Friday, January 13, 2006

Sick leave study is totally bogus;

Chamber drowns sorrows at Avenue Bar

It was obvious at first glance that a Chamber of Commerce "study" on the effect of a proposed Madison sick leave ordinance was bogus. When I said that yesterday, though, I had no idea how bad it really was.

This morning's Wisconsin State Journal, which trumpeted the study in a page one scoop on Thursday, has this to report today:
There are major flaws in a Greater Madison Chamber of Commerce study that predicts dire consequences if a proposed law to guarantee paid sick leave for most employees in the city is adopted.

The biggest flaw is in a centerpiece conclusion of the study - that the sick leave law could result in a huge loss of property taxes.

The study, even if all other assumptions are accepted, exaggerates the loss by a factor of 10...

The study, prepared by NorthStar Economics and released Thursday morning by the chamber at a press conference at the Avenue Bar, claims that many companies [the number was 185 -- Xoff] will leave the city if the sick leave proposal is adopted, causing a loss of up to $21 million in city property tax revenue.

But a Wisconsin State Journal analysis found a major miscalculation of city property tax revenues - a decimal point is in the wrong place - that inflates projected property tax losses tenfold.

Further, the study indicates the city would be hit by the tax loss. But the numbers used to make calculations are for collections by the city, Dane County, the Madison School District, and Madison Area Technical College, so any loss would be shared.

"We have to redo the property tax numbers," NorthStar Economics vice president Dennis Winters conceded.

How dramatic is the difference? The study suggests a $4.2 million to $20.1 million hit on the city's budget. But even if all the study's other contested assumptions are used, the State Journal's review suggests that the revised impact on the city's budget would range between about $150,000 and $750,000.

The chamber has removed the study from its Web site and will repost it after mistakes are fixed, chamber executive director Jennifer Alexander said Thursday evening.

"The error is regrettable," she said. "That doesn't change the rest of the impact (it shows) on employees and employers."

The sick leave proposal, initiated by the grass-roots Healthy Families, Healthy City Campaign and introduced by King to the City Council in mid-September, would provide an hour of sick pay for every 30 hours worked - about nine days annually for a full-time employee.

It would cover employees who work at least 12 hours a week, exempt businesses with fewer than five employees, and count any sort of leave - vacation, sick or personal time - toward the requirement. Employees could also swap shifts if they're out sick...

[The study] devotes four pages to the negative impacts of other recent mandates, including the city's minimum wage, already eclipsed by state law, and the city's sweeping smoking ban.

But a prominent chart showing a dramatic drop in "leisure and hospitality employment in Madison, Wisconsin," is misleading.

The data cited for the city doesn't exist and is actually for the Madison metropolitan area, which includes Dane, Columbia and Iowa counties, said Eric Grosso, state labor economist for the Department of Workforce Development.

Winters agreed, but said most hospitality jobs are in Madison and that the drop reflects troubles.

A bigger problem with the study that it is based on a chamber survey that shows 37 of 92 respondents - 40 percent- would "consider" leaving Madison if the sick leave law passed.

The survey was done months ago when there was much misunderstanding about how the law would work and it didn't sample outside the chamber membership, [Ald. Austin]King said.

Such a survey "might be a good way to tell how scared people are but it's not a good way to tell what people will do," added Laura Dresser, an economist and director of the Center for Wisconsin Strategy.

"We knew going in the survey was going to be of limited scientific potential," Winters said, adding that the study's projections are conservative, offering scenarios in which between 2 and 10 percent of businesses that said they would consider leaving would actually relocate.

"The time and resources were lacking to do a full-blown economic study," he said of relying on the survey.

The study also seems to have unreliable data on the number of businesses that would be affected by the proposed law, Dresser said.

Chip Hunter, an associate professor of management and human resources at UW- Madison's School of Business, also questioned many parts of the study.

The property tax analysis, for example, is not only based on bad math but seems to presume that property would have no value if a business left, Dresser and Hunter said.

And an estimated $15 million in compliance costs for businesses is unrealistic, Hunter said.

The bottom line is the study provides no true insight into impacts of the law and the public "should not really pay any attention to it," Hunter said.

NorthStar will fix math errors and will stand behind the study, Winters said.

Although imperfect, the study's conclusions reflect what businesses, especially small businesses, are saying, Alexander maintained.

"This only reinforces what we've heard," she said.
It didn't say whether Alexander was still at the Avenue Bar when she said that.

It's a classic example of what happens when an organization with a point of view and an ax to grind commissions a study to support what it already believes. NorthStar Economics , whoever that is, was so eager to please its client that it went way off the deep end.

(Owen Robinson of Boots and Sabers swallowed the whole study since it fit his view of the world, commenting on how the business people, not Austin King, were the ones to believe. Meanwhile, Ald. Brenda Konkel was asking all the right questions on her blog. Lakeshore Laments says that maybe the numbers were wrong, but the conclusions were right.)

When you misstate impacts by a factor of 10 (that darned decimal point will get you every time) and say the impact on the city budget will be no more than $750,000 and perhaps as little as $150,000 -- rather than $4-million to $21-million -- you have committed what is known as a monumental screwup. There's a stronger word than screwup (starts with f, rhymes with truck-up), but this is a family blog.

Instead of trying to defend this study, even in its general findings, the Chamber should do its best to wipe the egg off its face, demand a refund from NorthStar, and head back to the Avenue Bar.

THIS JUST IN: Well, it was in last Sunday, but I just found it: Pure Madnesson reports that the Chamber'ss Alexander is giving up her paid sick leave, to set an example, and urging Chamber members to follow suit. Details.


At 9:38 AM, Blogger Pure Madness said...

So, the sky really isn't falling?

At 9:58 AM, Blogger Dave Diamond said...

FYI, NorthStar Economics is run by the former #2 man at UW System, David Ward. Most of the studies they've done to date have revolved around the impact that UW has on the economy. Looks like the folks up in Van Hise Hall might want to double-check the decimal points in the statistics they use when lobbying the Legislature...

At 10:19 AM, Blogger Owen said...

So the impact on tax revenue is less than stated, but the jobs still might move, eh? I guess that doesn't matter as long as the tax man gets his due.

At 11:28 AM, Blogger Xoff said...

"Might" is the key word, if you read the article.

At 2:43 PM, Blogger austin said...

Good catch, Xoff. You were one of the very few who didn't fall for the lies. But the flaws went much, much deeper than the 30-fold overstating of the tax flight.

Also, the mistaking Madison MSA data with City of Madison data was the same error that Cieslewicz was getting beaten up for all week.

Read the whole laundry list of errors here:

Most shocking is that the Chamber continues to stand by the study. WOW!

Keep up the great insights...


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