Paid family and medical leave will have a major impact on Connecticut businesses, particularly small employers, according to a new survey released today.
CBIA's 2018 Fourth Quarter Economic and Credit Availability Survey found 63% of surveyed business leaders expect the proposed mandate to significantly impact their operations.
Nineteen percent say paid leave will have a moderate impact, 6% expect no impact, and 4% were unsure.
A key legislative committee last month approved two identical bills mandating that all private sector employers offer up to 12 weeks annual leave at 100% of salary, capped at $1,000 per week.
As proposed, the program will be funded through an employee payroll tax, while employers are required to continue paying benefits for workers on leave.
Eighty-eight percent of businesses surveyed in the fourth quarter employ less than 100 employees.
Many of those small employers said the paid FMLA mandate will impose significant financial and operational hardship.
"Not only would we have to bear the cost of benefits, we also have to hire a temporary worker to do their job," one small business owner responded.
"We don't have redundancy for most jobs. The time and expense of training a replacement and then letting them go when the original worker returned would be impossible."
CBIA vice president of government affairs Eric Gjede said one-size-fits-all mandates like paid FMLA disproportionately target small businesses, many of whom "are absolutely fearful about these measures and their cost burdens."
"It comes down to competitiveness," he said. "That's the key element driving the viability of any business.
"The last thing we should be doing is adding to the growing cost of running a business in this state.
"Connecticut lawmakers must provide businesses the clarity and predictability that being here is the right strategic choice."
Minimum Wage, Taxes
Survey respondents were evenly split when asked about raising the state's hourly minimum wage to $15—42% expect a significant or moderate impact, 41% project no impact.
When asked how they would mitigate that impact, surveyed businesses offered a range of responses, including making greater investments in automation and reducing workforce levels, hours, or benefits.
"This might bar us from bringing in unskilled, young workers and training them," responded one small business owner. "Young interns or high school age employees do not bring enough skill, however we pay them while we train them over six months to a year."
Replied another: "We start most of our employees at $15 now, so this would have a minor effect on us. Reducing the cost of living is the only thing that will keep workers in this state."
With Connecticut facing a two-year, $3.7 billion budget deficit, business leaders are also concerned about the prospect of tax hikes.
When asked what could happen if significant tax increases were enacted, survey respondents said:
- 18% would not give raises
- 17% would not hire new workers
- 16% would reduce or eliminate new investments
- 13% would reduce employee benefits
- 11% would cut their workforce
- 11% would move their residence out of state
- 10% would consider moving their business out of state
Business Conditions and Outlook
Nearly half (46%) of those surveyed expect business conditions to remain stable, the same percentage as in the fourth quarter of 2017.
Only 15% expect conditions to worsen (16% in 2017) and 40% expect conditions to improve somewhat or significantly, compared to 38% in 2017.
There is more optimism when it comes to hiring.
Fifty-eight percent of respondents expect employment levels to remain stable, up two percentage points from 2017, while 34% anticipate their workforce to grow, either somewhat or significantly, compared to 28%.
Ten percent of business owners expect to reduce the size of their workforce, compared with 17% in the fourth quarter of 2017.
Ninety percent said credit availability is not a problem for their firm and 35% reported that they have used financing over the last three months to meet credit needs.
Nearly two-thirds (59%) of respondents feel the lending climate in Connecticut is average, while 10% say it is excellent, and 15% report it as good.
Conversely, 12% consider it fair, while 4% feel its poor.
The top types of financing that businesses need include working capital (28%), capital to buy machinery and equipment (14%), and capital to expand their plant or office (7%).
The survey was in the field mid-January through early February. The response rate was 6.3%. The margin of error was +/- 7.5%.
CBIA is Connecticut's largest business organization, with thousands of member companies, small and large, representing a diverse range of industries from every part of the state. For more information, please email or call Meaghan MacDonald (860.244.1957).