Lower Sales, Higher Costs Endanger Massachusetts Main Streets
October 22, 2020 by Jon B. Hurst, President
Come January, countless small business owners will review their receipts and expenses and decide if they can stay open. They will be making that heart wrenching decision at a time of great uncertainty. Can they take the risk that they can bring consumers back into their stores and restaurants and drive up sales to cover their expenses, or are the costs of operating just too much?
Four major pressure points for small business in Massachusetts are state government mandated cost drivers that are coming their way.
On January 1, 2021:
- The third annual minimum wage increase on the journey to $15 will occur. The 5.8% increase will create further wage compression up through the wage scales, not just for new hires.
- Health insurance premiums for small businesses will increase by an average of 7.9%, despite the low utilization brought about during the COVID crisis. As is usually the case, the increase is a rate far higher than is typically seen by big business and big government.
- Benefits for the new Paid Family & Medical Leave law will become effective, adding red tape and compliance headaches to the payroll taxes already underway.
- And finally, unemployment insurance tax rates will be boosted dramatically through either experience rated tax schedule increases, or socialized solvency fund assessments—or both—to cover what is expected to be as much as $5 Billion of federal borrowing to cover the landslide of layoffs. The level of borrowing to cover the UI Trust Fund deficit, and the ultimate cost is unprecedented, and current public policy puts the entire cost on the backs of local employers, especially smaller employers. Even before COVID-19, Massachusetts had the highest UI tax rates in the nation. And keep in mind most of those layoffs were not at all the fault of the small business owners; rather they came by government shutdown orders, and in the wake of the continuing economic damage of the COVID-19 crisis.
Will our public policy leaders seek ways to lower those very high mandated payroll costs--particularly small business health insurance premiums and unemployment insurance taxes, while our businesses fight to bring their customers back?
In addition to controlling government mandated costs, we also need our consumers to spend locally in an age that they can send those dollars anywhere. In many too cases the economic investment of our own consumers is simply leaving the local economy. That spending needs to swing back, particularly as we enter the vital holiday sales season.
Convincing our shoppers and diners to trust the state government COVID-19 orders, and the national and industry safety protocols is vital to bringing back sales. Consumers need to know that small businesses are in many cases exceeding state orders, and are focused on giving their customers a safe and pleasant experience, which will bring them back again and again. But they need to hear that messaging not only from the small businesses themselves, but also from our elected leaders, our healthcare leaders, and opinion leaders in our various industries and our communities.
Consumer spending represents 70% of our economy. It matters where we spend those dollars, and that message must be repeated over and over again. Yet sales are only half the equation concerning the future viability of a small business; the other half is comprised of the costs of doing business. Consumers and elected officials alike hold the future of Massachusetts Main Streets in their hands with the decisions that they will make.