Your Immigrant Employees are at Greater Risk of Financial Stress

Posted by Frank Gogol

If you’re a business owner, you already know that financial stress will hurt your employees’ productivity. From their presence in the office to the quality of their work, workers who are stressed out — especially financially stressed — will show up less and deliver poorer work. 

But did you know that your immigrant and visa holding employees are at a much higher risk of financial stress? As you’ll see below, how much your immigrant employees suffer or don’t suffer from financial stress is directly related to how much access they have to quality financial services designed to meet their unique set of circumstances.  

Financial Stress and Your Employees

Before we take a look at how financial stress, directly and indirectly, your immigrant and visa holding employees, let’s first take a look at how financial stress affects your employees in general.

According to a IFEBP survey, four out of five employers report that their employees’ personal financial issues are impacting their job performance somewhat, very much, or to an extreme degree. These personal financial issues have resulted in increased stress among employees (76% of employees), worker’s inability to focus on work (60%), and increased absenteeism and tardiness among employees (34%).

Using data from a Salary Finance survey, well look at the impact of financial stress on employees and the story it tells. 

4x More Likely to Suffer from Depression

It’s not surprising, but employees who suffer from financial stress are 4 times more likely to suffer from depression. In fact, it’s estimated that nearly 7% of full-time workers in the U.S. have experienced major depression in the last year. And even those that stress that’s leading to depression is exterior to your company, it’s effects can still be far-reaching when it comes to employee attendance and performance. 

34% of Employers Report Absenteeism

Studies have shown a direct correlation between employee depression and rates of absenteeism and tardiness. Employers, again unsurprisingly, reported a higher rate  (34%) of absenteeism and tardiness a month employees suffering from financial stress. In fact, U.S. Centers for Disease Control and Prevention (CDC) reported that lost productivity due to absenteeism in the U.S. cost employers $225.8 billion annually, or $1,685 per employee – but this figure does not account for indirect costs, such as overtime pay and decreased morale among employees picking up the slack. 

4.9x More Likely to Produce Lower Quality Work

Presenteeism is defined as the act of attending work, but not being engaged with tasks. Employees suffering from financial stress are 4.9 times more likely to produce lower quality work. Like absenteeism, these costs can come in the form of workers having to be redone by the employee, from other employees having to pick up the slack, and other kinds of additional work being created. A study in the Journal of the American Medical Association found that depression-related presenteeism was 3 times more costly than those that resulted from absent employees. But what is the actual cost of depression-related lost productivity? Harvard Business Review has reported that presenteeism costs the U.S. economy more than $150 billion each year.

Given all of these things — depression, absenteeism, and poor work performance — it’s easy to see the deep impact of financial stress on employees and the companies they work for. Financial stress is a wide-reaching application that costs businesses in the U.S. hundreds of billions of dollars a year. And there’s no group of workers in the U.S. that financial stress impacts more deeply than your immigrant worker.

Financial Stress and Your Immigrant Employees

Now that we’ve explored how financial stress, directly and indirectly, affects employees’ work performance (and your company’s bottom line), let’s take a look at the unique and more difficult financial situations facing your immigrant and visa-holding employees. 

Immigrants Have a 13% Greater Chance of Being “Unbanked”

Immigrants and visa holders in the U.S., when compared to their U.S. counterparts, are more likely to be “unbanked’, meaning they do not have a bank account. According to a 2013 study, immigrants are 13% more likely to not have any kind of bank account

A savings or checking account is among the most important basic financial tools. Having these kinds of accounts allows an individual to store their money securely, reduce the financial transaction fees, pay bills, and other obligations safely, establish creditworthiness, and achieve a high standard of financial health. 

So why don’t more immigrants and visa holders open bank accounts? The simple answer? It’s difficult. 

Generally speaking, to open a bank account, you need to be able to verify your name, date of birth, and address as well as provide a government-issued ID like a Social Security Number. Immigrants, however, must also provide a number of additional documents, including, but not limited to, an up-to-date passport, government-issued ID from the home country, a birth certificate, an alien identification card, a consular ID, a foreign driver’s license, and proof of a rental or lease agreement with their name and current address. 

Producing any or all of those documents, depending on the bank’s requirements, can be a monument task unto itself, turning the simple act of opening a bank account into a months-long chore. And rather than go through all that trouble, sometimes just to be denied, many immigrants opt to go without a bank account.  

As a result, though, unbanked immigrants are subject to increased financial stress. Their money is less secure, they pay a significant amount more in fees every year, and they struggle to establish and credit in the U.S.

Remittance Creates and Added Dimension of Stress

Remittance is a type of financial transfer that moves money from one country to another. It is also a service many immigrants use to send money back home to support their families abroad. In 2017 alone, immigrants in the U.S. sent a total of $148 billion in remittances from the United States. To put that into perspective, that’s $3,322 per immigrant in the U.S., or 6.2% over the average U.S. salary ($53,490). 

This number, though, assumes that every immigrant in the U.S. is using remittance services to send money abroad. According to Stilt’s internal immigrant transaction data however, which includes more than 50,000 individual accounts, only 80% of immigrants utilize remittance services. This means that that average amount sent abroad by remittance-using immigrants is closer to $4,152, or about 8% of the average annual salary. 

This means that the average remittance-using immigrant is living on just $49,338, while still paying for housing, transportation, and other regular costs of living. Moreover, 5 of the 10 states with the highest cost of living (California, New York, Massachusetts, Maryland, and New Jersey) are among the 6 states with the highest immigrant populations

Put simply, immigrants in the U.S. have to make do with less in areas of the U.S. where the cost of living is extremely high because of the added financial burden of supporting family abroad through remittance. 

Most Immigrants Have Little or No U.S. Credit History

In addition to being unbanked and having the extra financial burden of remittances, immigrants in the U.S. also struggle to get access loans and lines of credit because they lack U.S. credit scores. Access to credit is crucial to new immigrants because it allows them to get funds that help them get established in the U.S with things like apartments and vehicles.

Most experts agree that a credit score of 740 or higher is a “good” credit score. Individuals with a good credit score can easily access loans and lines of credit because their score is singal of their creditworthiness. They get approved for higher amounts and receive better interest rates.

In theory, a person can get a credit score in as little as 3 or 6 months of living in the U.S., but building a “good” credit score can take years. That means years of little to no access to loans and lines of credit and high interest rates for those immigrants lucky enough to get approved. 

Most immigrants who arrive in the U.S. lack a U.S. credit score. In many many instances, these immigrants have a credit score in their home countries but these scores do not transfer to the U.S. upon arrival and few lenders consider foreign credit scores when considering loan and credit card applications. 

According to Stilt customer data, as much as 20% of immigrants have no U.S. credit score of any kind and the average score for those immigrants with credit scores is 690, far below what’s considered “good” credit. So most immigrants struggle to obtain lines of credit and the ones who do get approved for loans and credit cards see higher interest rates than the average U.S. citizen. 

Everything discussed above — lack of access to credit, the burden of remittances, and being unbanked — is a perfect storm of financial stressors that impact immigrants in the U.S. This financial stress affects all areas of the average immigrant’s life. This is especially true for their work performance and it leads to increased levels of depression and absenteeism and increased levels of presenteeism that are costing your business money.

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