Survey: Businesses say recession is likely, salary reduction is not

DES MOINES — Small and midsized businesses and employees alike are anticipating a recession, but most businesses are not preparing to reduce employee salaries, according to a national survey from Des Moines-based Principal Financial Group.

The survey found 70% of businesses and 74% of employees think a recession will likely happen in the next six months.

Twenty-nine percent of businesses said they had reduced operating expenses and increased cash reserves, while 26% said they had increased prices for products and services to deal with recessionary pressures.

Overall, 58% of businesses said they would not reduce the salaries of employees, according to the survey. Fifty-two percent said they would not reduce benefits offered, and 49% said they would not reduce the employer-paid portion of benefits offered.

For small businesses, 64% said they would not reduce salaries, while 49% of large businesses said they would not reduce salaries.

The survey polled 500 business owners or leaders at companies with 2-10,000 employees and 200 full-time employees in October 2022. Companies with between 2 and 499 employees were considered small, while companies with 500 to 10,000 were considered large.

Amy Friedrich, president of Principal's U.S. Insurance Solutions, said in a press release the results signify small and midsize businesses are committed to their employees.

"While the economic outlook is murky, business owners understand employees are their most valuable asset and they're continuing to support them with retirement and protection solutions, as well as financial wellness programs," she said.

While the survey was national, JD Davis, the vice president of public policy at the Iowa Association of Business and Industry, said Iowa's manufacturing industry — which is closely tied to agriculture — makes the state better suited to sustain recessionary pressures. Workforce shortages are a common concern of Iowa businesses, he said.

"Member companies are nimble and have adapted to supply chain issues and other headwinds during and coming out of the pandemic," he said in an email. "ABI will be engaging Iowa policymakers to continue to work on solutions for needed workforce participants."

While the Principal survey found fears of a recession, more businesses were experiencing growth compared to 2021, with 61% of respondents saying they were growing, compared to 51% in 2021. Fifty-three percent of small businesses reported growth, while 73% of large businesses did so.

Mental health was also a concern related to a potential recession, with 67% of employees who think a recession is likely saying the concerns negatively impact their mental health. Millennial employees had the highest rate of mental health concerns, with 79% saying recession concerns negatively impact their mental health.

Friedrich said there was a disconnect between the concerns of employers and their employees.

"While employers are more concerned about economic impacts, employees' concerns focus on personal health and wellbeing," she said. "Employers have an opportunity to focus on understanding and meeting employees' needs and addressing them for continued long-term job satisfaction and growth."

The survey found more employers were offering financial benefits for full-time employees compared to six months ago. The percentage of companies offering financial benefits were:

Paid family and medical leave—79%Retirement plan contribution match—72%Disability insurance—72%Financial wellness program—61%Access to digital financial advice platform—52%