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Higher earners often misjudge the financial problems faced by lower-income peers, study finds
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Higher earners often misjudge the financial problems faced by lower-income peers, study finds

High-income earners often misunderstand the financial realities faced by their lower-income peers, believing that only education can solve financial well-being problems, a study has found.

This misconception is highlighted in Wagestream The state of financial well-being in 2024 report, which points out that such an approach overlooks the fundamental barriers that prevent those with lower incomes from achieving financial stability.

The study identifies an ’empathy gap’, with executives earning over £60,000 significantly underestimating the financial knowledge and resilience of lower earners such as those earning £25,000.


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The study found that those with higher incomes often mistakenly believe that only financial education can solve the deeper financial problems facing these individuals and tend to underestimate the financial capabilities of those with lower incomes, believing that they save “only one-third ” from what I actually do.

They also perceive that those on lower incomes worry about money often (about 30 percent), with 10 percent doing so weekly and 20 percent daily. For those with higher incomes, only 10% report similar concerns (4% weekly, 6% daily).

This mismatch reflects a larger gap in understanding, which has direct consequences for workplace policies designed to support financial well-being.

“A minority of higher earners make all the decisions that affect the majority of the workforce and yet struggle to understand their (lower-income colleagues’) real circumstances,” the report said.

Action lag

This empathy gap leads to what the report describes as an “action gap.” Higher earners advocate financial education at the expense of more practical support mechanisms, failing to recognize that despite widespread awareness of essential financial habits, lower earners find it difficult to “act” on this knowledge because of their financial constraints.

While 90% of respondents across income levels agree on the importance of building an emergency fund, only 35% manage to consistently save 10% each month. This action gap is particularly pronounced among lower income earners, for whom even basic savings goals can feel out of reach.

“We don’t have a financial literacy crisis — we have a financial action crisis,” the study noted.

“This finding has significant implications for workplace financial wellness programs, indicating that they need to be action-oriented and focus on helping those with lower incomes overcome inertia to act on their pre-existing knowledge .”

Increasing pay equity

However, differences in pay in the workplace are often influenced by differences in the skills required for different roles.

As Lisa Seagroatt, founder of HR Fit for Purpose, said, “businesses need a mix of different skills to meet their goals, so the roles needed can range from basic skills to highly skilled.”

This highlights the importance of recognizing the diverse skill sets that contribute to a company’s success, as well as the complex nature of pay structures that arise from these different skill requirements.

In addition to skill differences, market sector wage rates also play a crucial role in shaping what companies are willing to pay for their more skilled employees.

“Market sector pay rates influence what a company is prepared to pay for its more skilled employees,” Seagroatt said People managementhighlighting the external factors that significantly affect internal salary structures.

She elaborated further, noting that companies need to be aware of industry standards while also considering the unique skills their workforce brings to the table. This dynamic can lead to discrepancies that must be carefully managed to maintain equity within the organization.

To address these challenges, HR professionals must actively foster a culture that values ​​all employees, regardless of their salary grade or role.

Seagroatt insisted that “HR should always try to discourage discord around pay gaps by fostering a workplace culture that demonstrates that everyone is valued and needed.”

To improve workplace culture, one effective approach is through financial literacy programs, which Ian Moore, managing director of Lodge Court, believes can help “educate all employees about the financial realities and challenges facing the various income groups”.

This not only builds understanding, but, according to Moore, “helps higher earners better understand their peers’ situations,” fostering a culture of empathy and awareness.

Integrating empathy and sensitivity training into leadership programs also supports this goal, allowing managers and executives to “better relate to the financial struggles of those with lower incomes.”

Another key strategy Moore highlighted is the importance of reevaluating and adjusting compensation structures to ensure they promote fairness and equity within the organization.

“Implementing pay transparency policies can reduce disparities and build trust,” noted Moore, noting that transparent pay practices contribute to a more inclusive and supportive workplace culture.

By focusing on fair compensation and open dialogue, Moore said, HR can “bridge the gaps that might otherwise lead to disengagement or resentment,” creating a more cohesive and motivated workforce.

Hannah Copeland, senior HR consultant and team leader at WorkNest, added that training and mentoring programs are crucial to closing the gap between high and low earners.

“For example, where a higher (and probably higher paid) employee gives a lower paid employee the benefit of their experience and learning so that they can develop and grow,” she explained. “HR can lead the facilitation and development of these programs within their organizations.”

Visit the CIPD Knowledge Center to find out more about employment laws related to equal pay