Wayne Pesce, president of the Connecticut Food Association, says the combination of tolls on Connecticut’s highways, an increase to the state’s minimum wage and imposition of paid family medical leave program could be “potentially devastating” for its members.
“Between a pending 50 percent mandated wage increase, a paid family medical state mandate, pending Eversource energy rate increases, a proposed $160 million sugar tax and tolls that drive supply chain costs up, we feel under siege,” Pesce wrote in an email.
The CTFA represents 240 companies in the state with a combined 435 food and pharmacy retail stores employing 30,000 people.
“Each of these measures individually are concerning – combined they are potentially devastating,” Pesce wrote.
CTFA members occupy a big chunk of Connecticut business. According to CTFA, they have $5.7 billion in sales per year, but the industry operates on slim profit margins – typically 1 to 1.5 percent, leaving little room to absorb large cost increases.
Democrat leaders in the legislature have made tolls, increasing the minimum wage to $15 per hour and implementing a paid family medical leave program part of their top five agenda items for the legislative session.
Gov. Ned Lamont, likewise, has made those issues top priorities as part of his budget. Lamont campaigned on being business-friendly, but business organizations have fought the minimum wage increase and the paid FMLA program for several years.
The governor’s budget — and bills circulating in the legislature — would institute a .5 percent tax on employees, allowing them to take up to 12 weeks per year for family medical leave with payment up to $1,000 per week and increase the minimum wage from $10.10 per hour to $15 over the next three years.
Both measures contain costs for the state at a time when Connecticut faces on-going budget deficits. In his budget, the governor estimated the paid FMLA program would cost $5 million to start but estimates of previous bills by the Office of Fiscal Analysis placed start-up costs at $13.6 million.
Last year, OFA estimated increasing the minimum wage to just $13.50 would increase state labor costs by $45.3 million and also raise costs for municipalities.
But the costs for Connecticut companies, particularly grocery stores which typically pay check-out clerks and sales associates less than $15 per hour, will see their labor expenses grow much more significantly and that cost will be passed on to the consumer in the form of higher prices. The minimum wage increase may also affect employment at those grocery stores. Opponents to the
minimum wage increase have long pointed out that rising automation in the form of self check-out aisles at grocery stores mean that stores facing higher employment costs can more easily afford to cut staff.
That argument is weighing on at least one major grocer in the state — Stop & Shop. Stop & Shop is currently in negotiations with its employee unions and several have already held votes to authorize a strike after accusing the company of trying to cut employee benefits.
Radio advertisements run by the United Food and Commercial Workers International decry the store’s use of self check-out lines.
Lamont balanced his budget by adding a tax on sugar-sweetened beverages and a surcharge on plastic grocery bags. Combined the two measures are expected to bring in $193 million but put further pressure on grocery stores and beverage distributors.
Lamont and Democratic leaders’ push for tolling Connecticut highways will not only raise the day-to-day cost of living for Connecticut residents driving on highways, but also increase the cost of shipping goods like groceries into the state.
Connecticut trucking companies say tolls will cost them hundreds of thousands per year – a cost they will be forced to pass on to their customers, including food retailers.
Much of Connecticut’s policy debate focuses on the wealthiest residents, the financial sector and hedge fund companies which account for a significant chunk of Connecticut tax revenue.
Well publicized departures of major investment firms and billionaires like Paul Tudor Jones have not only shown the financial services industry to be more mobile in the age of wireless technology but have also made lawmakers more nervous about the effect tax increases will have on the financial sector.
Testifying before the Finance, Revenue and Bonding Committee against a proposed 19 percent surcharge on financial services in 2017, head of the Connecticut Hedge Fund Association Bruce McGuire told lawmakers his members would just leave.
But for retail outlets like grocers, pharmacies and other companies which rely on foot-traffic, moving out of state is often not an option.
“Brick and mortar stores do not have the luxury of relocating our stores to a more business friendly climate,” Pesce said, making them a less mobile target for tax and cost increases.