New York City’s small businesses, hit by a $15 minimum wage in 2018, are now being threatened with a proposal to guarantee workers 10 days of paid vacation that could cost up to $1.6 billion per year.
Mayor Bill de Blasio’s plan is meant as a quality-of-life measure for the hundreds of thousands of workers who aren’t guaranteed paid time off. But companies say the cost of it would land on them, forcing reductions in work hours or even layoffs.
“The weight of all these burdens falls on small businesses,” Kathryn Wylde, president of the nonprofit Partnership for New York City, told the Washington Examiner. “Very often, small business owners don’t take vacations themselves because they can’t afford to, so it’s just grossly unfair.”
De Blasio estimates his plan would affect 500,000 workers in the city. Government statistics say the average hourly salary is about $42 for the mid-Atlantic region, and applying that figure to eight-hour shifts for 10 working days would yield a cost of $1.67 billion.
To put the numbers in context, the vacation plan would cost a business with 10 employees making $20 an hour an extra $16,000 a year, said Rachel Greszler, a research fellow at the conservative Heritage Foundation. If the hypothetical company’s profit margin were 2 percent, it would have to generate an extra $800,000 a year just to pay off the cost of the new mandate, she said.
“It’s probably nearly impossible to come up with that,” she added. “I don’t think the people who proposed this and are advocating it have really thought through, on a more personal level, about small employers and how this will actually impact them.”
De Blasio’s proposal, which will be sponsored in the 51-member City Council by council member Jumaane Williams, has yet to be introduced, though the Democratic mayor hopes to enact it as soon as possible. Modest by comparison with a European Union law guaranteeing at least four weeks of vacation and British law promising at least five, the plan — the first of its kind in the U.S. — comes just as Democrats are pushing for increased pay and benefits for workers whose salaries haven’t kept pace with inflation.
Since 2011, one-fifth of U.S. states and Washington, D.C., have begun requiring employers to provide paid sick leave, according to the National Conference of State Legislatures, and 18 states began with 2019 with higher minimum wages.
While New York’s law would have little effect on large corporate employers and Wall Street firms, most of which already provide paid time off for workers, de Blasio said it cuts across a range of pay levels, from new hires to people earning $100,000 a year or more.
“Almost one-third of all full-time workers and three-fourths of part-time workers don’t have the kind of time we’re talking about here,” the mayor said in a news conference on his plan. “There are so many New Yorkers who have either no time off or not enough time off that they’re barely keeping it together. They miss school plays, they miss weddings, they miss family occasions, they miss funerals, they miss all the things that make life whole.”
Despite the opposition de Blasio expects from businesses arguing that mandatory personal time will damage the city’s economy, the mayor said such legislation has worked well in other industrialized countries.
“Get used to the criticism; you’re going to hear it a lot,” he added. “We heard it when we did paid sick leave. We heard it when we did minimum wage, every time we raised the minimum wage.”
The traction that such initiatives gained around the country may signal that paid-vacation initiatives will also spread — perhaps as high as the federal level, according to Wayne Outten, the founding partner of Outten & Golden and president of Workplace Fairness, a nonprofit group that advocates for employee rights.
“This would probably be just the start of something if New York City does go ahead and implement this,” agreed the Heritage Foundation’s Greszler. “They’re an example for other cities, and there’s almost a race-to-the-top competition when you look a cities like San Francisco and New York City to see who can provide what they would call stronger labor protections.”
Given de Blasio’s presidential ambitions, she added, “it’s going to be something where others are going to pick up and say, ‘If New York is doing this, then we have to do it, too.'”
Another pressure point may be that the U.S. lags behind most other industrialized Western nations on paid leave. Among the reasons is the relative weakness of the country’s unions, Outten said. While organized labor won the passage of U.S. laws guaranteeing a 40-hour work week and a minimum wage during the early 20th century, its strength has dissipated in the decades since.
About one-third of U.S. workers were union members in 1955, when the American Federation of Labor and the Congress of Industrial Organizations merged, and the percentage shrank to 20 percent in 1983 and 10 percent as of last year, according to the U.S. Bureau of Labor Statistics.
“There’s a greater sense in the U.S., unfortunately, that capital is more important than labor, that the owners of businesses should be cable to call the shots and workers are more like cogs in the machine,” Outten said.
The danger of the latest proposal to rebalance that relationship, however, is that city leaders fail to realize the cost of their plan is compounded by a variety of other requirements, explained Wylde, whose organization was formed in the 2002 merger of the New York City Chamber of Commerce and Industry and the New York City Partnership. The plan is likely to affect the smallest businesses the most, since they’re the least likely to have the cash flow needed.
Businesses with just one owner who includes income on a personal filing may be hit particularly hard, since a GOP tax bill that cut the top rate for the largest U.S. companies also capped the amount of state and local taxes for which individuals can claim a deduction, Wylde added. New York residents pay a maximum rate of 3.8 percent to the city and 8.8 percent to the state, but were able to deduct the total amounts from taxable income reported to the U.S. Internal Revenue Service until 2018. Now, they can only deduct $10,000.
“Unfortunately, the legislators never seem to add up their wish list in terms of what it’s going to cost when you put it all together,” she said. “Each item will be considered as, ‘Well, it’s a small item and they can certainly do it,'” without evaluating the “cumulative impact of the past five years of legislators competing to see who can extract the most from business.”
Small business owners are unlikely to contest the city’s action publicly, she added, especially given a hostile reaction from some local officials that prompted Amazon — one of the largest U.S. companies, with a market value approaching $1 trillion — to abandon plans to locate an office complex employing 25,000 people in the city.
“It’s disheartening for the business community, which has fought hard to bring New York back from the doldrums of the urban crisis of the ’70s and ’80s, to find there’s really no appreciation for what it takes to build a business in this city at the city council level,” Wylde said.
