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March 20, 2019

Is it progressive to pile burdens on small businesses?

January 11, 2019
Mayor Bill de Blasio proposes that New York City become the first city in the nation to mandate Paid Personal Time for workers. City Hall. Wednesday, January 09, 2019. (Ed Reed/Mayoral Photography Office)

It’s hard to make it in New York City. Especially if you’re trying to run a small business.

Now, Mayor de Blasio wants to make it even harder for the little guys to survive.

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Claiming that he wants to “give workers a break,” de Blasio is pressuring the City Council to force any business owner employing at least five workers to guarantee them at least two weeks of paid leave annually.

Sure, everyone wants time off — including small business owners. And everyone would like to get a paycheck while they’re out, too. But that’s not always possible.

Money is often quite tight for small-business operators — a fact lost on politicians who’ve forgotten (if they’ve ever known) what it’s like to operate on a limited budget.

Employers in New York City already face exorbitant property taxes and steep rents. They pay hourly wages 30% higher than the state average.

Small wonder so many small-business owners have experienced the fear and anxiety of not being able to meet payroll. De Blasio’s paid leave gambit could push many of these businesses to the breaking point.

Consider a family-run corner grocery with 10 employees, each making $20 per hour. De Blasio’s proposal would automatically increase the store’s labor costs by $16,000 per year.

That probably doesn’t sound like much to the deep-pocketed mayor. But grocers average profit margins of just 2%. To generate the profits needed to cover the cost of the mandate, the grocer would need to increase revenues by $800,000.

That’s a huge nut to crack for a neighborhood grocery. And the business owner is unlikely to be able to absorb the new costs personally. According to one measure, the average income for a small business owner in New York City is $72,000.

Instead, they will have to face tough choices on how to cover costs. And the options are limited: cut workers’ pay; cut workers’ hours; lay someone off — or some combination of these actions.

There is, of course, one other option: Close up shop altogether.

Studies show that employers typically shift the cost of mandated benefits back onto workers — either through lower pay or fewer hours/jobs.

But most workers aren’t eager to sacrifice their own jobs — or that of a co-worker — for a two-week paid vacation.

Of course, for most workers, the proposed law would do absolutely nothing. According to the U.S. Department of Labor, 90% of all full-time, private sector workers already get paid vacations.

What about the 10% of private sector workers who don’t already have paid leave? The problem is not that their employers don’t want to give it to them; it’s that they’re generally in smaller businesses that aren’t yet profitable enough to provide paid leave.

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De Blasio claimed that his proposal would be a boon to the business sector, promising that “[o]ur city’s businesses will benefit from a more productive, healthier workforce.” But this promise is built on the blithe assumption that all the city’s businesses can afford to do what he wants and just need a little nudge from Hizzoner to do it.

Sorry, Mr. Mayor, but a worker who finds his hours cut back or her job eliminated is not more productive, and will certainly have a tougher time paying for health care.

The further New York City’s government interferes in the day-to-day operations of small businesses, the fewer it will have within its jurisdiction. That’s bad news for workers and the city’s neighborhoods.

It would be ironic if soon, thanks to the handiwork of a progressive mayor, only big business are able to survive in Bill de Blasio’s Big Apple.

Greszler is a research fellow in economics, budget, and entitlement programs at The Heritage Foundation.

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