Acton Commentary

California Dreamin’?


September 23, 2002 marked a historic day in California legislative history—California Governor Gray Davis signed into law the California Family Rights Acts of 2002 (CFRA). This act, pursued vigorously by women’s groups and labor unions, provides workers who take off work to care for a new child or a sick family member, up to 55% of their salary for six weeks. While people of faith must support the goal of creating a work environment hospitable to family life, it is doubtful that the means employed by this act actually serve that end. Instead, in a paradoxical read of the current political environment, in one fell swoop Governor Davis has managed to raise taxes on workers, endanger the state’s already faltering economy, and still claim a political victory on behalf of women, workers, and family values throughout California. How can this be?

It seems that Governor Davis assumes that bad policy can make for good politics. After spending a million-plus dollars a week in advertising in his bid for reelection, Governor Davis can’t break a forty percent approval rating, according to a recently released poll of the Public Policy Institute of California (PPIC). (A political rule of thumb is that an incumbent failing to poll at around 50% to 51% is in serious trouble). Notably, with little money to spend and almost no name recognition, Davis’ GOP challenger, Bill Simon, presently polls at 32% to Davis’ 40%. The pressing concern for the Davis campaign is not necessarily Davis’ low statewide approval rating, but the shift presently occurring among a demographic vital to his reelection efforts—women voters. The PPIC poll indicates that potential women voters, at present, prefer Davis to Simon by only 11 points (42% to 31%) as compared to the 19-point lead Davis previously enjoyed in late August. A shift of eight points within a vital political demographic is important, especially when your unknown and outspent opponent is trailing only by eight points statewide. With a critical electoral demographic flagging in its support, the Davis camp has calculated that it makes political “good sense” to give taxpayer subsidized family leave to those on whom child or elder care predominantly falls.

Many Californians, however, seem to be woefully unaware of the hidden costs and consequences that this new policy will impose on the very people it claims to help. To point out the hidden costs and consequences, of course, is not to ignore the additional, not-so-hidden payroll tax, which serves to fund this new entitlement program. This tax will reach upwards of $70 per year for many workers, further diminishing take home-wages. By mandating this employee-funded program, state policy makers have ignored the costs that employers incur while the employee is absent from work. The increased overtime pay for those employees picking up the slack for absent workers, salaries for temporary workers, and the time lost in training temporary workers are just a few of the stealth costs this program imposes on California businesses. Small businesses, whose successful operation often absolutely depends on the presence of its employees, will incur these costs most acutely.

It is also likely that employers, especially small business owners, will be forced to change hiring patterns to avoid incurring the costs imposed by those potential employees judged most likely to invoke this new entitlement. Since women most often serve as the primary caregivers for children and ailing relatives, CFRA may have the disproportionate effect of pricing women, especially single moms, out of the labor market. Given an employer’s need for workers to be present and productive at work, it is only logical that employers will look to hire those most able to be on the job for longer periods of time and at a lower cost. Should such an effect occur, no doubt, the answer of women and labor groups will be more regulation, further restricting the ability of an employer and employee to negotiate mutually satisfying terms of employment. The costs continue to rise for California’s 16 million workers.

Throughout this entire debate, the demands derived from one set of moral obligations—care of family and children, are seemingly pitted against another—the contract between employer and employee. Regardless of whether or not one thinks these two sets of commitments are of equal gravity, both involve serious obligations that require fulfillment. A parent’s first commitment should be to his family. Part of the parent’s obligation, however, is to provide the resources necessary to sustain the family. Those resources are the result of a person’s contract with an employer and most employers understand that employees who have a stable family life tend to be happier, more productive, and more fulfilled in their work. Thus, most employers realize the importance of family obligations and are keen to assist an employee however they can, especially in moments of crisis. Any employer who would ignore this fundamental moral obligation has failed in his duties and will, no doubt, have trouble attracting and retaining competent workers.

Mandating a taxpayer subsidized family leave program does harm to an employee’s ability to creatively negotiate important employment issues with his employer. The program as it is currently structured encourages a minimalist interpretation of the policy on the employer’s part and a maximal interpretation of the policy on the employee’s part. The seeds of further employer/employee confrontation are planted, diminishing an essential relationship of trust, but playing well to the goals of big labor’s political agenda in California.

It is clear that Governor Davis is prepared to sacrifice California’s future economic development and well being on the altar of his reelection bid. By raising taxes on workers, penalizing small businesses, and damaging the role of women workers in the labor market, CFRA has further endangered the state’s already faltering economy. In a recent poll of 283 of the state’s business executives, 56% indicated that California has become the worst state in the union to do business. Perhaps generations of “California Dreamin’” have turned this state, once known as an entrepreneurial Mecca, into a nightmare.