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Monday, Jun 5, 2023

The Small Business Squeeze

The general consensus is that the worst of the Great Recession is behind us, and now it is not a matter of whether we will recover – but how quickly. The Valley’s largest public companies are certainly hitting their stride again, as the Business Journal’s top 50 local public companies saw stock prices increase at an average of 26 percent in 2013. That exceeded the increases for the Dow Jones Industry Average (a 20 percent gain) and the Standard & Poor 500 (a 25 percent gain). What is harder to track is the recovery of our smaller, privately owned businesses, of which there are thousands in the Valley. But the Valley Industry and Commerce Association has heard from many of them, and the bottom line is: While they have not had to make any more drastic changes to employee numbers, they are just getting by on thin profit margins. With a business climate like that, it seems like Los Angeles and California would be working to create policies and regulations that help our small businesses stabilize so they can hire and re-hire employees, contribute more tax revenue and stir the local economy. However, the opposite seems to be the case, looking at proposals from Sacramento: More Minimum Wage Hikes A mandate to raise the wages for all employees is one sure-fire way to ensure small businesses that are still struggling to make ends meet will choose to let go of part-time or even full-time employees – the opposite of what we want to happen. However, small businesses – particularly in the food services sector – are trying to gauge how the upcoming minimum wage increases will affect their bottom line. Statewide, the minimum wage will increase from $8 to $9 on July 1, 2014 and then will increase again to $10 on Jan. 1, 2016. Between the wage increase, workers’ compensation rates increasing and other related fees going up due to the minimum wage increase, this accounts for about $10,000 in increased costs per full-time employee each year. That makes or breaks a business that is barely in the black now. An immediate solution in the employer’s control is to let go of part-time staff or even make further cuts to full-time staff. How does a minimum wage hike improve our economy if more people are standing in line at the unemployment office? Without even seeing how these quick and significant changes to wages will affect our businesses, a ballot measure has been proposed to increase the minimum wage to $10 by March 2015 and $12 by March 2016. The ballot measure was introduced by Ron Unz, a Silicon Valley resident and failed gubernatorial candidate described as a “52-year-old multimillionaire” by the media. Clearly, this guy has never looked at the books for a small business, or else he would know that increasing wage costs by more than 50 percent over the course of two years is a shortsighted idea at the tail end of a recession. Increasing Sick Leave Requirements As if small businesses weren’t getting hit enough by minimum wage hikes, other costs of doing business are at risk to increase, such as paying out for sick leave. Our state legislators have proposed Assembly Bill 1522, carried by San Diego Democrat Lorena Gonzalez, which would require employers to provide paid sick leave to employees who work as little as seven days per year. If this bill passes, California would be one of only two states with this benefit extension. Proponents of the bill claim they are protecting part-time workers, but there will not be any part-time workers left when small businesses are forced to cut them because of the high costs of employing them. Small businesses are the backbone of our economy: The 3.2 million small businesses in California employ 52 percent of the state’s workforce. Our unemployment rates would be even higher if small businesses did not do all they could to hold on to their staff during the worst of the recession. And yet, the way we thank them is by constantly proposing policies that drastically increase their costs without giving any breathing room in between each new counterproductive policy. The only way to change how Sacramento votes is to bring the business vote to the State Capitol. Valley businesses must contact their representatives and give them the numbers: How many part-time employees will lose some or all of their hours because of the high costs of these hikes? How many full-time employees will be laid off because a 50 percent wage increase is unsustainable for a small business? Every business has its own answer, but the general answer is: Too many. These policies are taking our recovery back instead of forward. The Valley Industry and Commerce Association (VICA) is a business advocacy organization based in Sherman Oaks that represents employers throughout the Los Angeles County region at the local, state and federal levels of government.

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