Mose Americans realize that Washington is dysfunctional and perverse. So is Washington, D.C. The city has long been unfriendly to business, encouraging enterprises to locate in the suburbs. Now the city fathers are upping business costs again by mandating paid family leave. Such a policy is unfair to all employees except those who take leave, since it shifts rather than expands benefits. And the law will further discourage job creation in the city.
For the nation’s capital, it’s one step forward, another step back. D.C. has long been recognized as one of the nation’s least friendly business climates, but in recent years, officials have attempted to lure employers into the city limits. The results can be seen around the city. The latest evidence is Columbia Heights’s D.C. USA shopping complex, which features prominent retailing chains such as Target, Bed, Bath & Beyond, and Best Buy. These businesses not only bring new shopping opportunities to the neighborhood, but an estimated 1,200 new jobs, more than half of which will be filled by D.C. residents.
Yet while area residents were celebrating the opening of this new consumer paradise, the D.C. Council was busy discouraging other businesses from following D.C. USA’s lead. In March, the D.C. Council passed and the Mayor signed the Accrued Sick and Safe Leave Act, legislation to force employers to provide workers paid sick leave. Businesses with twenty-four or fewer employees will have to provide three days of paid sick leave, while those with more than one hundred employees will have to offer seven days.
Most people naturally respond to this news by cheering the D.C. government: after all, who doesn’t recognize the need for workers to take time off due to illness? The problem with this reaction, however, is that it focuses solely on the recipients of the new benefit without considering the other side of the ledger: those who bear the costs and suffer from the mandate’s unintended consequences.
Consider what happens to a business if an employee uses paid leave. The job that person was hired to perform will go undone, another employee will have to pick up the slack, or the business will have to hire a temporary replacement worker. In any case, the employer’s costs will go up or productivity will go down. Smaller businesses, which tend to be more financially vulnerable than larger ones, are particularly affected. Large employers may shift work with relative ease, but a store with a handful of employees often cannot function when one worker doesn’t show up. The owner will have to hire a replacement while still paying the leave taker’s salary. Those additional costs will have to be made up for somewhere: prices may rise for consumers or perhaps employees will receive lower pay.
Many advocates of these types of mandates also lament stagnating wages. Yet mandated benefits contribute to slow growth in wages since they raise the total cost of employment. As of 2006, more than 30 percent of the average worker’s total compensation was paid as benefits.