Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: SATURDAY, October 29, 1994 TAG: 9411010015
SECTION: EDITORIAL PAGE: A9 EDITION: METRO
SOURCE: RITA CORBITT
DATELINE: LENGTH: Long
Why does it cost less to pay overtime to existing employees than it does to hire new workers? Two words: employer mandates. An employer mandate is a legal requirement imposed upon an employer by the federal, state or local government.
The 1982-89 period saw small business create more than 12 million new jobs. Businesses with less than 20 employees created more than 6 million of those jobs. Today, it costs more than 44 percent more to add an employee to payroll than it did in 1989 (not including inflation) because of employer mandates. These mandates have added more than $150 billion to business costs of hiring, training and employing Americans since 1990.
The Fair Labor Standards Act of 1989, Americans with Disabilities Act of 1990, The Clean Air Act amendments of 1990, the Civil Rights Act of 1991, the Family and Medical Leave Act, the Commercial Drivers Licensing Act and other mandates form the basis for this drastic increase in the cost of hiring. These have also led to a major increase in lawsuits against employers because some of the mandates were poorly written. Business people responsible for implementing regulations know the tremendous financial burdens that compliance places on business, particularly small business. Employees who have to work and live under these mandates know little of the regulation details, but are experiencing the results in the form of long hours and overtime.
Small businesses' creation of jobs has been virtually derailed by this barrage of regulations. Congress has developed a trend of passing legislation mandating that every American breathe clean air, drink pure water, and suffer no discrimination whatsoever due to race, color, religion, sex, age, marital status, veteran status, disability, bad breath, body odor or dirty fingernails, and the burden of enforcement has been placed on employers. Employer mandates also demand that employees work in an environment safer than one finds in one's own bed. If the employee falls out of his chair while sleeping on the job, the employer gets a citation and is forced to pay a hefty fine because the chair didn't have a seat belt.
Small-business owners are working harder than ever to try to comply with regulations, and keep current employees employed. They're afraid to hire unknowns due to cost and legal liability incurred. They are ``unknowns'' because job-application forms have become almost meaningless as the result of employer mandates. It's against the law to ask virtually anything about the applicant other than name, address and Social Security number.
In 1982, pretax profits per small-business employee averaged about $1,600. It hit an all-time high of $3,600 per worker in 1987. In 1992, it hit a 10-year low of $750 per worker. Small businesses with 20 employees saw pre-tax profits drop from $72,000 in 1982 to $15,000 in 1992. Profits needed to expand, hire and train employees, buy trucks, build offices, and build warehouses dropped a staggering 79 percent per employee in a 10-year period due to potential profits spent to fund expensive, nonproductive employer mandates.
These drastically declining profits met with higher income taxes mandated by tax acts of 1986 and 1993, and state and local taxes added about 10 percent to the business-tax burden. Add to that increases in insurance costs, and you get the dreary picture of why small businesses aren't hiring.
Few small businesses have been able to pass increased costs of doing business on to the buying public. Unsure economic conditions, soft markets and the uneasiness many have with the current tenants of Washington, D.C., have resulted in businesses' attempts to streamline operations to survive. In small business, that means we all work harder and longer hours. Our quality of life suffers because of the long hours, and our families miss us at the supper table. But due to the risk and costs involved in hiring additional employees as a result of employer mandates, most small businesses and many large businesses will continue to operate short-handed.
``If you can't stand the heat then get out of the kitchen,'' many may mutter as they read this. Many small-business people have done just that - left the kitchen because the rewards of owning a business don't equal the risks. Others stay, not because they can stand the heat, but because their families (employees included) have to eat. They do so with declining hope that government regulation of their business lives will lessen.
Perhaps getting small business placed on the endangered-species list would generate concern. Instead of ``Save the spotted owl'' banners, we could march on Washington, D.C., with banners to ``Save the exhausted business person.''
Rita Corbitt of Chamblissburg is co-owner of a small manufacturing business in Roanoke with her husband.
by CNB