Thursday, April 14, 2011

Job Creation Do's and Don'ts, Part Deux

In my last post I relayed my thoughts on the CA legislatures efforts to eliminate an important tool used by many employers (consumer credit report information) in hiring competent employees while protecting their assets and the personal information of their customers. There is another piece of legislation moving its way through the legislature that, if passed, will significantly increase the cost of doing business in CA at the worst possible time.

AB 10 (Alejo), proposes to increase the CA minimum wage by fifty-cents to $8.50/hour in January 2012, and then automatically index annual increases based on the inflation rate. A minimum wage increase to $8.50 an hour would make California's minimum wage the second highest in the nation.

There are several reasons to oppose this increased burden on employers. First, as many businesses struggle to simply survive in the midst of a serious recession, increasing their employee costs will not help to spur job growth, and let's face it, job growth is the only real way to dig out of this economic hole.

Now before anyone gets started on the "you're just protecting greedy business owners" bandwagon, let me remind you that the vast majority of employers in this country are small businesses with fewer than 100 employees. Those business owners are not getting rich in this economy. Most of them are struggling to survive, struggling to pay their bills and taxes, and struggling to meet payroll every two weeks so they don't have to lay anybody (else) off. Raising the minimum wage will not help them do that.

It's important to remember that an increase in minimum wage does not only increase the cost of hourly employees' wages, but salaried employees' compensation as well. In order for employees to qualify as 'exempt' under any of the six exemptions in CA labor laws, they must meet a salary based test. In other words, they must earn at least two-times the minimum wage. If AB 10 is implemented, annual salaries for exempt employees would increase from a minimum of $33,280 to $35,360, and continue to increase each year based on the inflation index.

Second, it seems to me that automatically increasing employee costs annually based on inflation will not only crush job creation, but will have a spiraling effect on the economy. Increased costs will necessarily need to be passed on to consumers in the form of higher prices...increasing inflation...increasing employee costs...increasing prices...increasing inflation...increasing employee costs... You get the idea.

Interesting point...this automatic adjustment moves only one-way, UP! There is no provision in the law for decreasing minimum wage during times of deflation. In other words it locks-in the higher wages when prices (and presumably profits) decline. That's simply bad economic policy.

We must always keep in mind what sets CA apart from the rest of the country when we talk about job creation, the good, the bad and the ugly. We have a talented workforce, nearly perfect weather and a lovely quality of life. Good.

CA is also one of the most challenging places to do business. Higher taxes, highly restrictive regulations and a nearly bankrupt state government. Bad.

We already know its expensive to do business in CA. Continuing to increase the cost of keeping people working doesn't make any sense in a deep recession. Nor will it help us stem the tide of employers leaving the state or encourage others to come. Worse yet, it will likely stop those that are already here from creating new job opportunities. That's just ugly.

Wednesday, April 6, 2011

Job Creation Do's and Don'ts

Oh my I have forsaken thee. Far too many months since I've written, not that I've been slackin' off you understand. There has been a lot of activity lately, some good and some not so good.

Good news...Super Bowl MVP Quarterback Aaron Rodger's hails from Chico. Now you KNOW that's got to be good for tourism. (No parade though. You asked for it and we tried our best but it isn't going to happen. Please stop asking...)

Not-so-good news...the State of California remains (seemingly) hopelessly deadlocked on budget negotiations. Too much finger-pointing and not enough compromise(things we all should have learned in grade school) are glaringly absent from the process. That's bad for everyone.

But even with the deadlock on the budget the legislature still seems hell-bent on writing bills that are truly bad for job creation and employers. Two you should know about are AB 10 and AB 22. The Chamber of Commerce is following these closely and lobbying our lawmakers to oppose them both.

AB 22 (Mendoza) negatively affects private employers by restricting their ability to utilize consumer credit reports when making employment decisions.

Employers utilize employee credit reports to assist in the overall evaluation of an applicant, just like they use college degree requirements, past employment references, etc. All these factors together provide objective information regarding an individuals past behavior or character as an indicator of their likely future behavior.

Employees in many industries (think in-home care, senior care facilities, hospitals, car retailers) have access to not only the employer's assets and financial information, but also the assets and financial information of customers. All of us should want employers to have access to all the data they need to help them make the best hiring decision possible. AB 22 needs to be killed.

Next post we'll report on AB 10 (Alejo), another job-killer bill that we're following. But now...back to work!