Newsletter May 25, 2023

POLICY

• Drug possession bill fixed in special session
• What employers need to know about WA Cares tax collection and reporting
• WR signs-on to protect victims of Unemployment Fraud

ECONOMY

• April retail sales rebound

ON THE LOCAL FRONT

• Seattle Councilmembers introduce Controlled Substances Ordinance
• Mayor Harrell renews and expands Metropolitan Improvement District

RETAIL THEFT & PUBLIC SAFETY

• WR continues efforts to inform Washington businesses on the effects of retail crimes on public safety
• Violent incidents in stores are costing retailers millions

TRENDS

• The forever labor shortage: More Americans are getting too old to work
• Growing number of city retailers relocating to the suburbs

SAFETY

• Essential considerations for hiring young workers

Drug possession bill fixed in special session

Last week, during a one-day special session, the Washington State Legislature passed a compromise bill, Senate Bill 5536. The bill is in response to the Washington State Supreme Court’s Blake decision and the need for updates to the drug possession law. Sponsored by Senator June Robinson (D-38-Everett), the bill received overwhelming support and was signed by Governor Jay Inslee May 16.

Drug possession is now classified as a gross misdemeanor, with a maximum six-month confinement for the first two convictions and a fine capped at $1,000. The bill also establishes pre-trial diversion into treatment and mandates early conviction vacation for those who have completed treatment or substantially complied with recovery programs for six months. The bill pre-empts local governments from imposing stricter penalties, ensuring a uniform gross misdemeanor standard throughout the state.

“This is a win-win,” said Mark Johnson, WR V.P. of Policy & Government Affairs. “Individuals suffering from substance use disorders are often preyed upon by organized retail crime rings who use them to commit retail thefts and other criminal activities. SB 5536 strikes a careful balance between treatment and accountability to break the drug use cycle, leading to safer communities and protecting retail employees and their customers.”

What employers need to know about WA Cares tax collection and reporting

Beginning July 1, 2023, Washington employers must start collecting WA Cares Fund premiums from their employees as they do for Paid Family and Medical Leave (PFML) premiums.

Unless they did not incur any payroll expenses during that specific quarter, employers must continue to submit quarterly reports on their employee's wages and hours.

To facilitate this process and streamline reporting, the WA Cares Fund is currently updating the Paid Leave reporting system. This will allow employers to conveniently report for both programs simultaneously. Employers will not share any portion of the WA Cares contributions with their employees.

For further details and guidance, employers can access helpful information from the PFML website. The integration of WA Cares reporting into the existing system aims to provide employers with enhanced convenience and efficiency in fulfilling their reporting obligations.

Use these links for resources, including exemption information, an employer tool kit, graphically-designed materials, and posters.

WR signs-on to protect victims of Unemployment Fraud

On May 5, WR joined with business associations and companies in the Unemployment Insurance industry in a letter to congressional leadership in support of the Protecting Taxpayers and Victims of Unemployment Fraud Act (HR 1163). Key provisions in the bill include:

Incentivizing states to recover fraudulent unemployment payments:

• Allowing states to retain 25 percent of fraudulent federal funds recovered: Currently, state workforce agencies have little incentive to pursue costly investigations and prosecutions.
• Allowing states to retain 5 percent of state UI overpayments recovered, upon meeting data matching integrity conditions, and dedicating such funds to preventing future fraud—reforms supported by DOL-IG, and in past budget requests by President Trump and President Obama.

Improving program integrity and preventing future fraud:

• Allows states to use funds recovered to improve UI program integrity and fraud prevention by:
• Hiring investigators and prosecutors to go after criminals to recover fraud payments;
• Modernizing state systems’ ability to verify identity and income in unemployment administration;
• Adding program integrity activities as determined by the state to deter, detect, and prevent improper payments;
• Ensuring UI claims are verified against the National Directory of New Hires (NDNH) and the State Information Data Exchange System;
• Stopping UI payments to incarcerated and deceased people. 

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April retail sales rebound

April’s rebound in retail sales is an indication of the tenacity of consumers despite prevailing economic uncertainties. The growth is attributed to moderating prices, a robust labor market, and wage growth, all bolstering consumers’ purchasing power. Caution persists among consumers, however, based on concerns about the economic climate. Retailers are responding by offering competitive prices and convenience to assist budget-conscious consumers.

Jack Kleinhenz, NRF Chief Economist, stated that consumers remained active in April, choosing to be selective and price-sensitive in their purchasing decisions. He anticipates that consumer spending will register modest improvements throughout the year. The slower year-over-year growth is somewhat attributed to last year’s upward data revisions and emerging signs of tightening credit conditions and diminishing excess savings.

Last week, data from the U.S. Census Bureau revealed that total retail sales in April rose 0.4% from March and 1.6% year over year. By contrast, March sales showed a 0.7% drop from the previous month but a 2.4% rise year over year.

Retail sales—excluding automobile dealers, gasoline stations, and restaurants to concentrate on core retail—indicated that April witnessed a 0.6% month-over-month increase and a 2% year-over-year unadjusted growth. The three-month moving average in April showed a 3.7% unadjusted year-over-year increase. For comparison, March’s sales decreased 0.7% from February but rose 3.4% year over year.

Read more

Seattle Councilmembers introduce Controlled Substances Ordinance

One day after the Washington State Legislature passed a new state law governing controlled substances, Seattle Councilmembers Alex Pedersen and Sara Nelson introduced legislation to criminalize the possession and public use of those substances.

The two Councilmembers worked with City Attorney Ann Davison to draft the proposed law, which would empower the Seattle City Attorney to prosecute possession and public use of controlled substances as misdemeanors or gross misdemeanors in accordance with state law. Because the City Attorney can only prosecute violations of the Seattle Municipal Code, the City must incorporate the new law into the City’s code.

The Council’s Public Safety and Human Services Committee will consider the legislation. The Committee’s chair, Councilmember Lisa Herbold, expressed opposition to considering earlier legislation until the state took action on controlled substances.

Mayor Harrell renews and expands Metropolitan Improvement District

Seattle’s Mayor Bruce Harrell enacted a law renewing and expanding the Metropolitan Improvement District (MID) last week, a key component of his Downtown Activation Plan. Councilmembers Andrew Lewis and Sara Nelson, the Downtown Seattle Association (DSA), the Seattle Office of Economic Development (OED), and leaders from various sectors were present to celebrate the unanimous approval of this legislation by the Seattle City Council.

The new legislation extends MID’s existence by ten years, enlarges its service boundaries to include the stadium district, and enhances an investment in cleaning services, downtown ambassadors, security, and more. The expanded MID will continue to bolster the downtown environment with cleaning and beautification efforts, safety and hospitality services, art installations, events, economic development, transportation and commuting services, and increased security. The MID, established in 1999, is one of 11 Business Improvement Areas (BIAs) in Seattle, managed by the DSA, and now extends its services to additional areas, including part of the stadium region, due to the new legislation.

Mayor Harrell expressed, “When something works, we embrace it, we recommit to it, and we expand it – and that’s what this effort is about and why it’s a key element of our Downtown Activation Plan. The expanded MID will support workers and small businesses, uplift vibrant events and dynamic activities for all ages, create a clean and beautified urban setting, and showcase what makes this neighborhood special – reconfirming that our downtown is a place for everyone.”

The renewed legislation will increase cleaning services, provide more funding for unarmed security and downtown ambassador wages, and sustain crucial existing services. The MID plans to gather $18 million in ratepayer assessments for funding downtown services.

As one of the BIAs serving downtown areas, services offered through MID directly support the Mayor’s Downtown Activation Plan’s main objectives to ensure downtown remains a welcoming, safe, and vibrant place for all.

From left: Gig Harbor Chief of Police Kelly Busey, WR Director of Communications, Robert B. Haase, Mark Johnson, WR VP of Policy & Government Affairs, Robert Nelson, President & CEO of the Washington Retail Crime Association (WAORCA), Mayor Tracie Markley, and Chamber President and CEO, Miriam Battson.

WR continues efforts to inform Washington businesses on the effects of retail crimes on public safety

Last week, WR delivered key presentations to two Chamber of Commerce events regarding the critical issue of organized retail crime (ORC) and its influence on public safety in Washington state. On May 16, the Gig Harbor Chamber of Commerce conducted its Crime Prevention Summit at City Hall, with local business owners and representatives attending. The event was officiated by Miriam Battson, the Chamber’s President & CEO.

During the event, Mark Johnson, WR's VP of Policy & Government Affairs, emphasized the prevalence of retail crimes posing threats to local businesses, employees, and customers. He elaborated on WR's steadfast commitment to curbing these threats and relentless pursuit of policies that provide tangible support to law enforcement and employers alike. Mark recognized that an active partnership between retailers and law enforcement agencies is essential to mitigating these risks and how WR is dedicated to creating and advocating for legislation that empowers these entities in the face of organized retail crime.

Robert B. Haase, WR's Director of Communications, pointed out the resources available for retailers on the WR website. The support materials include the comprehensive 24-page Guide to Public Safety & Retail Crime and others that offer strategies to safeguard patrons and employees while reducing instances of theft and vandalism. Additional presentations were made by key figures in Gig Harbor, including the Mayor, Chief of Police, and City Prosecutor.

From left: Bellevue Chamber President & CEO, Joe Fain, WR VP of Policy & Government Affairs, Mark Johnson, Carl Kleinknecht , Kemper Development, Renée Sunde, WR President & CEO, and Washington State Attorney General, Bob Ferguson.

On May 18, WR’s efforts continued at a sold-out Bellevue Chamber of Commerce event. Washington State Attorney General Bob Ferguson and Renée Sunde, WR President/CEO, spoke on pressing public safety issues, retail theft, and ORC impacting Bellevue’s businesses and community. The State Legislature has committed $2.265 million to fund an ORC Task Force aimed at coordinating investigations across different jurisdictions and supporting county prosecutors in handling criminal cases.

Violent incidents in stores are costing retailers millions

Organized retail crime (ORC) is increasingly alarming the retail industry, with Target recently highlighting a staggering $1.2 billion projected loss due to inventory shrinkage, primarily from ORC. Target CEO Brian Cornell revealed that violent incidents in brick-and-mortar stores, resulting in significant theft, are increasing and span across diverse merchandise departments. Cornell emphasized the dual impact: products stolen are no longer available for customers who depend on them, and the threat to the safety of guests and employees.

ORC has escalated in recent years, with thieves stealing goods to resell at lower prices in the face of rising inflation. In 2021, goods stolen from stores resulted in $94.5 billion in losses, an increase from $90.8 billion in 2020, according to a study by the National Retail Federation (NRF). NRF’s analysis found that 16% of the 132 crime groups surveyed used at least one violent tactic in stores. The escalating trend has prompted many retailers to identify ORC as a growing concern over the last five years.

The ORC crisis is not just a financial drain but also endangers employees and customers, disrupts store operations, and damages communities. This intensifying problem led some retailers to exit high-crime cities like San Francisco in 2023, impacting the retail and local community.

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The forever labor shortage: More Americans are getting too old to work

According to a recent Moody's Investors Service report, the workforce in the U.S. and other G20 countries is aging, hinting at long-term labor shortages even with job market fluctuations. The report attributes the decline in working-age populations to falling birth rates and longer life spans. South Korea, Germany, and the U.S. are expected to experience the steepest declines over the next decade.

Labor Department data shows the job market is still resilient, with active "prime age" workers (25-53 years old). Their participation rate has slightly exceeded February 2020 levels, currently at 83.3%. However, the overall labor force participation rate remains below pre-pandemic levels, largely due to an uptick in retirements among older workers.

In the past 20 years, the proportion of Americans aged 55 and over has doubled, and this aging cohort is set to expand further. While many older Americans are working longer, retirement is still inevitable. The COVID-19 pandemic has accelerated retirements among older workers, with Moody's attributing 70% of the labor force participation decline to aging.

Some sectors continue battling labor shortages. In particular, low-wage healthcare jobs, currently facing high demand due to an aging population, are seeing a dwindling supply. A Mercer study forecasts a potential shortfall of 3.2 million workers in this sector over the next five years.

Michael Madowitz, director of macroeconomic policy at Equitable Growth, warns that this wave of retirements could significantly impact industries reliant on expertise and "human capital." Recalling the productivity slump in the 1970s and 1980s as baby boomers replaced retirees, he expresses concern about a similar "brain drain" in the future. This trend may push companies to devise strategies for retaining older workers, although this will not apply to all industries. Madowitz suggests that lower-wage employers, like fast-food chains, might opt for automation instead.

Growing number of city retailers relocating to the suburbs

Retail businesses, particularly those once thriving in city office districts, are migrating to suburbs as remote work diminishes urban foot traffic. With office utilization rates in major cities still hovering around half of pre-pandemic levels, retailers, restaurants, and bars catering to office-goers have struggled. In April, pedestrian traffic in urban centers was down by 25% compared to the same month in 2019, says MRI Springboard, a real estate software provider.

Big city retailers, grappling with declining sales and increasing property crimes, are eyeing the suburbs. For instance, Sweetgreen, the salad shop chain, closed several urban locations and expanded to suburban areas. By summer, 50% of its outlets were in the suburbs, up from 35% in 2019.

Suburban landlords have seen strong demand from retailers despite inflation and rising interest rates. Site Centers and Phillips Edison, shopping center owners, reported record-high leasing and occupancy. Even upscale enclosed malls like those owned by Simon Property Group are showing recovery, boasting higher foot traffic and near pre-pandemic occupancy levels.

This urban-to-suburban shift in retail availability was evident in the second half of last year, marking the first time since 2013 that urban retail availability surpassed suburban availability, as per real estate firm CBRE. Moreover, rent growth in suburban areas outpaced urban regions.

Retail analyst Dana Telsey confirms that retailers are exploring suburban centers, citing Dig, a fast-casual eatery, as an example. The company, hit by the shift to remote work, is now primarily opening restaurants in suburban areas and residential neighborhoods of larger cities.

Meanwhile, smaller urban retailers are hoping for a workforce return. For instance, Beehive Shoeworks, a Chicago-based shoeshine and repair business, recently applied for hardship accommodation on a pandemic-era loan due to the decline in customers.

Retail landlords like Whitestone REIT, witnessing a surge in business at suburban shopping centers, now see more potential in suburbs than city office districts. The shift is attributed to remote work and the rise of cultural, entertainment, and fine-dining establishments in suburban areas.

Read more on Wall Street Journal’s website

Essential considerations for hiring young workers

Hiring teen workers can be a smart move for businesses that are looking for motivated employees. These entry-level workers will need guidance and safety training, however.

Young, seasonal first-time retail workers frequently lack safety and job-specific knowledge and skills. This absence of work experience and safety training often leads to a lack of awareness and can result in potential injuries. Claims data confirms that injury rates among teen workers are two to three times higher than older workers.

Teens and young adults might miss potential dangers that may be apparent to a seasoned worker, and assuming young workers know what to do in any given circumstance can be dangerous. (See our recent post on Situational Awareness). Remember that training younger workers will be most effective when the instructor avoids using industry jargon and has a straightforward approach when presenting.

When training on workplace tasks, give clear instructions for each task while encouraging young workers to ask questions. Supervise younger workers closely, immediately correcting any issues or risky behaviors, and prepare them for emergencies, such as fires and violent or unexpected dangerous situations.

It is best to assign a work buddy to mentor them for the first part of their training.

Important safety and health skills to review with young workers:

• Empower teens to ask questions and report problems or concerns when unsafe or threatened.
• Recognizing how workplace injuries can affect their personal lives.
• Identifying hazards in the workplace.

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WR diversity statement

WR is committed to the principles of justice, equity, diversity, and inclusion. We strive to create a safe, welcoming environment in which these principles can thrive.

We value all people regardless of race, ethnicity, gender, religion, age, identity, sexual orientation, nationality, or disability, and that is the foundation of our commitment to those we serve.