Obama's Latest Drag On American Businesses: Paid Family Leave & Sick Pay

Awhile ago, two researchers at the Brookings Institute released this very disturbing graph:

What this shows is that, for the very first time in more than thirty years, America's businesses had more defaults/closures (exits) than those being started up (entry).  Despite the recession being over in mid-2009, the adverse exit versus start up trend has not abated; and, obviously, this is one of the reasons that our job market is so soft.  While the recession can be easily blamed for the crossover in the first place, the fact that we haven't gotten back on track with higher business creations has a lot more to do with regulations under this President and the Democrats.  Regulations that have presented high hurdles for many small businesses to even get off the ground, and regulations that have also accelerated business closures.

Now, Obama wants to beat down U.S. businesses even further by pushing 6 weeks of paid family leave for both of the parents who have just had a baby or adopted a child. Additionally, he wants all employees to have 7 full days of paid sick leave.  But, just like a lot of what Obama and the Democrats have done over the last 6 years, the cost to American businesses, and ultimately you and I, will be phenomenal.

In the case of paid family leave, there are approximately 4 million babies born each year in this country.  Since half the women giving birth are unwed, this law could, worst case, give roughly 6 million parents of newborns a full six weeks of leave.  In addition, there are about 1-1/2 million adoptions each year; meaning that an additional 3 million more parents would benefit from Obama's proposed law.  But, because there are teen births and some births are to freelance workers and workers who already get paid leave, let's assume that only 6 million parents would impact businesses.   

According to the Census Bureau, the average per capita income in the U.S. is $28,155/year or $542/week.  A six week leave would then cost the average business roughly $3,250 for each person taking leave.  There's more.  Most business cannot simply cover a missing staff member for six weeks.  If they could, then they obviously don't need that person.  So, you have to double the $3,250 to take into account that a temporary worker would have to be hired to cover for the on-leave worker.  This means that each of 6 million workers on family leave would cost a business $6,500.  In total, that is a sum of $39 billion annually that businesses would have to absorb and pass on to you and I in higher costs. In the case of marginally profitable businesses, this additional expense could push them into bankruptcy.

Then, there's the paid sick leave proposal.  According to the Institute for Women's Policy Research, more than 40% of the 156 million workers in this country aren't afforded paid sick leave.  That means that at least 62 million employees would benefit from a law that mandated 7 paid sick days.  Now, having been a manager at a company who had a 7-days paid sick leave policy, I personally know a lot about this topic.  Monthly, I would receive a report reflecting how much year-to-date sick leave took place in my own department and as compared to the company as a whole.  Statistically, about 74% of employees took exactly 7 sick days a year; mostly just one day at a time and mostly on Fridays with Mondays being the second heaviest days.  Because of the Friday phenomenon, the company instituted casual and half-day Fridays and the number of reported Friday call-ins due to sickness plummeted.  So, what I am saying is that paid sick days are mostly another form of paid vacation. The abuse of which probably would best be curtailed if left unpaid.

So, here's what universal paid sick pay will cost companies.  Using the Census data on income info above, 62 million workers getting paid for 7-days sick time, will cost businesses a total of  $47 billion dollars each year.  All of which will be passed on to us.

Combined, Obama's family leave and sick pay proposed regulation will cost businesses an estimated $86 billion per year.  This, in turn, will exacerbate the decline in business creation and the rise in business closures.  A fact that is already clearly noted and obvious to anyone who drives around and sees many former storefronts and office buildings still empty from the days of the recession. 


References:

Brookings Institute: Declining Business Dynamism in the United States: http://www.brookings.edu/~/media/research/files/papers/2014/05/declining%20business%20dynamism%20litan/declining_business_dynamism_hathaway_litan.pdf

Dodd Frank Banking Regulations:  Community banks, the lifeblood for small business growth, are disproportionately affected, impacting their lending ability and consequently their ability to infuse growth into the broader economy: http://www.forbes.com/sites/franksorrentino/2014/07/24/after-four-years-of-dodd-frank-bank-regulation-is-still-a-guessing-game/

Government report finds regulations have spiked under Obama: http://thehill.com/regulation/administration/299617-government-report-shows-spike-in-regulations-under-obama

Obama Plans to Push Paid Family and Sick Leave for Workers:  http://www.cnbc.com/id/102340223

CDC Fast Facts: Births and Natality: http://www.cdc.gov/nchs/fastats/births.htm

Almost half of first babies in U.S. born to unwed mothers: http://www.cbsnews.com/news/almost-half-of-first-babies-in-us-born-to-unwed-mothers/

Facts about adoption: http://www.pbs.org/pov/offandrunning/adoption_fact_sheet.php

Census Bureau QuickFacts Of the United States:  http://quickfacts.census.gov/qfd/states/00000.html

More than 40% of private sector workers in the U.S. currently don’t get paid sick days, according to the Institute for Women’s Policy Research: http://fox8.com/2015/01/15/obama-to-press-for-paid-sick-days-and-paid-family-leave/