City Mandates Come With a Cost

Businesses everywhere understand the value of good employees, and no one wants employees to come to work who are sick. Similarly, residents know that stable and high-quality businesses are key to a growing economy and quality of life. Last month the Los Angeles City Council decided to increase the number of paid sick days that employees in the city are entitled to. They settled upon six as the magic number. This is yet another policy that hurts us all – businesses, employees and residents in the Valley. Proponents of this ordinance say it will help employees, especially those in service occupations. “Economically, minimum wages may not make sense. But morally, socially, and politically they make every sense,” noted Gov. Jerry Brown as he signed the statewide minimum wage increase in April. But I ask – how is it moral, socially responsible, or politically expedient to damage our economy? How will it help service workers when employers who can no longer pay the mounting costs turn to automation, cutting hours and jobs? How will it help employees when businesses pay for these mandates by cutting other benefits? Benefits that the employee may value more, but can no longer receive because the city has decreed how people must be compensated? How will it help when higher costs, including for essentials such as food, are passed on to consumers and residents in Los Angeles? These mandates have to be paid for somehow. Since last year, numerous regulations and mandates on businesses have been pushed through without time to stop and consider the cumulative effects. Last summer a new statewide requirement mandated that employers provide up to three days of paid sick leave. Brown has also signed legislation to increase the minimum wage to $15 per hour – an increase of 66 percent over five years. California doesn’t operate in a vacuum. Los Angeles certainly doesn’t. The federal minimum wage is $7.25. That’s less than half of $15 – and as great as the San Fernando Valley is, any business leader would need to think twice about moving a business here. The paid sick leave requirements hit restaurants and small businesses hardest – and these businesses will feel the upcoming minimum wage increases the most as well. These are also the types of businesses that already have intangible benefits that may be lost. As one example among many, employees can trade shifts and work around their other commitments, such as getting an education or caring for family. Young people can take their first step into the job market. If businesses are forced to cut positions, this flexibility may be lost. Increasing the paid sick leave requirement at a city level when we haven’t seen the full effect of these other laws is a bad idea. How will businesses be forced to react – cutting hours, cutting positions, cutting other benefits, leaving the area, raising prices, investing in automation? We don’t yet know, but we do know that none of these are positive outcomes for Los Angeles. Two years ago the state legislature settled on three mandated paid sick days. Now, Los Angeles has rehashed the whole debate and come to a different conclusion. Our local elected officials seem to have decided that money grows on trees, and that piling more costs onto businesses is the clever and fashionable thing to do. As the effects start to be felt, they may see that it is not so straightforward. But by then it will be too late. Successful businesses will have left the Valley. New businesses will choose other locations, or never get off the ground. Service jobs, which many people depend on, will be harder to find. We all want Angelinos to be employed in good, stable jobs. Making employing workers more expensive is a terrible way to achieve that goal. Stuart Waldman is president of the Valley Industry and Commerce Association, a Sherman Oaks-based business advocacy organization that represents L.A. County employers at the local, state and federal levels of government.