Why Regulations Can Help Your Business Grow

Last Updated May 25, 2011 11:13 AM EDT

What makes a city a great place to build a business? If your city required every employer to offer paid sick leave and family leave, what would that do to your business?

If you think your company would suffer, you're not alone. The conventional wisdom in the US is that low costs and little regulation help businesses thrive and cities generate jobs. That logic has caused the Chamber of Commerce to challenge everything from raises in the minimum wage to tough consumer safety protections.


But, a new report from the Partnership for New York City and PricewaterhouseCoopers punctures a big hole in this argument, as it declares San Francisco--a city known for its ample worker protections and regulations--as one of the top 5 cities "of opportunity" in the world. The analysis relies on a host of indicators, everything from intellectual capital and innovation, costs, and health, safety and security. (You can read more about the PwC report here.)

San Francisco: A Challenge to the Orthodoxy

Starting in the mid-1990s, San Francisco began to challenge the notion that the key to growth is cut, cut, cut. Over the past decade, the city has in many ways transformed its basic labor standards, providing residents with, among other things:


  • the right to access health care,
  • a city-wide minimum wage
  • paid sick days ordinance

It's worth looking at this paid sick days ordinance. In 2006, when San Francisco voters approved a paid sick days ordinance, the city became the first place in the United States where a worker had the right to stay home sick and get paid for it. While access to paid sick days is the law in at least 145 countries, the United States does not require that employers allow an employee to stay home if they are ill, even if they have the flu. Currently, only about two-thirds of workers nationwide have the right to stay home sick and less than half have the right to stay home to care for a sick child.

And, it turns out that once in place, employers aren't actually opposed to the ordinance (after fighting tooth and nail against it). According to new research, "Surveys of over 700 employers and nearly 1,200 employees found that two-thirds of employers support the law."

Employers' reaction to paid family and medical leave program

In 2002, the state of California implemented a paid family and medical leave program, whereby nearly every worker is eligible for up to six weeks of paid leave for the birth or adoption of a child or to care for an ill family member, on top of a long-standing program that gives workers paid leave for their own temporary disability.

Here, too, researchers have found this policy wasn't a job killer. In fact, an employer survey shows that after trying to defeat the law, a few years after implementation , "Most employers report that [paid family leave] had either a "positive effect" or "no noticeable effect" on productivity (89 percent), profitability/performance (91 percent), turnover (96 percent), and employee morale (99 percent)."


Forbes Mag: Way Off Base

Yet the idea that these kinds of protections hurt business is so ingrained that when Forbes magazine, ranked the best places for business last year, they put San Francisco at number 38. Even though they note that San Francisco economy is "expected to be among the 10 most vibrant over the next three years with annual gross metro product growth of 5.8% in San Jose and 5.7% in San Francisco."

In the PwC findings, the authors note that, "The successful modern city relies on intelligence and social well-being as much as economic clout--a conclusion that seems not so much to challenge any theory as to confirm common sense."


Heather Boushey is Senior Economist at the Center for American Progress. Her research focuses on employment, social policy, and family economic well-being. Much of her current work focuses on the Great Recession's impact on workers and their families, as well as policies to promote job creation. She co-edited The Shriver Report: A Woman's Nation Changes Everything (Simon & Schuster ebook, 2009).

image courtesy of flickr user, http2007