Context

Wagestream is a financial wellbeing app provided in the workplace for employees in frontline roles, such as in hospitality, retail, logistics and healthcare, who are typically lower earners working variable hours.

Wagestream's State of Financial Wellbeing research programme explores how financial wellbeing is experienced and understood in the workplace and has previously included studies of the dynamics between managers and their employees. The current research was undertaken to instead understand the dynamic between higher and lower earners, a conceptually different but overlapping distinction representing workplace leaders and the workers they support.

Higher earners were defined as those on annual salaries of £60,000 or more, and lower earners as those on annual salaries of £25,000 or less. An 'empathy gap' refers to the tendency for higher earners to underestimate the financial savviness of lower earners, and an 'action gap' refers to the greater difficulty lower earners have in applying positive financial behaviours.

The study

Undertaken in partnership with CogCo, Wagestream's research objectives were to understand:

• the extent to which financial circumstances and outcomes differed between higher and lower earners
• what awareness people in each group had of the financial circumstances of people in the other group
• the money management behaviours that higher and lower earners use and how these relate to financial wellbeing outcomes.

The report describes the results of analyses from two studies undertaken in 2024, both focused on participants who were classed as higher earners and lower earners. The first study, which explored the empathy gap, used a sample of 138 higher earners and 129 lower earners, all of whom were in full-time work. The second study, which explored the action gap, used a nationally representative sample of 643 participants.

Key findings

The empathy gap

Higher earners:

• over-estimated how much lower earners were missing out on social activities (higher earners predicted 31% missed out on social activities monthly, while in reality 10% did)
• under-estimated how much they saved (higher earners predicted £1,000, in reality the median average was £3,000)
• under-estimated how long they could last without their main salary (30 days vs 75)
• over-estimated how much lower earners worried about money (37% vs 20%)
• predicted how much lower earners spent on groceries and how much they had left at the end of the month with reasonable accuracy.

The action gap

• 90% of all earners agreed that saving for an emergency fund as sensible, and 91% agreed you should 'save a little if you can'.
• Yet, only 23% of lower earners said they tried to save at least 10% of their income each month vs 73% of higher earners.
• 87% of all earners agreed that it is best not to spend money you do not have, yet only 36% of lower earners and 50% of higher earners agreed that they created and stuck to a monthly budget.
• The gap between lower and higher earners suggest a 'financial action crisis' rather than a 'financial education crisis'.

Points to consider

Methodological strengths or limitations

• The research design was apparently theory-driven (i.e. design of the two studies was framed around the empathy and action gaps), suggesting that prior hypotheses and assumptions were made but are not given.
• No information is provided about how the survey questions were developed or validated.
• The findings are based on comparatively small sample numbers, and details about the sampling methods are not provided. Some statistical significance testing was undertaken, though the thresholds are not stated.
• The report does not always make clear which samples are referred to, and there is a mismatch between the sample groups reported for the attitudinal measures and those reported for the behavioural outcome measures. This reduces the validity of some comparisons.
• Some of the observed differences in perceptions may reflect over-optimism among lower earners, rather than purely being attributable to the low expectations of higher earners. This possibility is not discussed in the report.

These observations should be taken into consideration when viewing these findings.

Applicability

The findings should be of interest to policymakers, employers and other organisations who seek to support the financial wellbeing of employees directly or through third-party providers.

Relevance

The findings are relevant in a context in which a large proportion of households are struggling financially, and where the focus of many interventions is solely on financial education.

Generalisability and transferability

Due to limitations in the research design, the findings should not be generalised to the wider population of UK workers or to other groups or contexts.