San Francisco and NYC retail and restaurant sectors are beginning to see the ugly side of socialism: store closures and layoffs, as their owners cannot keep up with local government mandates that raise the costs of their businesses.

Socialism is in fashion again in America. At the local level that is, where governments have been passing mandates that tell corporations how to run their businesses. 

Like the “Fair Workweek” laws. These laws require employers to prepare working schedules for their employees ahead of time. 

That’s on top of minimum wage mandates, which tells employers how to pay their employees. 

The Fair Week mandate hits restaurants and retailers particularly hard, a sector which employs a large number of hourly-paid workers. 

In theory, this mandate is a good thing. It addresses the unpredictable nature of employment in these two industries. 

“Retail and restaurant employees are often victims of erratic work schedules,” says Krista Hardwick, in-house legal counsel, at Deputy. “These hourly paid workers are typically scheduled with only a few days-notice, sent home early from shifts without warning, not paid properly for working overtime or during breaks — which means they can’t properly plan childcare or coordinate with other part-time jobs accordingly.”  

The Fair Workweek laws are designed to solve this problem. “They enforce fair scheduling practices to ensure workers have ample notice (typically two weeks) of their schedules and paid accurately and on time for their work,” Hardwick says. “As the name suggests, Fair Workweek laws aim to make unpredictable scheduling practices tenfold more fair — and predictable — so that workers can manage their lives outside of shiftwork more easily.” 

That’s the pretty side of socialism. 

In practice, however, things are different. Implementing a fair workweek is a complex task, according to Hardwick. “As fair as the laws are for workers, they are incredibly lengthy and complex, and national food and retail chains with hundreds of locations across the country have as much trouble implementing them as more localized chains,” she says. 

And that imposes a big compliance cost on employers, who eventually pass it on to consumers in the form of higher prices, and, in some cases, they go out of business and send workers to the unemployment lines. 

That’s the ugly side of socialism.

But there’s a more fundamental problem in setting schedules ahead of time.It requires the guessing of market conditions, the number of customers who are expected to visit restaurants and retail stores a couple of weeks down the road.  “It is tricky when evaluating these kinds of workplace changes for locations like NYC and SF because they have atypical norms when it comes to hiring, especially in certain industries,” says Jono Bacon, CEO of Jono Bacon Consulting and author of People Powered: How Communities Can Supercharge Your Business, Brand, and Teams. 

Simply put, government mandates make it difficult to run businesses. “When governments get involved in the private sector with mandates and regulations that dictate how companies are run, they’re making it more difficult for them to do business,” says Kerry Jackson, Fellow in California Studies at the Pacific Research Institute. “Thousands of businesses have fled California in the last 10 years for this reason.Yet politicians keep passing laws that give some companies little choice but to leave. It’s not smart policymaking.”

Socialist governments from the former Soviet Union to Cuba and Venezuela tried to have companies plan what they would produce, how many people they would hire, how they would work, and how they will pay them.

That didn’t work, because it was an impossible task, given the lack of perfect foresight of decision makers.

It didn’t work in those societies, and it won’t work in San Francisco and NYC, where businesses are beginning to see the ugly side of socialism.