The Road to California is Paved With Good Intentions: Why Texas City Councils Should NOT mandate Cal
My apologies to California, it IS a nice place to visit, but you would NOT want to start a business there! However, the City Councils of Texas' largest cities disagree. They are doing their best to bring California's hostile business climate to Texas. We should all hope they fail.
The City Councils of Dallas, San Antonio, and Austin have all passed ordinances that mandate specific PTO policies for employers working within their city limits. For example, Austin's ordinance requires any employer working within the City of Austin to provide one hour of paid-time off for every 30 hours worked. The time-off begins accruing as soon as the employee begins working and can accrue up to 48 hours for an employee of a "small employer" (defined as less than 15 employees) or up to 64 hours for a "large employer" (defined as having more than 15 employees).
Well, everyone loves time-off what could be wrong with that? Indeed, the author is the beneficiary of a much more generous PTO policy as are the employees working for Adams Insurance Service. Who but a real Scrooge could disagree with this government mandated benefit?
The same logic applies to the debate over minimum wage requirements as do the same counter-arguments. Just like minimum wage requirements, mandated PTO actually brings real harm to the employees most likely to be the "beneficiaries" of these well-intentioned but highly misguided mandates. How so?
It makes the cost to employ workers that would not otherwise be offered PTO in their position much higher. Thus, it makes those employers less likely to hire low-skill entry level employees. There is a reason that when I visited a McDonald's in Orange County, CA in January the only human being I interacted with was the person that handed me my empty cup to fill. A large flat screen took my order and accepted my credit card payment. I then filled my own cup with ice and delicious Diet Coke. McDonald's does not have to pay the kiosk minimum wage, nor does it have to provide any PTO, government mandated or otherwise. McDonald's wins. Low skilled workers (i.e., kids) looking for that first job lose.
But, what about the employers who cannot afford to make the investment in technology that McDonald's makes? Indeed, most jobs come from these small employers. They will just pass these costs on to their customers who will pay more for their products, right? Reality is much more complicated. These employers will certainly make economically rational decisions to minimize their cost increases. Most likely, they will choose to employ fewer entry level workers and utilize more productive tenured employees. Where do these first rung on the career ladder jobs go? They simply disappear.
Thus, the ordinances hurt the very people they are meant to help. Sadly, these arguments gain no traction with the local city councils passing these ordinances confident and self-righteous in their drive to "help" workers. So far, most of the ordinances have been stayed by court actions filed by business-friendly groups in Texas. The hope was that the Texas legislature, with its business-friendly disposition, would pass a law that would pre-empt this legislation in this last session. But, to the disappointment of most, the legislature failed to get this done.
The real question is what comes next? Make no mistake that these City Councils will not stop at paid time-off. This was simply the low-hanging fruit. Something called "predictive scheduling" is next. San Francisco has set the example on this one requiring employers to give advance notice of schedules and offer "predictability pay" when those schedules change. It is hard to stop someone convinced that they can create a workers' paradise by means of government mandate. If only they would read a little history or consider contemporary examples.