How Labor Regulations Designed to Help Employees Leads to Fewer Jobs

American economic growth has been steady for years with record lows of unemployment. Yet new labor regulations are threatening to undo all of that and put millions of Americans out of work, according to a new study by the American Consumer Institute. Often these regulations are passed with the intention of helping people find work, but often the results are disastrous. The minimum wage for example has been passed under the guise of increased pay for workers but often at the expense of lower employment opportunities and reduced hours. As labor regulations often have these affects lawmakers should proceed with caution when passing new regulatory measures.

To highlight the impact labor regulations will have on the American public, the newly released report documents that negative consequences from hiking minimum wage rates, predictive scheduling, paid leave and joint employment regulations. Below we summarize our findings and highlight their impacts.

Minimum Wage

While the minimum wage has promised to be a “living wage” for low-income families, very rarely does that turn out to be the case. Often when wages rise, companies are forced to decide between reducing hours, firing staff or often both. Unfortunately for those working these minimum wage jobs, they would have received better pay had no minimum wage existed in the first place.

In Seattle, after the minimum wage was raised to $15 an hour, researchers from the University of Washington found that workers saw a reduction in hours by 9 percent. As a result, the average employee saw their pay decrease by $125 dollars per month.

If the minimum wage were applied to a national level, over 2 million jobs would be lost along with a reduced economic output by nearly $190 billion per year.

Predictive Scheduling

Created to protect workers’ schedules, predictive scheduling laws have cropped up forcing businesses to post schedules two weeks in advance while prohibiting employers from “calling in” employees on short notice. However, predictive scheduling has instead constricted employee working hours and has made it more difficult for businesses to hire new workers.

After San Francisco passed a predictive scheduling ordinance, businesses offered fewer part-time positions and were less willing to give flexible schedules to their employees. In New York, employers are forced to pay $40 for cancelling an employee’s shift and are unable to “call-in” workers on a 72-hour notice.

The implementation if applied on a national level is even worse, with the impact of predictive scheduling costing the U.S. half a million jobs and a lower economics output of $44 billion dollars.

Paid Leave

Paid leave laws intend to give people needing extra time away from work the option to return unpunished, but instead makes employers hire people that won’t need paid leave to begin with. As people are able to take weeks off from work, it puts businesses in a tough spot as they have to find replacements for a few week period only to let them go once the employee returns.

Already implemented in four states, paid leave laws have been enacted with less than desirable results. In California, the impact had a higher incidence of unemployment and longer duration of unemployment for women in the state. Our report also ran a synthetic control test to measure the impact San Francisco’s paid leave had its economy. By 2017, around 4,000 jobs were destroyed due to paid leave and if implemented on the entire state of California, $900 million earnings would be lost as well as 22,000 jobs.

Joint Employer

In 2015, under the Browning-Ferris decision, the National Labor Relations Board (NLRB) overturned decades of legal precedent pertaining to the franchise industry by broadening the joint employer standard. In effect, this made previous mundane business relationships subject to more scrutiny.

Indeed, due to uncertainty about what “indirect control” can be construed to mean, every interaction between franchisees and franchisors have become fraught with legal risk. According to a filing in an ongoing case against McDonald’s over whether it can be held liable for the labor law violations of its franchisees, the company has spent over $2 million on discovery alone. All this has been to the detriment of businesses where the Browning-Ferris decision has cost up to 375,000 jobs and reduced annual economic output by $33 billion.

Conclusion

Despite a booming economy and an engaged work force, things can quickly turn south if the U.S. is not careful about protecting our economy. Regulations, which have been propped up under the guise of “worker rights” cause more harm than good to American businesses and workers.

Instead of stifling economic growth, cities and states should allow the free market to handle these issues. Only then will we continue to see job creation and business proliferation in this country. Hopefully, legislatures and members of congress will be keen to recognize this and put a stop to the endless regulation we are currently seeing.

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