Study Finds California Taxes and Regulations Hinder Women-Owned Businesses, Working Mothers; Rules Block Access To Day Care

4/9/2002

From: Dawn Collier of the Pacific Research Institute, 415-989-0833, ext. 136, dcollier@pacificresearch.org

SAN FRANCISCO, April 9 -- California taxes and regulations disproportionately hinder women-owned businesses and discourage entrepreneurship by women, especially working mothers, according to a new study by the Pacific Research Institute.

Women and Entrepreneurship in California: Obstacles, Incentives, and Reform, takes an in-depth look at the most significant tax and regulatory barriers facing women, from starting a small or home-based business to laws that are reducing access to much needed child-care services.

"The irony is that California lawmakers passed a lot of these taxes and regulations intending to help women and families," said Women and Entrepreneurship author Donna Matias, director of the Entrepreneurship Clinic at the University of San Diego School of Law.

"But the costs and the red tape they've created are actually hurting women who want to start their own home-based business and working moms who are desperate to find child care," she said.

Approximately 80 percent of California businesses are small businesses, and most of these (79 percent) have fewer than 10 employees. But laws designed for larger businesses often fail to make practical exemptions for small and home-based businesses, such as costly ergonomics regulations. Other regulations place undue burdens on the home-based business. In Los Angeles, home businesses may not receive more than one client per hour, and only two pickups or deliveries per day.

Day care is crucial for working women but state regulations remain especially onerous when it comes to children less than two years old, classified as "infants." The result is that, despite overwhelming demand, less than five percent of California's 260,000 licensed day-care centers are able to accept children under two.

In the Bay Area, from 1996-1998, the number of family day-care openings fell by 28 percent in Marin County, 21 percent in San Francisco, and 12 percent in Santa Clara County. Matias cites another recent study of over 300 Latina mothers in southern California that found that nearly 60 percent of the women were unable to work or lost a job because they could not find licensed child care.

Other financial and practical barriers the small business owner must overcome include:

State Taxes & Municipal Laws: Small and home-based business owners face state income tax, franchise tax, sales and use tax, and payroll and employment taxes, as well as local municipal taxes, licensing and permit requirements and costs, and zoning laws.

State Labor Laws: Small and home-based business owners must comply with minimum-wage and living-wage laws, the state overtime law, medical and family leave requirements, and sick leave rules. These costly requirements often do not fit the pattern of the home business, and discourage small employers from hiring.

Health & Safety Laws and Mandatory Insurance: Small and home-based business owners are responsible for costly payouts and extensive paperwork to comply with unemployment insurance, workers' compensation, and state disability insurance requirements. Workplace safety measures designed for heavy industry, such as the Cal/OSHA, also create obstacles for smaller businesses.

While women-owned businesses in California grew 42.2 percent from 1992-1990, Matias shows how growth would increase if legislators made much needed reforms.

Women and Entrepreneurship recommends that legislators relieve the tax and regulatory burden on small and home-based businesses, and create incentives for employers to hire additional employees and provide benefits. The study urges the enactment of exemptions from overtime restrictions and ergonomics standards. Matias also proposes updating child-care laws to encourage more entrepreneurs to open or expand child-care businesses.

The study also includes profiles of women entrepreneurs in California and their struggles with the state's regulatory system.

For more information or to schedule an interview, contact Dawn Collier at 415-989-0833, ext. 136. The study is available at http://www.pacificresearch.org/.

------ The Pacific Research Institute (PRI) is a nonprofit, nonpartisan 501(c)3 organization promoting individual freedom and personal responsibility as best achieved through a free-market economy, limited government, and private initiative.