of value and belonging in the workplace.
- Mental Health Support: Employers are encouraged to provide access to internal mental health support services to help employees manage stress, anxiety, and other mental health issues related to financial difficulties.
By demonstrating a commitment to employee mental and financial well-being, employers can help improve the overall productivity and focus of their employees by aiding them in navigating the challenges that come along with unpredictable inflation. The strategies mentioned above will strengthen the business’s resilience in the face of a global economic crisis, allowing for happier and healthier staff which would lead to an increase in work ethic and overall profits.
What are your views on the current cost-of-living crisis? Does your employer or do you, as an employer, utilise any of the above strategies? Let us know in the comments!
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