If someone offers you something for nothing, you’d take it, right? Free toaster for opening a bank account … free turkey with a $50 purchase at the grocery store … 1 hour of paid time off for every 30 hours worked.
They all sound like good ideas, and so the residents of Milwaukee overwhelmingly approved the sick leave mandate. To what degree was the public informed on the implications of this referendum? I’m not sure. I’ve heard from many people who voted "yes" without realizing what they voted for, but I didn’t talk to every person who voted.
There is, however, one person that sticks out in my mind – a very bright, highly educated manager in our organization. After the election, we talked about the choices we made and what the future held. She told me that she had voted "yes" on the sick leave referendum, and when I asked why, she replied, "Why not? Glad you asked…"
We all know that there’s no free lunch. And there are certainly no free benefits (hence, cost-benefit analysis). In fact, this sick leave mandate has a very straightforward cost.
Let’s say that you work for a company that doesn’t offer paid sick leave, and your wage is $10 per hour. If you get sick, you take the day off, and you don’t get paid. Under the new mandate, however, you would accrue 1 hour of paid sick leave for every 30 hours worked. This means that you now get paid for 31 hours, having worked 30 – a 3.33-percent increase. You’re not getting 3.33 percent more in salary, though, just in benefits. Let’s stop and think about this. Essentially, all the mandate has achieved here is an artificial 3.33-percent wage increase. But someone has to pay for this, and the burden falls squarely on employers.
In any business climate, increasing operating expenses is bad for business. In an economic climate that has already resulted in thousands of layoffs, as well as voluntary wage cuts, imposing this additional burden will force businesses to cut costs further. So it’s either additional layoffs, as Whole Foods indicated it would be forced to do, or …
A smart business in this position would cut its salaries by 3.33 percent and offer a "bonus" of $10 per hour to the employee above who works instead of using his/her "sick time."
The employee then makes the same amount of money as before. And if you’re sick and want to use the sick time, it’s the same as taking an unpaid sick day. The employer has the same salary. But why would we as a city make an employer have to do this? What message does this send to businesses considering moving to Milwaukee?
This mandate doesn’t make sense for multiple reasons. It doesn’t make sense to, on a city level, effectively impose wage and benefits regulations. States and federal government do that (minimum wage, Federal Medical Leave Act, etc.). Otherwise, an island of disadvantage for businesses is created, and believe me, I’ve heard of multiple business owners already considering leaving the city as a result.
Today, I talked to a business owner that wouldn’t do a cost of living salary increase (typically about 3 percent) in 2009, saying that the extra "sick time" would in effect be that raise. Businesses will be forced to cut costs if forced to comply with this mandate.
This will result in salary cuts, other benefit cuts or layoffs, because today’s economy certainly won’t support product price increases. And it will create an accounting and human resources nightmare. Furthermore, the illustration shows how the mandate can easily be made to be a moot point.
Talk to almost any business owner, large or small, and they will tell you that their organization is struggling to keep costs down, while trying to offer the best benefits packages to attract the best talent. The organization I work for already offers paid time off (PTO) – a bank of time that combines sick time and vacation time. But every organization is different. Some offer higher salaries and lower benefits, others offer perks. To force companies to comply by this tunnel-visioned mandate is a short-sighted idea.
Say it with me – there’s no such thing as a free lunch. With that in mind, let’s repeal a strangely-worded piece of legislation that will severely hurt business, and ultimately, employees.
Tim Gokhman is the director of sales and marketing at New Land Enterprises LLP in Milwaukee.