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California Shows How Paid Leave Law Affects Businesses: Not Much

By Esme E. Deprez, Bloomberg News (TNS)

SANTA BARBARA, Calif. — As presidential candidates debate government-mandated paid family leave, the U.S. has a 39 million-person test lab.

California in 2004 enacted the nation’s first such program, ensuring workers are paid for as long as six weeks when caring for a newborn or ailing loved one. The law is financed through an employee payroll tax, meaning companies in the world’s eighth-largest economy bear no direct costs.

It hasn’t been the death blow to businesses that opponents warned of, according to studies over the past decade. California’s employment growth outpaced the U.S. average by 2 percentage points during that time, according to data compiled by Bloomberg.

Paid leave is woven into the economic platforms that Democrats Hillary Clinton and Bernie Sanders are pitching to voters. Clinton told a New York crowd in April that it was “hard to believe” that “so many women still pay a price for being mothers.” In the party’s debate last week, she and Sanders decried U.S. lawmakers’ failure to join 183 countries in passing a nationwide policy.

Republicans such as Carly Fiorina, former chief executive officer of Palo Alto, Calif.-based Hewlett-Packard Co., and Sen. Marco Rubio of Florida, meanwhile, say businesses should be free to offer whichever benefits they choose.

National polls this year showed support as high as 71 percent of Republicans and 88 percent of Democrats for policies that benefit workers including paid family leave, equal pay and affordable child care. Some small-business owners say California’s law has helped them compete.

“I’m a small agency, so I don’t have the ability to give every benefit you might expect from a larger company,” said Adam Rochon, who co-owns Sequoia Employee Benefits and Insurance Solutions, a five-employee company that brokers benefit packages for companies near Fresno. “A program like this, where it doesn’t actually have an out-of-pocket cost, is great because it allows you to offer benefits you wouldn’t normally be able to.”

Private-sector workers can collect 55 percent of their wages, capped at $1,104 per week. Payouts to 1.8 million people in the first decade totaled $4.6 billion, according to the state. Nine in 10 people claimed them to bond with a new child, and, while most recipients were women, claims by men have jumped 411 percent from the first year. New Jersey and Rhode Island have since enacted similar policies. A proposal in the California legislature aims at making the program more accessible to the poor by boosting the proportion of earnings that lower-income workers receive.

An analysis for the U.S. Labor Department led by Columbia Business School professor Ann Bartel last year examined dozens of studies on family leave. It concluded that while California’s policy prompted mothers and fathers to take more time, it didn’t harm workplace productivity, profitability, retention or morale.

“The law has not caused major problems for California employers,” the study said. “Small employers, if anything, report fewer problems than large firms.”

Papua New Guinea and the U.S. are the only countries to not offer cash benefits to women taking maternity leave, according to the International Labour Organization, a United Nations agency in Geneva. Financing leave through social insurance or public funds is preferable, because when employers bear the full direct costs, it says, “this can create disincentives to hiring, retaining and promoting women workers.”

Among Americans in the private sector, just 12 percent work for companies that offer the benefit, government data show. Access among income groups is uneven: The highest earners are more than four times as likely to have it as their lowest-wage counterparts.

About half of Americans can take 12 weeks of job-protected leave under federal law, but it’s unpaid, leaving many unable to afford to take advantage of it even as greater shares of them work and care for aging relatives. The website mom.me recommends newly pregnant women get a second job, “assuming you’re not derailed by morning sickness.”

Proponents say a federal paid-leave program, which would require approval from a divided Congress, would boost economic stability and help close the gender pay gap. The Obama administration has been among the champions, and in January granted federal workers six weeks of paid leave.

“Paid maternity leave can increase female labor force participation, which contributes to economic growth,” Labor Secretary Thomas Perez said in a report last month. “If U.S. women between 25 and 54 participated in the labor force at the same rate as they do in Canada or Germany, which have paid leave and other family policies, there would be more than 5 million more women in the labor force in the U.S. This, in turn, would translate into more than $500 billion of additional economic activity per year.”

Opponents of such laws include California’s Chamber of Commerce, which says negotiations should take place between employers and employees without government interference.

In an article for the Huffington Post, Fiorina wrote that Hewlett-Packard, from which she was ousted in 2005, offered paid parental leave “because we wanted to compete for the best workers.”

Mandates in other countries have discouraged employers from hiring and promoting women, she wrote.

“We need an economy that is so strong that employers are forced to compete for workers by offering better salaries, better leave policies, more time off and good benefits,” she wrote.

Rubio is the only Republican with a paid-leave plan, but he would require no mandate. Instead, he’d give a 25 percent tax credit to businesses providing at least four weeks. Clinton hasn’t presented a formal plan but indicated during the debate that “we’re going to make the wealthy pay for it.”

Paid-leave laws saddle businesses with the expense of temporary workers or overtime to cover for absentees, said Jack Mozloom, spokesman for the National Federation of Independent Business, which has fought such policies.

He cited a 2014 paper from the Institute for the Study of Labor in Bonn, Germany, that found that “the labor force participation rate, the unemployment rate, and the duration of unemployment among young women rose in California compared to states that did not adopt paid family leave.”

Eva McHenry, who’s run a day care and preschool outside Modesto for 14 years, said she’s had six workers take paid leave. Her business hasn’t suffered, because she requires advance notice and has backup workers.

“When we take care of our employees they make for better employees,” she said. “My philosophy as a small-business owner and in life is: If you are prepared, you need not fear.”
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(Jennifer Oldham in Denver contributed to this report.)

Photo: It’s divided Congress, but families like this one could benefit from paid family leave. Philippe Put/Flickr

Drought-Stricken California’s Wealthy Pay Up To Keep Lawns Lush

By Esme E. Deprez, Bloomberg News (TNS)

SANTA BARBARA, Calif. — Mandatory water rationing struck California’s celebrity-filled enclave of Montecito last year and, within weeks, residents created a market based on avoidance.

Gardens stayed lush and lawns verdant as citizens paid tanker trucks to deliver thousands of gallons to homes in the seaside suburb of Santa Barbara. They drilled in back yards, driving the county’s tally of new wells to a record. Some simply paid fines for exceeding allocations, padding the water district’s budget by more than $2 million.

“People feel strongly about their landscaping and want to keep their homes beautiful,” said Patrick Nesbitt, who drilled a well to hydrate parts of his 70-acre estate but let his polo field go dry. “Why should anybody object?”

As drought drags into a fourth year, Californians statewide will confront similar choices thanks to unprecedented consumption cuts mandated by Gov. Jerry Brown. Rationing in the Montecito water district, where the typical house sells for more than $2 million and where Oprah Winfrey, Google Inc. Chairman Eric Schmidt and Berkshire Hathaway Inc. Vice Chairman Charlie Munger live, shows how the ability to stop one’s property from baking brown depends on a steady flow of green.

The state’s Water Resources Control Board last week outlined its plan for mandatory cuts, which range from 10 percent to 35 percent. Communities with above-average consumption, which are often wealthier, must conserve most.

The correlation between income and water use makes an emerald lawn symbolize an economic divide, said Peter Gleick, president of the Pacific Institute, a research and policy group in Oakland, Calif. Water is unevenly distributed; poor communities in the Central Valley also receive water by tanker, but to drink, not moisten greenery, he said.

“How would we feel if you could pay extra to smoke on airplanes?” Gleick said. “When we decide something is a bad idea in general for society, we don’t want the rich to be able to buy their way out of it.”

As much as 80 percent of urban water nourishes outdoor landscaping, a feature in ample supply on the sprawling estates of Montecito, an unincorporated hamlet of 9,000 people located 90 miles up the coast from Los Angeles.

Country clubs and homes capped with Mediterranean red-tile roofs are nestled between the Santa Ynez Mountains and white-sand beaches of the Pacific Ocean. Residents say the preservation of landscapes and property values are intertwined, and dead and dying foliage increase vulnerability to fire.

Yet virtually no groundwater lies below Montecito, making it reliant on outside sources. In February 2014, as reservoirs ran low and promised water from the state failed to materialize, the Water District declared a shortage emergency. Rationing followed.

In September 2014, each Montecitan used about 241 gallons per day. That compared with residents in Cambria, the least profligate, who used 40 gallons, and to residents in Rancho Santa Fe who topped the list at 585.

Customers cut consumption by about 40 percent in 2014 compared with the year before, said Water District General Manager Tom Mosby. About 95 percent stay within monthly allocations set by property size. Penalties for overuse total $2.2 million so far this fiscal year.

“The majority of our customers are willing to work with us,” he said. “If certain customers are doing whatever it is to augment the water supplied to their properties outside of the district water supply, we can’t stop that.”

Discontent festers. In a recent letter to the editor of the Montecito Journal, resident Bill Reyner accused the district of mismanagement and called the cuts harmful.

“How many of you have lost significant investments in landscaping, seen mature trees die, counted the seconds in your showers, tirelessly checked your water meters and even put up with the built-up urine in your toilets?” he wrote.

Nesbitt, the founder of Windsor Capital Group Inc. and the largest U.S. private owner-operator of Embassy Suites hotels, says he has conserved by replumbing his 10,500-square-foot villa and installing drip irrigation that uses nonpotable water.

“We’ve made, I think, a Herculean effort to comply,” he said.

Nesbitt lost a lawsuit to reverse the district’s decision reclassifying his polo field and horse-training grounds to residential from agricultural. He’s now suing the agency again, contending residential property owners subsidize lower rates enjoyed by agricultural customers. He says he’s trying to gain access to more nonpotable water by persuading the district to let him tap one of its wells.

It’s not just Montecitans who have sought workarounds. In Cambria, midway between San Francisco and Los Angeles, residents now use just 32 gallons a day, less than half than before the drought began in 2011, since rationing took effect in March 2014. Clyde Warren, a private water supplier who draws from a permitted well, says he now sells 20,000 gallons on weekdays. Prior to rationing, it was common to go days without selling any, he said.

He has customers who are ostentatiously green and customers who are ostentatiously affluent.

“We get Priuses in here, Mercedes, a little of everything,” he said.

Customers of the Los Angeles Department of Water and Power will need to conserve 20 percent. One is George Grifka, a cardiologist, who said economics already drove him to replace thirsty grass and rose bushes on his property overlooking a golf course. He brought in drought-resistant native species including aloe and blue ice plant.

“Water costs money,” he said. “I wanted to have a durable, aesthetically pleasing landscape that also would not be economically detrimental. Plus, I didn’t want to waste water.”

A couple of miles away near the Beverly Hills Country Club, Charles Ferraro, a retired hospitality executive, said he’s ready to conserve more, but draws the line at ripping out his lawn.

“I don’t have fake plants, I don’t have fake lawn,” he said on a recent afternoon as his gardener doused the grass with a hose. “I started working washing dishes at age 13 and worked my way up, and what I enjoy is what I worked for.”

Already, he said, he’s reset his sprinklers to run two days a week, down from three, and stopped hosing off his driveway.

(With assistance from James Nash in Los Angeles.)

(c)2015 Bloomberg News, Distributed by Tribune Content Agency, LLC

Peter Thoeny via Flickr