The city of Minneapolis is on the precipice of a major decision: whether to make itself the overriding authority on the sick-time benefits a private company provides for its workers. And Mayor Betsy Hodges and the City Council appear to be in quite a hurry, with barely a month between introduction of the draft ordinance and a final vote on May 27. In between will come a single public hearing on Wednesday.
The city is about to embark on this course with little original, Minneapolis-specific data on the potential costs or economic implications. To date, most of the data have come from extrapolations of national surveys and census data. No one has done a local survey to determine the typical sick-leave policy in this region, the number of companies here (including those who have collectively bargained benefits with their unions) that would have to adjust their policies, and the real cost of providing this benefit or of enforcing the new mandate.
Advocates — whose dominant voices include the Service Employees International Union — say the cost would be nominal — less than 7/10 of 1 percent of payroll. But Maryland state officials, where a similar proposal is before its legislature, have projected an average cost of about $445 per employee annually, or 24 cents per wage hour.
Minneapolis would not be the first U.S. city to enact such a mandate, and St. Paul is on a similar fast-track. Five states and a number of large cities already have done so, although the Minneapolis benefit appears more generous than most. Full- or part-time workers here could accrue six days of paid leave a year and bank up to 80 hours. Such accrued leave is considered a financial liability, which is why a number of companies have moved to restrict its use. Those who work as few as 80 hours in a year would be covered, and only businesses with fewer than six workers would be exempted. Costs would be borne exclusively by employers, whether a seven-person coffee shop, a tech start-up or a national franchise with multiple locations. Companies with collective-bargaining agreements and those that use paid time off (PTO) systems would still have to meet the city’s minimum requirements.
There are many good reasons for businesses to offer paid sick leave. On a humanitarian level, workers should be able to care for their physical and mental needs, and for those of family members, without jeopardizing their jobs or losing significant amounts of money. It is a benefit most full-time workers in all but the lowest-paid jobs already have, but one that far fewer part-timers enjoy. There also is a racial-equity argument, since low-wage and part-time jobs are filled disproportionately by people of color.
The real issue comes when the city imposes a one-size-fits-all mandate on employers, seemingly heedless of the hardship it may impose and the unintended consequences it could incur. Unlike some cities, Minneapolis would provide no exemption for start-ups or for smaller businesses in industries with razor-thin profit margins, such as restaurants and the grocery stores it so covets.
Compared with cities such as Chicago and San Francisco, Minneapolis provides only a fraction of this metro region’s jobs. Like it or not, Minneapolis is surrounded by large, robust suburban cities only too eager to gain a competitive advantage. Coming on the heels of the recently botched attempt to mandate scheduling for private-sector employees and with a push to raise the minimum wage to $15 per hour still on, employers are right to wonder whether mandated sick leave might not be just the beginning of more and more costly mandates from the city.
Minneapolis could have offered inducements to employers to voluntarily provide such benefits. One survey the city relied on showed that 70 percent to 75 percent of full-time workers already have sick leave, including more than half of those making minimum wage at the time of the survey. The city could work with other businesses to determine how best to get them to a system of paid sick leave. According to the U.S. Bureau of Labor Statistics, the average worker uses a little less than three days of sick leave a year. Smaller companies might find it easier to voluntarily provide a more modest level of sick leave that would give workers some relief without stressing the company’s bottom line.
Nonprofits operating in Minneapolis are among the employers most worried about a new sick-leave mandate, particularly those providing care to the chronically ill, disabled and to children. In its recommendations, the group that devised the policy recommended no exemptions for them but said the city should lobby state government for higher reimbursement rates to offset the added costs. Shifting the burden of a mandated benefit to every taxpayer in the state is a step that should be beyond any one city’s reach. It should be noted here that among the very small list of exemptions are county, state and federal workers.
The proposed ordinance would intrude deeply into the private sector, potentially hurting those workers it is intended to help by suppressing wages and job growth. There are too many questions and too few answers about the consequences of such a policy. The city should review more narrowly focused and voluntary measures first, and work with businesses to ensure buy-in before proceeding.
Mayor Hodges and a majority of City Council members have told the Star Tribune Editorial Board in endorsement meetings and policy discussions that they are committed to economic growth in Minneapolis, especially among small businesses. But while mandating costly benefits would please union interests that have significant power at City Hall, it would signal that city leaders are remarkably out of touch with employers.