When people who want more government regulations argue in favor of a new mandate on employers, they usually say, “Well, one more rule won’t break the bank.” However, seemingly harmless regulations have a cumulative effect that eventually cripple employers and prevent entrepreneurs from creating the jobs needed to fix our weak economy.
Just ask Fred DeLuca, founder and CEO of the Subway sandwich chain. In a recent interview, DeLuca said, “If I started Subway today, Subway would not exist.” DeLuca said the environment for entrepreneurs has “continuously gotten worse because there are more and more regulations. It’s tough for people to get into business, especially a small business.” Around here, it’s even tougher to stay in business. Washington has one of the highest business failure rates in the nation.
DeLuca knows a thing or two about starting a small business. In 1965, at age 17, he opened his first sandwich shop with just his entrepreneurial spirit and a $1,000 loan. Today there are over 38,900 Subway stores in 100 countries that generate $9 billion in annual sales and employ close to half a million people.
The fact DeLuca says he could not replicate that success in today’s business environment because of the “continuous increase in regulations” should give pause to anyone who supports creating new jobs. It is ironic that while Gov. Inslee and lawmakers from both parties tout job creation as their top priority, the Legislature considers a bill that would do the opposite, creating more obstacles for our state’s entrepreneurs.
The bill would require employees to be paid up to 24 weeks of family and medical leave a year. Workers could collect up to $1,000 per week of paid leave, or $24,000 a year, and each year that amount would automatically increase with inflation. The mandatory paid leave program would be funded by a new payroll tax on employers and workers.
Predictably, supporters of paid family and medical leave argue the new regulation wouldn’t cost employers much. They say the paid leave tax would be “just” .2 percent of wages beginning in 2014. They don’t say the tax would double to .4 percent of wages in 2016, after which the tax would be adjusted every year by state bureaucrats to whatever rate they think is needed to keep the program running. The real tax burden is unknown, but chances are it would rise far beyond official estimates, since the costs of government programs nearly always far outstrip their original estimates. According to the state, employers and workers would pay at least $825 million in new taxes in just the first five years.
The real problem is not the cost of any one regulation. As DeLuca points out, it’s the accumulation of “more and more regulations.” The compounded cost of all government regulations is already taking a toll on employers. State officials have increased workers’ compensation taxes 66 percent over the last decade. We have the nation’s 5th highest unemployment insurance taxes and the highest minimum wage, all of which adds to the impact of a new regulation.
The way to encourage job growth is not to burden employers and discourage entrepreneurs with more mandates and taxes. Too many entrepreneurs are already unable to bring their business dreams to fruition, and existing businesses are at their breaking point.
It’s easy for lawmakers and activists to appear generous when they want to make others pay for it, and it’s hypocritical and mean-spirited to say you’re all for jobs while making job-creation harder. Washington lawmakers should not continue to pile “more and more regulations” on job creators with paid family and medical leave, and then claim that helping the unemployed is their first concern.
Erin Shannon is the director of Washington Policy Center’s Center for Small Business. Before joining WPC, she was the public relations director of Washington state’s largest pro-small business trade association, and was formerly a Legislative correspondent for U.S. Congressman Randy Tate in Washington, D.C.