In addition to funding minimum wage campaigns all across the country, labor unions have begun sharpening their focus on another antibusiness decree: mandated paid sick leave. While not as headline grabbing as the minimum wage, restaurants would do well to take notice of this recent activity.
Examples at both the state and local levels illustrate this point. In January 2012, Connecticut became the first in the country to implement a mandated paid leave law statewide. The Employment Policies Institute — a nonprofit research organization I helped establish over 20 years ago — conducted a survey of more than 150 businesses to gauge how employers were preparing for the mandate’s implementation. The results were telling.
Nearly half of the businesses that began providing paid sick leave to comply with the law reported taking some of the following steps to acclimate to the higher cost of doing business: laid off employees, converted full-time positions to part time, decreased wages, cut employee hours, reduced other paid leave, scaled back employee benefits, or limited or restricted job expansions within the state.
In other words, it proved to be a remedial course of Unintended Consequences 101.
Even more concerning for employees were the future actions these businesses indicated they were likely or highly likely to take, including offering fewer raises, reducing overtime, hiring fewer employees and reducing employer contributions to other employee benefits like health insurance — which would be even more troublesome today with the skyrocketing costs under the Patient Protection and Affordable Care Act.
Mandating paid sick leave at the city level has also proven harmful to businesses and employees alike.
In Seattle — where a paid sick leave law has been in effect since September 2012 — a majority of business owners participating in another EPI survey reported mandated paid leave would raise their cost of doing business, with more than 25 percent saying it would cause big increases. One in five surveyed businesses reported being forced to cut jobs, reduce hours, decrease employee benefits or some combination of the three.
Similar outcomes were observed in San Francisco, which has had mandatory paid sick leave since 2007. The Urban Institute found that Bay Area businesses responded to mandated paid sick leave by scaling back employee bonuses, limiting the use of part-time employees and reducing paid vacations. The Institute for Women’s Policy Research — an organization that’s advocated for mandating paid sick leave — reported similar results, with nearly 30 percent of San Francisco’s poorest workers reporting layoffs or reduced hours at their place of work following mandated paid leave.
These and other surveys refute claims by advocates that government-mandated labor costs magically reduce the cost of doing business by lowering employee turnover; all of two businesses in the Connecticut survey anticipated the mandate would reduce employee turnover.
Of course these advocates don't have to worry if their Pollyanna views of how to structure a business don't pan out. While most of them have never run anything but their mouths, if their recommendations cause job loss, it surely won’t be their paychecks that get reduced.
Richard Berman is president of Berman and Company, a Washington-based communications firm. This article does not necessarily reflect the opinions of the editors or management of Nation’s Restaurant News.
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