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Some 80 percent surveyed are "very concerned"

Well-Being Index: 'Erosion in confidence'

By Porter Anderson
CNN Career

(CNN) -- As Wall Street mulls over the Federal Reserve's quarter-percentage-point cut in interest rates -- from 3.75 percent to 3.50 percent -- one survey's gauge on workplace sentiment is offering a look at the economy through careerists' eyes.

"There's an erosion of the American worker's confidence underway," says Dan Houston, "an erosion of confidence about the investments those workers have made over the years."

Houston, senior vice president for the Principal Financial Group, is going over the company's latest edition of its Well-Being Index. It's a quarterly study commissioned by Principal from Harris Interactive to track careerists' perceptions of their own financial condition in the workplace. Results of the study were released with the opening bell of trading on Tuesday.

graphic What's happening to your financial "well-being" in the current economic situation?

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I'm really concerned. My financial picture is deteriorating fast now.
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More data from the newly released Principal Financial Well-Being Index. Click here.


"One of the questions we've been asking in these studies," he says, "is 'Given the downturn in the stock market this year, have you made changes in how you have your retirement savings invested (moving from volatile investments to more stable investments)?'

"In the first quarter of 2001, the response to that was, 'No, I have not made changes' 68 percent of the time. And in the second quarter, we see a 14-percent drop in that answer -- only 54 percent say they haven't made changes."

Even more revealing from that question is the "yes" answer. In the first quarter of this year, 11 percent of respondents to the survey said they'd moved retirement investments into comparatively stable instruments. By the second quarter, the "yes" answer was almost doubling -- 21 percent said they'd opted for more stable investment vehicles.

"We keep pounding away at the message," Houston says: "There has to be more education in this. Investors need investment education and savings education" in an economic and market climate that continues to challenge analysts -- even members of the Fed board.

And yet, as Houston is quick to point out, "If you go back to the 1973 time frame -- when the markets capitulated (to recession) for two years -- we didn't even have that many qualified retirement plans. This is the first time we've ever been able to test asset allocation at a time in which it's the participant who has this choice of how to invest those dollars."

Not to get Sartrean about it, it's a question, Houston is saying, of freedom and responsibility. The rise of online investing, in particular, has empowered single investors as never before. And many careerists are directing their own retirement-savings programs in ways they never could. But with that capability comes the responsibility of handling your own money. The Well-Being Index is designed to check how workers feel they're doing.

"My company is concerned about my (and my family's) long-term financial future."
  Fourth Quarter
First Quarter
Second Quarter
  10-499 11-1,000 10-1,000
Agree Completely 5% 7% 5%
Agree Somewhat 16% 21% 19%
Neither Agree or Disagree 25% 21% 28%
Disagree Somewhat 24% 13% 21%
Disagree Completely 30% 39% 28%
  Source: Principal Financial Group/Harris Interactive

1,200 workers

The Principal Financial Well-Being Index was conducted through Harris Interactive's QuickQuery omnibus research product, which is fielded randomly to more than 7 million respondents on the Internet. More than 1,200 full- and part-time employees of small and midsize companies were interviewed. The results were then weighted by Harris to reflect the national population of such careerists. There's a 95-percent confidence level assigned to this study, with an error range of plus-or-minus 3 percent.

Dan Houston, senior vice president with Principal Financial Group: If current market and economy conditions continue for two more quarters,
Dan Houston, senior vice president with Principal Financial Group: If current market and economy conditions continue for two more quarters, "We'll start seeing the floodgates open."  

"Interestingly," says Houston, "we're not seeing any erosion in percentage of workers' salaries being saved. People are continuing to save. So they're not losing confidence in salary schemes. Instead, people are saying, 'I may have to save even more.'"

Here are some snapshot results from the study.

•  Eighty percent of small- and midsize company employees responding to the survey said they're "very concerned" about their financial future. This response is in line with that of the two previous quarters' index readings -- 74 percent in the fourth quarter of 2000 and 84 percent in the first quarter of this year.

•  Forty-eight percent of respondents disagreed with the statement "My company is concerned with my (and my family's) long-term financial future; 24 percent agreed with that statement.

•  Fifty-three percent of responding careerists disagreed with the statement "I am extremely happy with my financial well-being."

•  Harris' research showed that female respondents are less happy (61 percent) with their current financial situation than their male counterparts (46 percent).

•  A third of respondents to this second-quarter 2001 poll said they have yet to plan for retirement or security. Employees of companies with 10 to 500 workers are less likely to have begun planning for retirement than employees of companies with 500 to 1,000 workers.

•  When asked to rank the overall importance of various financial features, respondents ranked job security and their long-term financial futures on a part -- 44 percent each. The concept of "challenging work," as an important lure to employees, ranked far below job security and long-term financial future -- just 13 percent said they see challenging work as an important criterion. In earlier Well-Being Index research, challenging work had been named by respondents as being considerably more important.

"I am very concerned about my (and my family's) long-term financial future."
  Fourth Quarter
First Quarter
Second Quarter
  10-499 11-1,000 10-1,000
Agree Completely 47% 58% 51%
Agree Somewhat 27% 26% 29%
Neither Agree or Disagree 13% 6% 11%
Disagree Somewhat 7% 8% 6%
Disagree Completely 6% 2% 3%
  Source: Principal Financial Group/Harris Interactive

Careerists on benefits

The Principal Financial Group specializes in retirement and investment services for business and institutional clients, as well as for individual workers.

A part of its interest in mounting the quarterly Well-Being Index is finding out what careerists want in benefits.

•  In the newly released second-quarter study, health insurance ranked the most commonly provided employee benefit, 83 percent of surveyed companies reporting that they offer health insurance benefits.

•  Sixty-four percent of those companies offer defined contribution retirement savings plans, as employees surveyed ranked health and retirement programs their own top priorities among benefits.

•  Perhaps an irony: Even while health insurance benefits are the most widely offered, they ranked among these respondents as the benefits careerists would most like to see improved. Thirty-seven percent said they'd like to see health-care plan improvements, while 18 percent of respondents said they'd like to see their companies' defined contribution retirement plans improved.

•  Retention may be a key to employers' considerations of benefits programs for their staffs. Seventy-seven percent of those workers asked said they agreed with the statement: "Having a good benefits plan would keep me working for my current company."

•  Fourteen percent of respondents said they'd like a profit-sharing program or bonus to be added to their existing benefits programs.

•  When the possibility of a sabbatical came into the picture, 85 percent of employees said they'd like to see health benefits continue while they were on their breaks; 28 percent said they'd like to see life insurance continue; 27 percent said they'd like a defined contribution retirement plan continued; and 18 percent said they'd like to see disability insurance continued.

•  But in terms of feasibility in sabbaticals, 47 percent indicated they'd like to take one but can't because of financial reasons or an employer's unwillingness.

"Given the downturn in the stock market this year, have you made changes in how you have your retirement savings invested (moving from volatile investments to more stable investments)?"
(This question was not asked in the Fourth Quarter 2000 survey).
  First Quarter
Second Quarter
  11-1,000 10-1,000
No, I have not made changes 68% 54%
Yes, I have made changes 11% 21%
I do not have retirement savings 21% 25%
  Source: Principal Financial Group/Harris Interactive

Confidence and caution

The Well-Being Index's release follow's Friday's report from the University of Michigan's preliminary August consumer sentiment index. In that study, consumer sentiment was seen to be rising, to 93.5 in August from 92.4 in July. This surprised some analysts who had expected no change in August.

In terms of consumers' comfort with their current financial picture, there was another increase, to 101.7 for August, from July's 98.6.

What seems to be stabilizing consumer confidence -- and, it would be expected, employee confidence -- is an expectation that the sort of interest rate cuts anticipated Tuesday from the Fed will combine with the federal tax rebate to move the economy out of its second-quarter sluggishness.

But the Gallup Organization is reporting widespread disappointment in stocks as an investment vehicle among Americans.

Six in 10 questioned by Gallup earlier this month said they have money in the stock market -- either in individual accounts, mutual funds or retirement instruments such as those Principal offers. Forty-eight percent say their stock market investments have lost money in the past year. Only 17 percent say they made money on those investments. This contrasts with survey data from 1997, when Gallup found 76 percent of investors saying their investments had made money in the previous year.

At Principal, Houston says the move away from equities as investment instruments may be no more than six or seven percentage points, among the more than 3 million workers the company has in various retirement workers.

But Houston says things could change -- and the flight from equities could become more severe -- if current market and economy conditions "drag on for two more quarters. My guess," he says, "is that if that happens, we'll start seeing the floodgates open."


• Principal Financial Group

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