Paid Leave, Higher Business Costs in New Jersey

On the Small Business Survival Index 2007, New Jersey had the worst public policy climate for entrepreneurship and small business among the 50 states. Only the District of Columbia was worse.

Yet, state lawmakers in the Garden State continue to work very hard to make matters even worse.

Consider that on Monday, March 3, the state senate passed a measure that would allow employees to take up to six weeks off to care for a newborn or sick relative. The New Jersey version differs from the federal Family and Medical Leave Act by making this paid leave. According to various news accounts (see, for example, the New York Times and the Philadelphia Business Journal), the leave could allow employees to take as much as two-thirds of their pay, up to $524 a week. It would be funded by what’s being called an employee payroll deduction of 64 cents a week, or $33 a year. That is, it would be funded through a new payroll tax.

The fallout for business would be significant. The cost of labor would increase in various ways, such as through the new tax, and through higher costs related to training, turnover, the use of temporary employees, etc.

The Philadelphia Business Journal noted opposition from the New Jersey business community, reporting:

"The passage of paid leave in the Senate demonstrates that although there is much rhetoric about growing the state's economy, the reality is that it is anti-business as usual in Trenton [the state capital]," Jim Leonard, senior vice president with the New Jersey Chamber of Commerce, said. "We are about to place a mandate on our struggling employers that does not exist in 48 other states. This is not a welcoming message to companies looking to expand here or explore New Jersey as a place of investment."

Unfortunately, Mr. Leonard is absolutely correct.

The state assembly is expected to pass the measure, and Governor Jon Corzine said he would sign it. And so goes the continuing decline of New Jersey.