The latest Principal Well-Being Index study by Principal Financial Group showed owners of small and midsized businesses are opting to raise prices and reduce operating expenses before cutting salaries or benefits, despite a belief among them and their employees that there will be a recession in 2023.

Seventy percent of employers and 74% of employees believe it’s somewhat or very likely a recession will happen in the next six months, up from 65% of employers in July. Among small businesses, 64% said they will not reduce salaries, compared with 49% of large businesses, and 57% said they will not reduce benefits to adapt for a recession, compared with 45% of large businesses.

“If there’s one constant in our research of the small and midsize business community, it’s that they remain committed to their employees. Earlier this year, businesses said they weren’t going to impact benefits or wages, and that sentiment is holding,” Amy Friedrich, president of U.S. Insurance Solutions at Principal, said in the news release. “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.”

The study found more businesses say they are currently growing, compared with this time last year — 61% are seeing growth, compared with 51% last year, despite concerns of a recession. More than half, 53%, of small businesses also reported growth, the highest in 2022 and up from 46% in July.

Employees are preparing for a recession by reducing discretionary spending, the survey found, with decreasing savings for retirement the least likely action employees said they would take to adapt for a recession.

The impact of recession concerns on employee mental health is significantly affecting employees from the millennial and Z generations. Both were more likely to report impacts to their stress levels or mental health.

The full results of the study are available at this link.