As many New Mexico businesses struggle to survive and recover from the economic effects of the COVID-19 pandemic, “paid sick leave” ordinances have been hampering many businesses' ability to recover.
New Mexico Sun reported that since the beginning of the pandemic, small businesses have taken a hit due to local mandates and ordinances that either forced businesses to reduce or completely halt traffic for extended periods of time. Almost 40% fewer small businesses in the state were still open as of the end of June, compared to before the pandemic.
“I think for a business owner, one of the most difficult things was this kind of internal struggle that we all want to be safe, we all want to keep people healthy, but I still have bills to pay, I still have insurance, I have rent, I have employees,” Matt Simonds, owner Broken Trail Brewery, told KOB4 News earlier this year.
In addition to the various expenses that many businesses have to be responsible for, New Mexico businesses will also have to account for government mandated paid sick leave for their employees, since in April, New Mexico Gov. Michelle Lujan signed the Healthy Workplaces Act into law guaranteeing at least one hour of paid sick leave to New Mexico workers for every 30 hours worked. The measure is scheduled to go into effect on July 1, 2022.
But a Texas study offers a cautionary tale.
When government steps in to mandate paid sick leave policies on businesses it can affect everyone involved—business owners and employees alike. Businesses voluntarily offering paid sick leave packages are prepared to balance the ramifications—monetary and otherwise. A study on mandatory paid sick leave conducted by Texas Public Policy, a state-policy focused think tank, states that often when governments step in, however, they try to mandate a one-size-fits-all paid sick leave ordinance on businesses in the city, and small businesses are not prepared for the consequences.
In a panel discussion on the effects of paid sick leave ordinances on the small business community, Annie Spilman, a state legislative director for the National Federation of Independent Business (NFIB), noted the kind of decisions small business owners have to make when such mandates are handed down.
“So, when the government mandates that you should offer something as part of your employee benefits package … it’s Economics 101,” Spilman said. “If they can’t afford it, they’re going to have to cut back in other areas. ‘Do I cut positions? Do I cut hours? Now, do I have to take away their vacation time, or maybe not reimburse them to get insurance, because if I don’t comply with this mandate, I’m going to be fined, penalized?’"
Spilman added that even without paid sick leave policies, regulations on businesses can cost tens of thousands of dollars per employee, per year.
A Wall Street Journal editorial claims that while some saw paid sick leave ordinances as a way to curb the pandemic, the numbers have shown that to be far from true. In most cases, the mandates bring "modest benefits and significant costs." Even before the pandemic, a study by the Institute for Women’s Policy Research found layoffs or reduced hours reported by almost 30% of lowest wage earners because employers and business owners could not strictly offset the costs through price increases.
In 2017, the U.S. Chamber of Commerce Foundation did a study on the effects of government regulations and mandates on small businesses in America. The regulatory cost of just the largest federal rules totals more than $40 billion. Small businesses are hit with 82% of the cost, with state and local governments adding their own layers of regulation.
The study by Texas Public Policy indicated that “mandatory paid sick leave ordinances do not achieve their intended purpose of allowing employees to take time off when they are sick.” Additionally the report concluded that the “cost and consequences of mandating paid sick leave negatively affect[s] employers, employees, and consumers.”
Texas Public Policy interviewed several Texas business owners as part of their study to gauge the impacts of paid sick leave on their operating costs.
“As far as the economic impact for us, just to cover paid sick leave for my Austin operations is going to cost—just for the employee level—about $200,000 a year,” Skeeter Miller, owner of the popular County Line restaurant in Austin, said.