Two months into California’s economic lockdown, it’s time to start working on creating a V-shaped economic recovery.
Gov. Gavin Newsom has shown strong leadership during the past couple months in response to the coronavirus outbreak. Now he needs to unleash the power of private enterprise to protect our livelihoods.
He made the right decision in moving the state into a shelter-in-place strategy at a time when many people were still not convinced COVID-19 was that serious a threat. As a result, the virus has not had the same impact here as it has in many other large states.
It is also important that we continue to take prudent precautions to prevent a spike in cases or a later second wave of illnesses.
However, the unemployment statistics are beyond alarming. Nearly 5 million California workers have filed for unemployment benefits since March, and Newsom projects the state’s unemployment rate will peak north of 24.5%. In comparison, the jobless rate peaked at “just” 12.3% during the Great Recession in 2010.
While many counties are easing their shelter-in-place mandates and businesses are trying to reopen, many sectors of the economy remain shut down. And most businesses that are open or are trying to do so have had to radically rethink their operations to allow employees and customers to practice safe social distancing.
As a result, many of the state’s 1.4 million family businesses are struggling, even with the influx of federal assistance. If the strict quarantine were to last much longer, many of these businesses — and the 7 million jobs they provide — will be gone.
Needless to say, billions of dollars in tax revenues that state and local officials were counting on to provide the wide array of government services are gone as well. If the economy doesn’t rebound, the loss in tax dollars will be far greater, resulting in even more painful cuts.
We will not be going back to “business as usual” any time soon, but there are four things the governor could do to jumpstart the economy and help family businesses in particular before it’s too late for many of us to resume operations.
First and foremost, he should urge backers of the so-called split-roll initiative to stand down. Now is not the time to make dramatic changes to Proposition 13 and burden struggling businesses with an additional $12 billion in commercial property taxes. Even in the best of times, raising business taxes by this huge amount would cause many companies to fail and cause many others to downsize or relocate out of state. Doing so now would be devastating to the economy.
Second, he should suspend Assembly Bill 5. The prohibitions against independent contractors are so restrictive that they will make it hard for many family businesses to get back on their feet.
Third, he should work with lawmakers to provide protection during the rest of the year for employers against wage-and-hour lawsuits authorized by the Private Attorneys General Act. These lawsuits filed by trial lawyers can cost employers hundreds of thousands of dollars for paperwork violations even when workers incur no damages. Family businesses will need as much flexibility as possible to rebuild operations after this shutdown.
Finally, the governor has the authority to suspend the mandated minimum wage increases if economic conditions warrant it — and clearly they do. Holding off further increases until our family businesses can recover would be extremely helpful.
The governor has shown Californians leadership to prevent the coronavirus from causing a public health catastrophe. It’s now time for him to show the same leadership to prevent an economic catastrophe that could last for years.
Ken Monroe is chair of the Family Business Association of California. He wrote this commentary for CalMatters, a public interest journalism venture committed to explaining how California’s Capitol works and why it matters.