What Factors Are Leading to the Rise of Wage Garnishment Across the U.S.?
Garnishment of wages is a serious matter, and one made even more serious by its far-reaching implications for both individuals and businesses. Consider this: 7 percent of the U.S. workforce has their wages garnished, according to the ADP Research Institute® (ADP RI) report, The U.S. Wage Garnishment Landscape: Through the Lens of the Employer. The report offers a more granular look at these payroll garnishments and their impact. The research is based on aggregated, anonymous pay data of 12 million U.S. workers.
It's important to note the significance of this issue. When employees do not have their financial "house" in order, they are more likely to have higher levels of stress and an inability to focus on their job, reports the Society for Human Resource Management. This discussion is not only about the scope of the garnishment issue in the U.S, but it's also about how to improve worker productivity and performance.
Wage Garnishment: A Snapshot
Although 7 percent of workers have wage garnishments in place, not all are created equal. According to ADP RI, wage garnishments can be grouped into four distinct categories:
- Child support (3.4 percent)
- Student debt and consumer loans (2.9 percent)
- Tax levy (1.5 percent)
- Bankruptcy (0.4 percent)
Failure to maintain these various financial obligations is the reason that employees have garnishments levied on them, but it's also worth noting that many workers carry more than one of these financial burdens. Reuters found that the U.S. government is trying to reclaim some of the more than $137 billion in student loans by any means necessary, up to and including garnishment of wages, Social Security benefits or even tax refunds. This affects the more than 8 million Americans that have defaulted on student loans, reports Reuters.
How Employees With Garnishments Differ From Peers
Looking at the group of affected individuals as a whole, there are similarities worth noting. For instance, according to ADP RI, child support is the primary reason for wage garnishment in the United States, so having kids can be one of the first demographic indicators. Middle-aged workers carry more garnishments than other age groups, with the highest rate hitting the 35 to 44 age group. Additionally, men are more likely than women to have a wage garnishment — 71 percent of garnished workers are male. Child support is heavily weighted toward men, with 92 percent of the obligation relying on them.
Finally, the pay groups that are hit most often by this phenomenon are those in the midrange. More than 60 percent of garnished workers earn income in the $20,000 to $60,000 range, according to ADP RI. Interestingly, the average number of child support garnishments decreases as individual compensation increases, which could be related to the correlation of aging out of prime child-rearing age.
Each of these data points helps to paint a demographic picture of what the typical garnished worker looks like: a middle-aged, male worker with children and income under $60,000. While not everyone fits that profile, it represents a significant portion of the garnishment population.
Understanding the Broader Issues
Carrying a wage garnishment can weigh heavily on employees. Employees with a garnishment are not bringing home their full paycheck, which could affect their financial well-being, and the stress associated with having a portion of your wages forcibly removed is not to be taken lightly. This affects an employee's financial wellness, which focuses on the mental and emotional impact of financial stress on workers. Credit Union Times reports that financial wellness for the average worker is just 5.4 on a 10-point scale.
Employers should take care to be extra supportive of those affected by garnishments. This can come through offering financial wellness services, coaching or even common employee assistance programs for any financial stress that workers are experiencing. By supporting these employees and their unique needs, employers can ensure that this group moves beyond wage garnishments over time and joins the rest of the unburdened employee population.
Stay up-to-date on the latest workforce trends and insights for HR leaders: subscribe to our monthly e-newsletter.