As employers recognize the importance of diversity and inclusion in their workforce, they are also realizing that Hispanics do not participate in retirement plans at the same rate of other groups. Currently, only 25.5% of Hispanic families participate in any type of retirement savings plan, including individual retirement accounts and employer-provided defined contribution (DC) plans, according to The Survey of Consumer Finances, 2019. Additionally, nearly half (46%) of Hispanic employees are likely to experience financial distress, compared to 37% for all U.S. employees, according to Willis Towers Watson’s 2020 Global Benefits Attitudes Survey. However, all is not lost. There are clear actions employers can take to improve those numbers and enhance the financial wellbeing of Hispanic workers.
Hispanics, defined as an ethnic group consisting of individuals of any race with cultural roots tracking back to Spanish-speaking countries in Latin America, account for over 18% of the U.S. population, according to Pew Research. In the last 10 years, Hispanics accounted for half of all U.S. population growth due to immigration and high fertility rates. Also, during this period, the buying power of Hispanics grew by over 200% to $1.5 trillion, according to the Multicultural Economy Report from the University of Georgia. The Hispanic population is projected to continue to rapidly grow, such that by 2050, they will represent nearly 30% of the total U.S. population.
Hispanics also account for 18% of the total U.S. labor force, according to the U.S. Bureau of Labor Statistics. While at present they have a low attainment of bachelor’s degrees compared to the general U.S. population, Hispanics are enrolling in colleges in record numbers (see below) and are slowly increasing their numbers in professional sectors. Companies are realizing the future potential of this rapidly growing community and the incredible opportunity for business expansion.
College enrollment rates indicate the percentage of 18 to 24 year olds enrolled as undergraduate or graduate students in two- or four-year institutions. Source: U.S. National Center for Education Statistics
However, research shows Hispanic employees are less likely to receive benefits or retirement plans from their employers, resulting in lower participation in retirement savings plans than that of non-Hispanics.
Because Hispanics live an average of two years longer than the non-Hispanic, white population, according to the Center for Disease Control, it is essential to help Hispanics appreciate the many financial benefits of saving for retirement. Employers can play an important role in this process, but to do so, they need to understand the underlying cultural components.
The Hispanic population is far from a monolith, as Hispanics also represent different races, sexual identities, genders, and so on. However, there are certain common cultural elements that set the Hispanic population apart and make their experiences with retirement and savings programs unique. Family and trust are at the core of this intersectionality.
Hispanic young adults are more likely to be caretakers of their parents and older generations. In addition, they tend to have larger families: According to data from the National Center for Health Statistics, while the fertility rate in the U.S. Hispanic population has dropped almost 25% over the last 10 years, the rate stands at 65 newborns per 1,000 women ages 15 to 44 for the Hispanic population compared to 58 for the general U.S. population. Hispanic women are the least represented in the female labor force. According to the U.S. Department of Labor, labor force participation for Hispanic women is lower compared to the participation rate for all women.
Labor force representation indicates the percentage of the population age 16 or older who is employed or actively looking for a job.
Balancing the management of family building and its expenses, taking care of dependents (elders and children alike) and saving for their own retirement compounds both the emotional and financial strain. To meet these demands, U.S. Hispanics age 30 to 55 carry higher than average levels of debt and are more likely to borrow from their retirement accounts. Wealth accumulation for Hispanic employees overall is further exacerbated by disproportionate representation in lower-paid occupations such as operations, laborers, technicians and craft workers. Additionally, Hispanics are less likely to have bank accounts, making their access to financial services, such as credit, more expensive as compared to the general U.S. population.
Moreover, while older generations of Hispanics have relied on families as an informal part of their safety net at retirement, projected reductions in the family size of future generations further thins the family safety net for Hispanic employees in today’s workforce.
Employers have a unique and important opportunity to improve the financial outcomes of their Hispanic workforce. While this segment of the population tends to be less trusting of traditional financial institutions, they tend to trust their employers. Our 2020 Global Benefits Attitudes Survey highlighted that the Hispanic population is more likely to look to their employers to provide assistance with debt refinancing, housing assistance and college preparation for their children.
According to Willis Towers Watson’s 2020 Defined Contribution survey, nearly two-thirds of plan sponsors have reviewed or plan to review aspects of their DC retirement plan as part of their overall diversity, equity and inclusion (DEI) strategy. And 80% of employers surveyed in Willis Towers Watson’s 2020 Emerging Trends survey plan to conduct a benefits program assessment by 2022/2023 (a 30% increase from pre-2020).
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Making a difference starts by understanding the problem. Data, such as prevalence of loans and hardship withdrawals from savings plans or wage garnishments, can help employers measure the short-term financial insecurity of their workforce. Parsing that data to see the picture for specific populations, like Hispanic employees, can highlight certain specific needs and their prevalence.
For example, this data can also help employers understand perceptions overall that Hispanic employees, and females in particular, report unfairly missing out on promotions and job opportunities – which, in turn, can lead to decreased income. Beyond the data, employee listening tools like surveys and focus groups can uncover opportunities to improve employee engagement and personal financial outcomes.
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There are a wide range of broad and point solutions available to employers to help with employee financial wellbeing. Using insights from data and employee voice input will uncover the type of solutions that will provide the highest value to employees. Hispanic employees tend to value things like loan refinancing, decision support, college preparation for children and housing assistance. Note that different workforces may have different priorities; understanding those priorities is essential to meet the needs of a diverse population.
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For the Hispanic population, transparent communication through a trusted voice, generally from a member of the community, is a good way to reach individuals. One-on-one coaching, navigation and decision support can be particularly effective with Hispanic employees. However, it is critical to be thoughtful on how these programs are promoted to ensure trust and engagement.
Specific attributes of the workforce can help employers understand what language, medium, style and distribution channel will be the most effective. Leveraging business-employee resource groups focusing on Hispanic or multicultural employees can amplify the outcomes of a successful communication strategy and also help further demonstrate the organization’s commitment to diversity overall.
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Incorporating auto-enrollment and auto-escalation – features that automatically enroll and increase contributions to a savings plan unless an employee opts out – are helpful to all employees but especially Hispanic employees. Making benefits available to hourly, part-time and seasonal roles will help Hispanic employees as they tend to be employed more prevalently in those type of roles.
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The Hispanic population, in particular those who are foreign-born, show lower financial literacy than their counterparts. Hispanics are more than twice as likely to lack a bank account compared to the general U.S. population. According to our Global Benefits Attitudes Survey, nearly half of employees with low financial literacy find making financial decisions stressful.
Because Hispanic employees are likely to trust their employers, providing tools and programs that focus on breaching the literacy gap, offering practical ways to help them make financial decisions and providing access to trusted and fairly priced financial services can create a meaningful impact on the financial success of the Hispanic workforce. This empowerment can lead to increased employee wellbeing, employee engagement and productivity – as well as higher levels of retention of a growing population.
Employers have an opportunity to achieve their DEI objectives and improve the financial outcomes of diverse populations. Measuring financial insecurity in the short and long term, and listening to employees’ personal goals and needs are powerful tactics to identify the key areas on which to focus.
The evolution in the financial wellbeing space, as challenging as it can be to navigate, provides a wide variety of tools and programs. Yet these options must be tailored so that they can make a difference with different populations. By finding the right tools and solutions and by promoting and communicating in a way that aligns with the needs and aspirations of each distinct workforce group – including Hispanics – these employer programs can maximize their impact across an entire organization.
