Discussion on Financial Literacy and Job Turnover Rates
Individuals are required to make important economic decisions beforeinvesting or saving during retirement or before buying an insurancepolicy. Financial knowledge refers to skills or abilities that helpsomeone to make effective financial decisions. Lusardi and Mitchelli(2015) said that proper financial knowledge enables people to managetheir wealth wisely. The literacy is related to the financialstability of people and job turnover rate. The paper will discuss theliterature review of the link between financial literacy and the jobturnover rates among African-American males.
Bartel and Borjas (2013) supposed that job turnover happens due tovarious reasons. For instance, people can quit jobs voluntarily, andthey can be discharged involuntarily. People voluntarily quit theirjobs due to dissatisfying salaries, personal issues or jobdifficulties. While involuntary turnover is as a result of employerbeen dissatisfied by the work force or where a company isexperiencing financial instability and the management decide to firesome employees to ease the salaries budget. Frequent turnover,whether involuntary or voluntary makes individuals lose income andhinders them from gaining experience or being promoted at theirworkplaces.
According to Farber (2012), about 20% of United States workers whobegins a new job, they work for an average of 4 to 5 years. The rateof turnover is high among youths who work while studying. About 30%of low-income families, the heads are high school dropouts even inplaces where employment levels are high. Those who are employedrecord highest rates of voluntary and involuntary job turnover. It isaccounted to low education levels. African-American workers quitjobless frequently, but on the other hand, they are much moredischarged.
Particular groups of less-skilled workers have common problem of lowretention and job turnover. Among workers who were employed between1980 and 1990, they took a period of 9 months or less to turnovertheir jobs mostly after securing new jobs. (Hershey and Pavetti,2014). Some of those who left ended up returning in cash rolls. Inaddition, most males with a previous history of criminal records haverecorded a low job retention.
Mandell (2013) carried a survey, which was measuring personalcapability among a group of high school students. The students wereasked four different types of questions specifically about managingmoney, saving, spending and on income. The survey also includedquestioned about investing in stocks and insurances. Mandell (2013)stated that most of the high schools graduating seniors arestruggling with financial literacy basics. The survey demonstrated ahigh level of financial knowledge in business student.
Another study was carried on a certain group in England regardingtheir financial literacy in renting houses. The study involvedyouths, single parents, and students. The questions were about howthey manage their finances, buying and selling, and how they handlefinancial issues. The study found that single parents had challengeswhen dealing with financial problems. They found that students neededbetter financial handling skills.
In 2012, Chen and Volpe studied financial knowledge among a number ofstudents in various institutions in the United States. The studyfound that young males without business courses and with low workexperience had a minimal financial knowledge. Besides, businessstudents scored high compared to other students in non-businesscourses.
Another study carried in the United States has indicated thatfinancial behavior and level of savings vary between genders. Womenusually have low earnings hence they have a low saving and lowwealth. Unlikely, men have high incomes thus they have high savingsand are wealthy. In addition, women were recorded to face manydifficulties during retirement. Women have long life expectancieshence they had five years more in their retirement than men do.
In 2013, Schmidt and Sevak found that women in America have dependedon men for monetary support. Even though the trend is changing, a bigdifference still exists of financial well-being in both genders. Thestudy further found that the poverty level in females was higher thanin men. Poor education and skills as observed result to workers jobturnover. Besides, jobs characteristics and type of employers areother factors that result in high job retention. Large firms,unionized and paying high wages have recorded low job turnover rates(Holzer, Stoll and Wissoker, 2016). Proper payments motivate workersto perform better and avoid job retention. Similarly, effective humanresources policies and protective employment rules help in reducingthe turnover. Others include health benefits and promotion aspectsreduce retention (Henly and Lambert, 2015).
Recently, the United States faced a financial crisis that causedgreat financial losses to individuals. According to Luttrell,Atkinson, and Rosenblum, (2014), rentals net worth dropped from thirdquarter in 2007 to first quarter 2009. The crisis called forfinancial reforms in the nation to equip individuals on how tosurvive during such periods through proper financial decision-making.To handle the case, the government prioritized restoring financialsecurity for families. White House reported that savings from studentloans, retirement savings among another type of financial literacynot only benefit American families but also improves the state ofeconomic health (White House, 2012).
Grinblatt,Keloharju, & Linnainmaa (2013), stated that half ofAmerican households do not engage in the stock market, which is oneof wealth accumulation tool. They do not have financial literacy,which is the reason behind not participating in the stock market. Afurther report indicated that most of the American households havelow financial potentials. Members of minority groups likeAfrican-American and Hispanics have low income due to low education.Low income affects their retirement’s savings as well as having achecking account. They invest in neither high-return assets norfinancial assets like savings accounts (Lusardi, 2015). Lusardiproposed the use of financial seminars to this group of people thathave special needs. The seminars will assist in creating awarenessand increasing financial literacy to this minority groups. However,the decision is opposed by some people in other major groups who willfeel discriminated. The notion that financial planners are theresources of those wealthy has disadvantaged minority groups toacquire financial literacy through other external resources (Mitchellet al., 2011).
Increased levels of savings show an economy that is thriving. Theyargued that policies supporting savings are an important source ofeconomic development. High savings boost the economy, as individualsare able to invest the money in their projects. Nevertheless, thelevels of saving tend to be less among the African Americans. Withexpenses that comprise rental houses, medical bills and education, itbecomes virtually difficult to save. In addition, increasedcompetition in search for well-paying jobs, it is quite difficult tosecure well-paying jobs. Nevertheless, discrimination that existed inthe past is declining in a majority of states and organizations.Consequently, many of the African Americans are able to acquireeducation and compete favorably with other races. The economy ischanging rapidly, demanding high intellectual capacity. As a result,policies that support the minorities will be of great help inboosting the African-Americans savings.
Depression has been attacking most of African American men (Schagen& Lines, 2016). Researchers have tried to identifythe main cause of depression in African-American men. In theirresearch, they found that among the common causes are their economicstatus and incom.
The problem asindicated earlier is as a result of low financial literacy.African-Americans have low incomes, which is due to their level ofeducation. In addition, the men take care of their families with thelittle income. As a result, they are faced with poor financialmanagement, which ultimately develops stress, which later develops todepression. The government should venture and help this people fromthe financial stigma. In addition, the people should be educated onfinancial skills and how to take care of their finances. Similarly,the government should advocate their citizens to engage in savingsand investing in stock markets.
However, it is suggested that African-American social behaviors,cultural characteristics, and basic values influence their choice ofoccupation. The study further indicated that personal characteristicsand turnover intentions are some of the factors affectingAfrican-American accountants. Passion and right attitude drivesworkers to retain their job for a prolonged period. In addition, theemployers should create appropriate working conditions that willmotivate their employees to work.
Rasch and Harrell (2012) said that job satisfaction is inverselyrelated to turnover intention. Personal characteristics areassociated with job satisfaction. Rhode, Sorenson and Lawyer, 1976,said that workers who were referred as migrators had differences withnon-migrators in their interests and personal differences.Non-migrators had interest and passion to work with the firm. Howeverthe migrators had wavering interest and thus they could not retaintheir jobs.
However, the link between retention rate and job satisfaction has notbeen well researched. In 2014, Aranya and Amernic found that jobsatisfaction between accountants in Canada differed between employeesin public and private firms. The arrangement schemes and the settingsof the occupation indicated some weakness.
In conclusion, it is clear that African-American have lesssatisfaction with their jobs than other groups. Reduction insatisfaction can be associated with low-paying jobs, lack ofmotivations and poor working conditions. Majority ofAfrican-Americans live in congested areas that have poor facilitiessuch as water and rental houses. Due to low level of education amongmany African-Americans, they tend to secure manual jobs. Manual jobshave low wages compared to jobs that demands one to utilizeintelligence. Saving among the African Americans is limited. Theystrive to meet their basic needs utilizing their meagre earnings,only leaving less for investment in the future. Low satisfaction hasresulted in increase in turnover rate among the African-Americanpeople. In addition, low level of education among African-Americanhas resulted in the lack of financial literacy. Hence, they face thechallenge of poor management of finances and poor handling offinancial crises. As a result, African-Americans have been exposed tolow living standards, lack of wealth accumulation and others face thechallenge of succumbing to depression as a result of financialstress. Proper strategies should be developed to educate them onfinancial literacy.
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