As the demographics of California change, our small business makeup is changing as well. Latinos are the fastest-growing segment of business owners, and there are more than 700,000 Latino-owned businesses in the state. By 2030, Latinos will be by far the largest group in the workforce.
But the success of these businesses could be jeopardized by additional state-imposed cost increases. We fought to keep our businesses alive during the recession; some survived and many didn’t. Now policymakers need to make sure government costs don’t become the reasons for business failures.
A major area of concern is California’s efforts to tackle climate change. While many small business owners support climate change policies, we also have concerns about their hefty price tag. The California Energy Commission projects that between 2012 and 2020, electricity rates will increase by 26 percent to 42 percent and natural gas by 62 percent and 77 percent. The Boston Consulting Group estimates that fuel costs will rise by 49 cents to $1.83 a gallon, not to mention the expected hike starting Jan. 1 when gas and diesel fuels come under the cap-and-trade program. According to the Legislative Analyst’s Office, that could increase the cost of gasoline by as little as 16 cents per gallon and as much as 76 cents.
Small business owners are often left in the dark about the energy cost increases from environmental and climate change mandates. Latino-owned businesses are disproportionately impacted because many operate on a smaller profit margin, many don’t have as much access to financing and many businesses are less established. For minority-owned or family businesses, absorbing new environmental costs could mean being forced to reduce hours or lay off workers.
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If the climate change programs were the only additional costs, then some small businesses might be able to absorb those increases. But there are many others, and it’s the cumulative impact that state government has failed to consider. A small business in California pays 19 percent more in operating costs per job than a small business in another state because of higher costs such as minimum wage, workers’ compensation, health insurance, income taxes, and business licenses and fees. These costs represent a real challenge for every small business owner.
For workers’ compensation, California businesses pay 61 percent more than the national average. For health insurance, average premiums increased by 22 percent to 88 percent in 2014 and are expected to go up another 4.2 percent in 2015. The corporate income tax in California is 43 percent higher than the national average, and business licenses and fees per employee are 12 percent higher.
These higher costs are not easily managed, especially as incomes remain flat for middle-income consumers and poverty rates increase. As Gov. Jerry Brown and the Legislature look at our climate change policies and contemplate even more aggressive regulations, we call upon them to please consider energy affordability.
Whether the cost increases are in energy, health care or workers’ compensation, they all impact business. Too many are a bad recipe for small business success in California. We hope our lawmakers step up and represent their constituents as these far-reaching policies are proposed and implemented.
Alice Perez is president of the California Hispanic Chambers of Commerce.