January 2, 2019 by Jon Hurst, President

As we celebrate the New Year and look optimistically at the future, many small business owners are facing 2019 with fear for their profitability, given new state payroll mandates on wages and paid leave.

Effective January 1, small businesses saw the increased mandated payroll costs of a $1 minimum wage hike.  This increase is on top of a $3 increase which was just fully implemented two years ago, and is the first step of a $4 increase over 5 years.  Together, the $7 hike over 9 years represents an 88% increase over a period of time in which the cumulative inflation rate is unlikely to exceed 20%. But it isn’t just the wages of new employees, it’s the compression effect of higher wages right up the ladder, along with the mandated Social Security, Unemployment Insurance (UI) and workers compensation premiums that come with it.  And on July 1, those payroll taxes will also include a new state family and medical leave tax on employers and employees alike.

In the day and age of the smartphone, you can’t just raise prices to cover these new costs and expect consumers to still pay you for your goods and services when they can buy anywhere.   So to balance out the new mandated payroll costs, Beacon Hill should do the following in 2019 to ease costs:

1. Fix the Small Business Health Insurance Crisis.  Massachusetts has the second lowest individual premiums, yet the second highest small business premiums in the country.  At the same time large employers pay far less for far better coverage than do small employers.  That is shockingly unacceptable, and is due to discrimination under the law and in the markets. 
2. Close the Loopholes In The UI System.   Massachusetts is ranked 50^th by the Tax Foundation for unemployment insurance systems.  In short, employers and employees alike abuse the system due to an inadequate eligibility system.
3. Prevent Local Ordinances Affecting Consumer Choices.  Many states by law prevent local ordinances affecting interstate commerce, but MA does not.  So a patchwork on tobacco sales, plastic bag usage, water bottle sales, etc., has emerged across the state due to organized special interest group efforts before 351 cities and towns.  These affect local stores, but unfortunately not the new Internet competition.  For consumer choice and small business competitive reasons, require statewide standards for consumer product sales. 
4. Pass a Teen Wage.  Thirty-nine states have them.  Let’s make sure 14-17 year olds have the learning and earning opportunities they need, and small businesses have the incentives to hire them.