Like hiking the minimum wage, or mandating more maladies that must be covered by group health plans, voters’ decision last week to impose a new paid-leave program on Colorado workplaces seems at first blush like another easy fix for whatever ails employees. After all, those who had the cash flow to create our jobs surely can afford to sweeten the pot, right?
If only it were so. Then, we could raise the minimum wage to $50, or maybe $100 an hour. And we could mandate six months’ leave — a year? — at full pay for any employee who needs it.
In approving Proposition 118 by a significant margin, Colorado voters were signaling something probably all of us can relate to: Family life and its many responsibilities — sick kids and spouses; newborns fresh from the hospital; ailing relatives, etc. — can present a challenge to a household’s breadwinners. That’s why longtime proponents of mandating an employer-funded, paid-leave program — like the one just embraced by voters — labeled it “family” leave. They knew it’s what leave is used for in most cases, and they also knew it would appeal to voters.
But what the 57% of voters who went for 118 probably didn’t think enough about was the responsibilities faced by employers. They have to pay back their investors; service debts; cover operating costs and, above all, make payroll — i.e., the jobs they created in the first place. And they don’t have bottomless pockets from which to foot the bill.
Even with all those irons in the fire, according Tony Gagliardi of the National Federation of Independent Business in Colorado points out in today’s op-ed pages, 73% of Colorado small businesses already offer some form of paid leave. The balance of small business that don’t can’t afford to; and probably many that do offer paid leave cannot afford the one-size-fits-all approach that is being imposed under 118.
No flexibility to balance costs with the individualized needs of a given employee who seeks leave; just a standard package all will have to pay for. And there’s good reason to fear its effect on job creation. In short, the superficially appealing but seriously flawed 118:
• Imposes a $1.2 billion-a-year de facto payroll tax to pay for leave provisions;
• Is a broad-brush mandate on most Colorado employers;
• Will curb wages and kills jobs as employers are squeezed to pay up;
• … Amid a reeling economy slammed by a global pandemic.
In other words, it stands to have a crippling impact on job creation and wages even in the best of times — yet it couldn’t come at a worse time.
There’s also the new bureaucracy 118 will establish in state government just to administer the unwieldy program. The proposal sets up a “family and medical leave division” in the Colorado Department of Labor and Employment. The division will have the unilateral power to raise the payroll tax from its starting .9% to 1.2% of a paycheck — without asking permission from any of the employees or employers statewide who will be required to pay in.
Critics have been warning that the program’s financial stability will be short-lived. According to an analysis by Colorado’s Common Sense Institute, the new program will face the very real prospect of insolvency almost from startup. The analysis assumes a real-world claims rate of 6.2% and an average length of leave of 9.5 weeks among employees who seek paid leave and projects 2023 premium collections would not be sufficient to cover benefit and administrative costs in the program’s first year.
As critics have pointed out, the legislature will be faced with either approaching voters to raise taxes or allowing the program to issue bonded debt to cover claims by employees.
118’s backers had cast it to voters as an “insurance program” that assesses “premiums” into a fund that covers their pay for up to 12 weeks of leave. Only, an insurance premium is something you pay voluntarily. You might give your permission to deduct it from your paycheck. Think of your group health plan, to which your employer very likely contributes; you sign up for it, or not, during open enrollment.
Prop. 118 is the opposite; no employer or employee is given a choice if they don’t wish to participate. They have to, and they have to pay up.
Many Colorado employers already provide generous and wide-ranging leave options. Others, especially smaller workplaces operating on more of a margin, can and do work out creative, more affordable alternatives.
Meanwhile, many employees don’t want or need time off — but they do need as high a wage as their employers can afford, and of course they do need their jobs in the first place. All of which is now more precarious.