Clinton's Plans Leave Small Firms Worried : Business: Critics fear added costs, more red tape in proposals mandating health coverage, worker training.

By JONATHAN PETERSON

Dec. 31, 1992 12 AM PT

TIMES STAFF WRITER

Some of President-elect Bill Clinton’s most popular plans for the workplace are prompting howls from the group he will count on most to put America back to work: small business, the nation’s premier jobs machine.

The unhappiness centers on proposals requiring many employers to provide health care coverage for their workers and to spend specified amounts of money on worker training. In addition, Clinton would give employees the right to take up to 12 weeks per year of “family leave” without pay--a proposal that passed Congress and was vetoed by President Bush. And he would let the minimum wage rise along with inflation.

Each proposal targets a national need, and each enjoys broad support among the public, organized labor and other groups. The President-elect endorsed the ideas in the course of his change-oriented campaign for the White House.

Yet critics claim such strategies discourage new hiring because they push up costs and worsen red tape. While often unpopular with big, well-staffed corporations, they are most threatening to the little ones, which say they are least equipped to absorb an added load of regulation.

“The rubber hits the road when you decide how to pay for this stuff,” said Anthony Carnivale, chief economist with the American Society for Training and Development. “That’s the guts of the issue.”

The behind-the-scenes dispute is over what business leaders distastefully call “mandates”--in this case, federal policies affecting how they must treat their employees.

“We’ve got four or five issues that the President-elect has supported that would certainly give heartburn to most small business people,” declares John J. Motley, chief lobbyist for the National Federation of Independent Business, a small business lobby in Washington.

Training illustrates the conflict.

Clinton would require that employers with more than 50 workers devote at least 1.5% of their payroll costs to the task.

The goals of the proposal have broad appeal: to upgrade the work force, ensure that lower-level employees get their share of know-how and help the United States become more competitive in the global economy. Yet the idea is so controversial, even within Clinton’s inner circle, that Labor Secretary-designate Robert B. Reich recently told associates at Harvard University he is backing away from it.

Some observers expect Clinton to do the same. “It’s a matter of intense internal debate at the present time,” said Jerry J. Jasinowski, president of the National Assn. of Manufacturers, and an opponent of the mandates. “I think it’s going to be dropped.”

That would be just fine with Simone Lagomarsino, president of Northridge-based Premier Bank, a 55-employee institution with many small business clients. It also would suit executives of the printing company, avionics firm, packaging factory and restaurant from whom she recently sought opinions about Clinton’s proposals.

To these sorts of entrepreneurs, the issue is whether employers should be compelled--rather than just encouraged--to meet an ever-expanding list of society’s needs, from health insurance to retiree pensions.

“What I heard consistently was that we don’t need more paperwork,” said Lagomarsino, who stressed that her bank offers health care benefits and tries to be a responsible employer. “We don’t need more rules we have to live by. We’re already looking over our shoulder just trying to make sure we’re meeting all the guidelines we’re supposed to meet every day.”

Such sentiments contrast with the warm and cozy atmosphere at Clinton’s economic summit in Little Rock, Ark., where the President-elect wooed business leaders with his pro-growth rhetoric and command of fiscal minutiae.

Clearly, there is much in Clinton’s economic briefcase that appeals to the small business community, such as his support for tax incentives to promote investment in fledgling enterprises.

He frequently salutes small business as the nation’s key job generator, says he is aware of its problems and would cushion smaller employers from some of his proposed programs, either by exempting them altogether or phasing the rules in slowly.

It also is true that business of all sizes has been known to cry wolf about the dire effect of rules imposed for the good of society. Over the years, business interests have resisted child labor laws, Social Security, worker safety measures, the minimum wage and many consumer protections that today are as controversial as apple pie.

“In each case, these policies are buying something,” said Alan Blinder, a Princeton University economist who has advised the Clinton team. “They’re not just charges to business that you’re throwing in the sewer. You’ve got to weigh one side against the other.”

Nonetheless, critics deride the proposals as clumsy attempts to impose “one-size-fits-all” solutions on a diverse workplace.

Even the sweeteners for small business--such as exempting firms with fewer than 50 workers from training and family leave rules--could backfire, opponents warn, by impeding enterprises from expanding and encouraging employers to shift full-time jobs to part time.

Big firms, by contrast, often provide the sorts of benefits Clinton envisions, or could add them without jeopardizing the bottom line. Said Lawrence A. Hunter, chief economist with the U.S. Chamber of Commerce: “In general, the smaller you are, the more you fear these kinds of things.”

Such gripes are taken seriously for a simple reason: When it comes to job creation, small business lately has been without peer.

Between 1988 and 1990--a time when big business was starting to mail out pink slips--firms with fewer than 20 workers piled on more than 2.7 million new jobs, according to the Small Business Administration. More broadly, firms with fewer than 500 employees created 53% of all new jobs from 1976 to 1990.

And if past recoveries are any guide, the tiniest employers will expand most quickly over the next few years, a dramatic counterpoint to the current job-slashing frenzy in corporate America.

Such expectations lead advocates for small business to wonder if Clinton actually would go ahead and raise their costs in today’s job-hungry environment.

Clearly, Clinton’s comments about the economy and controlling health care costs have sounded encouraging to Mary Kelley, a Denver accountant who attended the President-elect’s economic get-together in Little Rock.

But ask her directly about “mandates”--even for health care--and the tone shifts. “You cannot have a benefit if you don’t have a job,” said Kelley, a partner in a 50-employee accounting firm. “I don’t support mandated benefits at all.”

Just how much a bite some of these mandates would take out of jobs is in dispute.

A key question is whether employers would be able to cut back wages enough to offset the added costs.

And the answer depends partly on the speed at which new benefits are phased in, said William S. Custer, research director for the Employee Benefit Research Institute in Washington.

If wages and other benefits aren’t adjusted to offset added new burdens, “then it will cost more to hire a worker, and fewer workers are going to be hired,” Custer said.

Custer figures that family leaves for the care of newborns and ailing family members probably wouldn’t cause widespread job losses. Despite their claims to the contrary, most employers could adjust to the absences, he says.

Any move to require health care coverage could prove thornier, however, potentially adding substantial new costs for some employers, according to Custer. Currently, 36 million workers and relatives are uninsured.