April 13, 2016

BLUE MODEL EXCESSES: Business Bears The Weight Of New York’s Benefits.

New York state has always been a very expensive place to do business. Soon, it will be more expensive still, as the state begins implementing two new programs just signed into law by Governor Andrew Cuomo: a $15 minimum wage and 12 weeks of paid family leave.

I hardly need to explain why requiring employers to pay at least $15 an hour is bound to be expensive for businesses. But the family-leave policy may require some explaining, because the governor insists it will not cost businesses anything at all.

So let’s start by explaining what the benefit is. When fully implemented, in 2021, it will cover 67 percent of a worker’s weekly salary, capped at 67 percent of the state’s average weekly wage (which is currently about $1,200 a week, making for a maximum weekly benefit of about $800). This is supposed to be fully paid for by a payroll deduction, which is allegedly going to be a little over a dollar a week.

In other words, it is supposed to be structured more as a mandatory insurance program than as a free benefit. I don’t see how the promised insurance can possibly be provided on a little over a dollar a week: An employee making the New York state average weekly wage, having an average two children, and perhaps caring for a sick parent or spouse once would collect a lifetime benefit of almost $30,000, while paying in about $2,300 over a 40-year career. But the premiums can be adjusted to make the math work out without forcing employers to cough up. (Though I suspect enthusiasm for the program among its beneficiaries would dim if it started docking substantial amounts from monthly checks.)

But this doesn’t mean there is no cost to employers. If the new law encourages people to take more leave, then employers are going to have to find someone to do their work. That means colleagues working harder to pick up the slack, or temporary employees who will need to be trained. There will be paperwork. All of this adds to the cost of doing business. The lower the profit margins, the more these costs will hurt.

By itself, adding mandatory family leave to the schedule of benefits is unlikely to bring many employers to their knees. But, of course, it is not as if this is the only cost that the government has seen fit to impose. It is also mandating that employers must soon start paying their workers a higher minimum wage.

The important thing, though, is that it gave politicians a talking point this election cycle.

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