Labor Committee Among ‘Biggest Impediments’ to Job, Economic Growth
What impact does the General Assembly’s Labor and Public Employees Committee have on Connecticut’s job growth and economy?
A significant one, based on a new report published by the legislature’s nonpartisan Office of Legislative Research.
The report shows that since 2016, the legislature enacted 28 workplace mandates that originated in the committee, long a source of anti-employer policies. Nothing was passed in 2020, when the pandemic forced suspension of the legislative session.
Those mandates “either created a new requirement for private sector employers to meet, tightened an existing requirement, or prohibited them from taking certain actions,” according to the report.
Their passage occurred amid a period of anemic job and GDP growth, reflecting a troubling disconnect between committee leadership’s priorities and Connecticut’s critical economic needs.
The report lists some of the more egregious mandates Connecticut companies—particularly small businesses—have struggled with over the past few years.
Others on the list are set to become effective in the coming year—undoubtedly adding to the many challenges employers will face in 2022.
Here’s a sampling of some of the more costly mandates:
- State-run retirement plan (2016): Requires private sector employers with five or more employees to automatically enroll any employee not eligible for an employer sponsored retirement plan into a new state-run plan. The program was initially supposed to go live in 2018, but has burned through budgets and executive directors while modifying the law to renege on various requirements—including one allowing multiple venders to offer plans—that were promised to secure passage. The mandate may well finally go live in 2022.
- Minimum wage (2019): Raised the state’s hourly minimum wage in multiple steps to $15 by June 1, 2023, with permanent increases each year thereafter indexed to the employment cost index, as calculated by the U.S. Department of Labor.
- Paid family and medical leave (2019): Requires virtually all private sector employers to provide employees with up to 14 weeks of paid leave each year at 95% of their salary (capped at $900 week). The program is funded by a 0.5% tax on employee wages. Employees have been paying into the system since the start of 2021, but are not eligible for benefits until Jan. 1, 2022. The business community argued the fund would quickly become insolvent, and reports indicate an overwhelming number of claims have already been filed.
- Employee recall restrictions (2021): Mandates that employers with 15 or more employees in the hotel, lodging, food service, or building service industries rehire laid off employees based on seniority rather than skill, merit, or needs. Organized labor has already used this mandate to target businesses in industries they were attempting to unionize.
- Call centers (2021): Requires call centers to provide 100 days notice to the Department of Labor if they plan to reduce or relocate their operations in the state. For each day of notice less than 100 days, they are subject to a fine of $10,000 a day. This mandate, tucked into legislation implementing the new two-year state budget after the House failed to act on the original bill, will not prevent a single call center from leaving the state, but guarantees no new ones will be added.
Unfortunately, the 28 bills listed in the report are only a small fraction of the harmful bills proposed by the committee, which has nine Democratic members and four Republicans, since 2016.
CBIA opposed more than 75 harmful bills approved by the committee, invariably along party lines, over the past six years, with most failing to win full legislative approval.
Earlier this month, CBIA president and CEO Chris DiPentima told the Hartford Business Journal the committee was one of the biggest “impediments to doing business” in Connecticut.
“There’s not a single initiative proposed by Connecticut’s business community or anything remotely designed to help create private sector jobs on that list of bills approved by the committee,” noted CBIA’s Eric Gjede.
“And that’s troubling given the state’s failure to fully recover from the 2008-2010 recession and the challenges we face rebuilding our economy following the damage caused by the pandemic.”
Connecticut was one of the few states not to recover all jobs lost in the 2008-2010 economic downturn.
The state has recovered 75% of the historic 292,400 jobs lost to COVID-related shutdowns and restrictions, while the U.S. has recovered 83%.
As of November, Connecticut’s unemployment rate was 6%, well above the U.S. rate of 4.2% and tied for sixth highest in the country.
A comparison of state, regional, and national unemployment rates between January 2016 and December 2019 shows Connecticut’s jobless rate was the country’s highest or tied for the highest in 29 of those 48 months—60% of the covered period.
Connecticut’s job growth was a woeful 0.36%—6,100 jobs—over those four years, just a fraction of the New England region’s 4.7% growth. The U.S. added jobs at a 3.8% rate during that time.
Connecticut’s economy was also largely stagnant from 2016 through 2019. GDP was unchanged in 2016, grew 0.9% in 2017 and 2019, and just 0.4% in 2018—well below the performance of the regional and national economies.
The state’s GDP contracted 6.2% in 2020, with only the economies of Hawaii and Nevada faring worse amid the height of the pandemic. The New England economy shrank 4.1% last year, while U.S. GDP declined 3.4%.
Personal income growth in the state—another key sign of economic health—also trails the region and the country.
A report from The Pew Charitable Trusts showed that if it were not for unemployment benefits and federal assistance, Connecticut’s personal income growth would have declined in 2020.
“It’s clear that the agenda being pushed by the leadership of the Labor Committee over the last few years has done nothing to help job and economic growth in Connecticut,” Gjede said.
“In fact, this slew of mandates makes a challenging situation even tougher—further driving up the high cost of doing business here, dumping administrative burdens on smaller employers, and reinforcing tired old perceptions about the state’s business climate.
“Connecticut should be making it easier—not more difficult—to create jobs here, to attract and keep companies here.”
‘Undermining’ Growth Opportunities
Gjede said Labor Committee leadership is undermining the “real opportunities Connecticut has to rebound from the pandemic better and stronger than before.”
“We weathered the pandemic relatively well compared with other states,” he said.
“Thanks to the 2017 bipartisan budget compromise that capped borrowing and spending, we have made unexpected progress in resolving the long term fiscal issues that held us captive to endless cycles of deficits and tax hikes for years.
“These changes have improved the state’s rankings in national business climate polls in almost every area except the cost of doing business—an area directly influenced by the state’s tax and labor policies.
“Lawmakers appear interested in providing tax relief in the coming legislative session. It’s also time they address the out-of-control torrent of workplace mandates that do nothing but harm Connecticut’s growth and reputation.”
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