

California companies with 5+ employees must now provide pensions? - jalanco
http://www.bloomberg.com/news/2012-09-28/california-is-first-to-offer-private-pension-management.html

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jalanco
"The law is aimed at businesses with five or more employees that don’t offer
pensions or 401(k) savings programs. The law requires companies to contribute
3 percent of a worker’s salary to a retirement account. Workers will be
enrolled in the program unless they choose to opt out."

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hga
Depending on the details, a strong motive to hire no more than 4 direct
employees. This could bring about some major structural changes.

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001sky
_3 percent of a worker’s salary_

Thats 1/3 of sales tax rate. Its literally not material, economically.
Logistically, this will need to be outsourced, which ironically mighthit fees
at a cost ~3% of payroll (ie, like a ~= to a credit card fee). So this law is
a boon for special interest = those companies.

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hga
Agreed with you on the outsourcing, but I think you underestimate the "death
by a thousand paper cuts" problem. Sure, any one of these things is not
necessarily material or at least very big, but there's no limiting principle
to California's style of government, they just keep piling up and up.

And it'll be material for companies that are right now at the margin, where
this pulls them under the break even point, or the point at which the salary
the eeeeevil business owner can pay himself is just not worth it.

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001sky
I don't disagree on the PITA factor. But its not a death-knell. Provided that
it is outsourced at payroll or via a bank relationship, etc. In that sense,
this is just another legistated subsidy to these industries.

But the only awkward case is n=4, where they need +1 to do the paperwork =].

But analytically, A 3 to 6% increase in labour cost only kills a very weak
business plan. Consider the edge-case example: Even with 100% labour expense
and a 6 month runway of cash, you are running out of cash 1/2x6%=3% sooner?
Thats ~3 business days (240/2x3%).

Again, its massive brain damage. Until it gets outsourced. But in theory it
should be no more difficult than a pre-tax Medical savings account, or a pre-
tax Transportation voucher system, etc (which almost everyone already has).

But even BigCo's outsource this crap to PayChex or what not.

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hga
The point I'm failing to communicate is that all these little bites add up.
Each particular one may not be very large, but when you add enough of them you
preclude a number of business plans, especially if you move your focus from
our sorts of businesses where the Bay area defines the very best place to do
them (although all of California enjoys the unique benefit of non-competes
being unenforceable, providing the country's most liquid market for human
talent).

If the California/Bay area competitive advantages aren't so overwhelming, you
have to ask yourself how much sense it makes to try to create and build it in
California vs. states that are sane. If the company type is inherently local
(e.g. a dry cleaner with all those environmental issues), can I afford to try
to continue running it in California, or should I move and do whatever
elsewhere, or just retire?

In the long run, its hard to see the Bay area etc. remain viable for high tech
if too many other types of companies are forced out of the state.

