Do You Support Trenton's A.C. Takeover? 
Paid Family Leave Tax Starts January 1
By Matt Rooney | December 29, 2008
On Thursday, New Jersey will take another step towards becoming one of America's least-friendly states for businesses of all sizes. Trenton is about to add 38,000 new dependents to the state entitlement structure in the middle of a dangerous recession. The inevitable result will be higher taxes and less jobs in an increasingly expensive Garden State. NJ 101.5 reports:
On Thursday, New Jersey will take another step towards becoming one of America's least-friendly states for businesses of all sizes. Trenton is about to add 38,000 new dependents to the state entitlement structure in the middle of a dangerous recession. The inevitable result will be higher taxes and less jobs in an increasingly expensive Garden State. NJ 101.5 reports:
"Starting January 1st, Garden State employees will be taxed to pay for a fund that will allow workers up to six weeks off to care for a sick family member or a newborn. Employees will not be permitted to take the time off until July. The law authorizes up to six weeks of employee paid family leave (family temporary disability leave) during any 12 month period, during which an employee could take time off to care for an ill family member, or a newborn or recently adopted child. Employees would receive two-thirds of their weekly salary, up to $524 per week. Workers seeking leave time would be required to provide their employers with prior notice of the need for leave time, along with a doctor's note listing details of the need for the time off."
WHAT DOES THIS REALLY MEAN?
I think the implications of this new socialist policy deserve some serious review. We all recognize and can be sympathetic with someone who needs time off from work to care for a sick family member or new addition to the family. However, we already have that without government mandates. These agreements generally have more lenient leave allowances from the employer, with low or no pay. The current system means that the employer only loses productivity, which can be replaced at a similar cost. It also offers the employee more time off to care for the loved one who so needs it. Everyone is happier.
BUT...
What about the employee who didn't save for the rainy day when he needed time off from work? You are responsible for your own actions. If you choose not to be prepared for your own future, that is your choice.
Side note- I thought that national government wants to introduce incentives for our fellow American to save? I guess NJ does not really care about national goals. Way to work together.
IMPLICATIONS:
Let us assume that any given employer gets 1 unit of productivity out of any worker per day. Let us assume that the average worker makes 235 productivity units per year for her employer (50 weeks * 5 days per week - 15 paid holidays- 10 vacation). That means for each annual salary paid, the employer gets 235 productivity units. We will also assume that each unit of work costs the employer $150. That translates to an annual salary of $35,250.
Under the New Jersey socialist regime, each employee is now entitled to 6 additional weeks off with 2/3 pay. When one employee takes this leave, this represents 30 units of lost productivity in our previous discussion. Thus, that employee's productivity decreases by almost 13%. Wow. However, the employee will "only" receive 2/3 of her pay. In our example, for those six weeks off, the employee will get $100 per day. Our annual salary changes to $35,250- (30 * 50) = $33,750, a 4% decrease.
Overall the employer receives 13% less productivity and pays only 4% less in payroll expenses. WOW, that is staggering.
The problem here, is that it does not pay to be an employer in New Jersey. Without employers, WE are UNEMPLOYED.
PERVERSE INCENTIVES:
The previous discussion aside, how many people do you know that wouldn't mind an additional 6 weeks off from work per year? Here is an idea, survey 5 people you know. Ask them, "would you take a 4% pay cut if you could get an extra 6 weeks off from work?" Most will say "YES." I find it hard to believe that some of those same people will not at least try to find a way to get the newly government mandated 6 weeks off from work. In an ideal world, this would not be a concern. We all know our world is far from ideal.
-Jeffrey N. Medio
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