How might a pandemic change Gen Z’s approach to benefits?
Generations are shaped by their experiences, and Gen Z will be no different. For Gen Z, COVID-19 may be the Great Depression, Kennedy assassination, Watergate and 9/11 rolled into one. These are defining before-and-after moments that often change people’s outlook and color their beliefs and actions.
Before the COVID-19 pandemic derailed our reality earlier this year, Gen Z faced a seemingly bright and certain future with a strong economy. As the oldest members of this generation entered the workforce — either out of high school or college — their employment prospects were solid. With a tight labor market and historic unemployment, employers were actively recruiting young talent.
All that has changed. With the economy contracting as a result of COVID-19 and employers shedding jobs, the youngest workers face the biggest backlash. According to the Pew Research Center, in May “the unemployment rate among young adults aged 16 to 24 (25.3%) exceeded the rate among other workers by a substantial margin…more than double the rate among workers 35 and older.” In July, the unemployment rate among those 20 to 24 continued to outpace than other age groups.
The employment landscape for Gen Z is different than it was just a few months ago. And, when benefits are tied to a job, by extension the benefits landscape has also changed. Compared to last fall, the context in which benefits-eligible Gen Z employees make annual coverage elections in just a few months may seem vastly different to them.
So, where did Gen Z stand before the pandemic as they made what might have been their first set of benefits choices? And, how might that impact their choices during this annual enrollment?
An analysis of responses by Gen Z employees using Businessolver’s proprietary decision guidance tool — the MyChoice Recommendation Engine — during last fall’s annual enrollment yielded some valuable point-in-time insights.
- Compared to other generations in the workforce, Gen Z is the most confused about their benefits.
- These youngest employees are financially conservative, and they are already positioning themselves as smart savers.
- Despite a focus on saving, with their short earning history, Gen Z is the least able to weather the impact of a large healthcare bill.
Fast forward to early summer when some employers hold their annual enrollment. While not as big a sample we see each fall, responses from employees using the MyChoice Recommendation Engine during “off-cycle” annual enrollments may give us an early indication of how Gen Z is weathering the pandemic from a benefits perspective.
Benefits literacy decreases, but Gen Z is stepping up
First, Gen Z’s level of confusion around benefits has increased — from 54% to 61%. Because of their relative lack of experience with benefits, Gen Z is the generation of employees least confident about their mastery of this complex subject. As they are just learning about benefits, some confusion is to be expected. However, the increase may be the result of Gen Z employees looking at their benefits choices more closely and critically in light of COVID-19. Such level of attention and scrutiny tends to expose cracks in knowledge or comprehension.
However, they are not letting a lack of benefits savvy create inertia. Just the opposite, as Gen Z is embracing the importance of saving for out-of-pocket healthcare costs and has concentrated on building a nest egg.
Last fall, just 4% of Gen Z employees indicated they had money in a fund to cover a large ER bill. By this summer that number had more than tripled to 14%. They still trail the other generations in the workforce but, unlike Gen Z, the percentage of Millennial, Gen X and Boomer employees indicating they were prepared actually decreased since last fall.
Already savers, Gen Z may bend toward more preparedness
Gen Z already understood the value of benefits, and their experiences as a global pandemic colors the beginning of their working lives may serve to amplify that focus.
For example, a desire to get ahead of the game may characterize Gen Z employees this coming annual enrollment and in the years to come. With COVID-19, Gen Z has experienced how quickly and radically things can change, and the importance of being ready. Already oriented toward financial preparedness, Gen Z may look for and take advantage of benefits like HSAs more than their counterparts in other generations. They are already more prepared for out-of-pocket financial costs than they were last fall.
Gen Z may also be more likely to focus on the risk-reward potential of various benefits options, which will make personalized support around decision-making vital for them. And, with an eye toward preparing for and protecting against potential risk, Gen Z may demonstrate more interest in and appetite for voluntary benefits than their colleagues in other generations.
However, to help Gen Z enroll in the suite of options that meet their requirements, employers need to address benefits literacy and comprehension. Making benefits education a part of the onboarding experience can help reinforce benefits knowledge for Gen Z and also drive their appreciation for this portion of total compensation.
While Gen Z still represents a smaller portion of the US workforce, as the economy recovers and more jobs are created, these young people will significantly impact the makeup of the employee population. Understanding their experiences and their state of mind related to benefits can help employers prepare for the future — starting with annual enrollment this fall.