Hartford Business Journal

28 Hartford Business Journal • September 28, 2015 www.HartfordBusiness.com OPINION & COMMENTARY EDITORIAL Bronin's pending mayoral tenure offers Hartford hope M ayor Pedro Segarra made the right decision to bow out of Hartford's mayoral race. Voters sensed it was time for change, and new leadership is needed to bring the Capital City to greater heights. Segarra's mayoral tenure was marked by ups and downs, but he deserves credit for bringing stability to an office that was marred by the corruption scandal of Eddie Perez. On the economic development front, Segarra made his mark early by advocating and overseeing in 2010 the teardown of the Butt Ugly Building, which stood as an eyesore on Main Street for years. There have been a lot of other positive developments under Segarra's watch: UConn decided to move its regional campus to downtown Hartford; Trinity College and the University of St. Joseph established and/or grew beachheads in the center city; count- less new apartment projects are underway and/or nearing completion; more employers are interested in a downtown Hartford presence; the long-awaited Front Street Enter- tainment District finally blossomed and has become a popular destination. In fairness, state aid helped support many of these projects but they still happened under Segarra's watch. Segarra also deserves credit for bringing a new minor league baseball stadium and team to the city, although the jury is still out on whether that development will be an economic boon or boondoggle. The recent spike in gun violence and what many considered poor management at times, were black marks on Segarra's record, but he is leaving the city a better place than it was before he took office. Now, the responsibility will be on Bronin's shoulders to grab the forward-momentum Segarra has left behind, and tackle some of the big issues that are restraining Hartford from reaching its full potential. Bronin, of course, still hasn't won the general election, but his coronation as mayor essentially happened last Tuesday when Segarra bowed out of the race. Republican Ted Cannon and other third-party candidates still remain challengers in the November election, but they have virtually no shot at derailing Bronin. Malloy's former general counsel deserves credit for running a great cam- paign. He received significant support from the business community, and his victory in the Democratic primary will likely boost business' confidence in Hart- ford's future. Still, talk, as they say, is cheap. Bronin has enjoyed and flourished in the role of being a Monday morning quarterback, criti- cizing and second-guessing many of Segar- ra's decisions, including his handling of the recent spike in gun violence and manage- ment of several city agencies, to gain politi- cal points. Actually governing and making decisions is a much taller order. Building a long-term sustainable budget and curbing Hartford's exorbitant com- mercial property tax rate remain top priorities for the business community, along with reducing poverty and the education gap. Bronin's effectiveness will be measured on the solutions he brings to bear on those key issues. We wish him luck, because Hartford needs a strong and decisive leader who can build partnerships with myriad constituencies to elevate the burgeoning status of the Capital City. n RULE OF LAW Private sector not to blame for income inequality By John Horak T he income inequality issue has advanced to the top of the public agenda, and for good reason. It is an important and bona fide issue — at least when it is framed as a dearth of equitably available middle class employment opportunities. The issue is not legitimate when framed in more radi- cal dress as equal pay regardless of effort or qualifications, though this version has its advocates too. Regardless of how the issue is framed the misleading part of the discussion is the reflexive presumption that the business sec- tor bears responsibility for the problem simply because its members refuse to pay at levels suf- ficient to alleviate income disparities. Based on this slender reed, equality advocates urge the use of "coercive" means to compel the sector to adopt more egalitarian practices. However, the problem is actually a con- sequence of the government's addiction to regulatory excesses that hamper growth and job creation — but convincing people to put the blame where it belongs (excess regulation) is difficult and perhaps quixotic. Nevertheless, I will try to do this by stick- ing my lance into the belly of the coercive solutions being used to twist the arm of the business sector to expose the erroneous thinking behind them. First, minimum wage statutes can be used to compel busi- ness to pay more. Connecticut's minimum wage of $9.15 will rise to $10.10 in 2017, and some cities in the country have raised their minimum to $15. A variation, which did not make it into law in the 2015 Connecticut leg- islative session, would have imposed a $1 per hour penalty on large employers paying less than $15 per hour to reimburse the state for the public benefits low-wage earners receive. I have no issue with minimum wage stat- utes generally, but the public should not be conned into thinking that the problem can be fixed with statutes that compel wage levels. Earlier this year, the Pew Charitable Trust pub- lished its analysis of what middle class means on a state-by-state basis, and in Connecticut the lower end is $44,732 per annum and the upper end is $134,196. We need jobs that pay upwards of $25 to $30 per hour to make a seri- ous dent in the problem, and statutes will never get us there because the law is not powerful enough to bend market forces to its will. If it was, we could set the minimum at $100,000 per annum and all enjoy the ensuing prosperity. Second, enormous media and related pressure is placed on the business sector. The Securities Exchange Commission recently adopted a rule requiring public companies to disclose the ratio of the annual compensation of all employees to the annual compensation of the CEO. An Aug. 11 Wall Street Journal op-ed accurately characterized this as an attempt to "embarrass companies about income inequality." There is also the "fight for 15" movement, which uses public pressure to drive up wages for fast food workers. However, if we parse through recent news stories the evidence suggests that changes brought on by this pressure are tripping over their unintended (but foreseeable) conse- quences. An Aug. 6 story in Bloomberg Busi- ness ("Unintended Consequences of Wal-Mart's Raise: Unhappy Workers") notes that Wal-Mart's decision to increase the minimum wage it pays newer workers to make them equal with senior employees upset the senior employees — who felt entitled to more because of their longevity. Wal-Mart clearly should have raised everyone's wages in lock step to avoid this problem, but on a deeper level the case demonstrates a basic facet of human nature — equality for its own sake is a non-starter because people rightfully expect to be treated better if they have greater longevity or work harder. Human nature cannot be changed by public pressure, or by legislation or regulation for that matter. Another example is Gravity Payments, the credit card processing firm in Seattle. It took a deep dive into these waters when its co-owner/ CEO Dan Price decided to pay all employees $70,000 per year (Price included). While his leap of faith brought praise and headlines, more fundamental questions lurk below the surface: Will radically egalitarian compensation prac- tices help or hurt the long-term competi- tive prospects of the business? Would a more traditional merit-based policy contrib- ute to greater growth and jobs for more people? A story in the Aug. 2 New York Times noted that two of Gravity's most valuable employees quit because "it was unfair to double the pay of some new hires while the longest-serving staff members got small or no raises," and because "people who were just clocking in and clock- ing out were making the same." Price has been sued by his brother and co-founder/owner with sufficient reason — he owes fiduciary duties of prudence to his brother and his jump into these waters seems as reckless as it is popular among equality advocates. Finally, it is not the purpose of the busi- ness sector to guarantee a middle-class liv- ing, to act as an instrument of government policymakers, or to save the government from its failure to create fertile soil for business to grow. Its purpose is to create and sell goods and services honestly and profitably and to create value and fair employment opportuni- ties in the process. It is the only sector of our economy that does this, and the other two sec- tors (governmental and nonprofit) live off its success and suffer with its failures. n John M. Horak has practiced law at Reid and Riege P.C. in Hartford since 1980. The views expressed are his own. HARTFORDBUSINESS.COM POLL Are hospital funding cuts the best way to deal with the state budget deficit? ● Yes ● No To vote, go online to HartfordBusiness.com. Last week's poll results: Should Congress reinstate Ex-Im Bank's charter? 86.7% Yes 13.3% No John Horak ▶ ▶ I have no issue with minimum wage statutes generally, but the public should not be conned into thinking that the problem can be fixed with statutes that compel wage levels. ▶ ▶ Hartford needs a strong and decisive leader who can build partnerships with myriad constituencies to elevate the burgeoning status of the Capital City.

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