FOR IMMEDIATE RELEASE: Tuesday, May 24, 2016
BizFed: Artificial Cost of Business Increases Such as Minimum Wage and Affordable Care Act Encourages Automation
LOS ANGELES, CA – Tuesday, May 24 – Los Angeles County businesses are investing in equipment and technology at the expense of hiring employees, according to a new Los Angeles County Business Federation (BizFed) Annual Member Poll. With participation from employers in more than 150 distinctly different business associations in Southern California, the BizFed survey captures the key issues of concern for the Los Angeles business community.
The survey indicated that 62 percent of Los Angeles businesses plan to invest in equipment and technology this year, an increase from 57 percent last year. However, fewer than half (41 percent) of employers plan to hire this year, and an additional 41 percent of respondents anticipated “no significant change” in employment outlook for 2016.
Generally speaking, investments in equipment and technology suggest positive economic growth and development, for both the investing business and the market as a whole. However, in a strengthening economy, it can also suggest a lack of confidence in investing in employees.
“Los Angeles employers are displaying an abundance of caution in the face of higher wages, taxes, fees and regulations,” said Pat Fong Kushida, President/CEO of the Sacramento Asian-Pacific Chamber of Commerce. “As businesses continue to get hit with local and state obstacles which are directly or indirectly related to personnel, they are increasingly feeling pressure to automate in order to remain competitive.”
Los Angeles businesses consider high taxes and fees, and government regulation and compliance to be two of the three most important concerns for employers in 2016, as well as the top two causes for business leaving Los Angeles County. High taxes and fees has been the top concern for Los Angeles businesses for the past six years, and government regulation and compliance has been a top three concern for five of the past six years.
Respondents of the survey also expressed concerns regarding costs related to the implementation of the Affordable Care Act, as well as costs related to state and local minimum-wage increases. Sixty-four percent of employers indicated that the Affordable Care Act will have a negative impact on their business, due to premium increases (35 percent) and employee contribution increases (16 percent), among other causes. Only six percent of businesses responded that the Affordable Care Act will have a positive impact through lower health care costs. Seventeen percent said the legislation will have no impact at all.
Moreover, 28 percent of employers indicated that an increase in the state minimum wage would force them to reduce employees and/or employee hours, and 22 percent said it would force them to increase prices and fees for goods and services. With respect to a local or city minimum wage increase, 33 percent of employers responded that they would reduce employees and/or employee hours, and 25 percent said they would increase prices or fees for goods or services. The majority of surveys were collected before Governor Jerry Brown signed Senate Bill 3 into law on April 4, 2016. The new law increases California’s $10-an-hour minimum wage incrementally, reaching $15 in 2022, after which it will continue to rise each year by up to 3.5 percent to account for inflation.
“High taxes, fees, and regulations, along with mandatory wage and benefit increases, are forcing employers to find more certain returns on investment” explains Mark Wilbur, Past Chair of BizFed and CEO of Employers Group. “Add to this the state’s business environment, and decisions to invest or hire more people have much higher stakes.”
Many experts agree small businesses will seek automation at a faster pace to offset wage and other cost-of-business expenditures. Faced with mandatory wage increases, businesses are known to reduce their number of employees and replace them with mechanized approaches. In industries with a greater number of lower-wage workers such as the restaurant industry, businesses automation is expected to accelerate.
The annual BizFed poll represents a snapshot of key issues of concern in the Los Angeles County business community, based on surveys of business owners and executives regarding the issues they deem most critical to the ongoing operation and growth of their business.
BizFed leadership and member associations use important insights from this year’s survey to advance a policy agenda that encourages a more supportive environment for local businesses.
About BizFed
BizFed is a grassroots alliance of more than 155 diverse business groups, including industry trade groups, chambers of commerce, ethnic business groups, business improvement districts, premier independent companies and agencies. The organization represents more than 275.000 businesses that employ 3 million employees across all 88 cities in Los Angeles County. BizFed is recognized as the credible voice for business in Los Angeles, Sacramento and Washington, D.C. For more information, please visit BizFed’s website.
