Majority of California's Small Business Employers No Longer Offer Health Care Benefits, Union Bank Survey Finds; Respondents Prepare for Growth, but Note Challenge of Finding Good Hires

For the first time in the survey's six-year history, a majority ofCalifornia's employers (52 percent) indicated they do not offer healthcare coverage to employees. For those employers who do offer a healthcare plan, 25 percent said that rising costs have caused them to shiftlarger portions of the health care burden to their employees and toreduce overall health benefits.

For the third year in a row, 30 percent of respondents selected"Opportunities for Growth" as the top advantage for doing business inCalifornia, many indicating they have specific plans to do so. About36 percent expect their staffing level to be higher than in 2005.Forty-two percent of the companies plan to invest in land, buildingsand equipment this year. About 43 percent plan to increase the volumeof inventories. The survey respondents also rated family ties (20percent) and climate (17 percent) as advantages to staying in state.

"We've found that the experiences of small business ownersgenerally mirror those of mid-sized companies and of largemultinationals in that the rising cost of providing heath care totheir employees is becoming prohibitively expensive," said Phil Flynn,chief operating officer, Union Bank of California. "Overall though,California's small business owners paint an optimistic picture for2006 about business conditions, the economy and their ability tohandle persistent issues with the high cost of benefits."

Small business owners identified the cost of workers' compensationas the No. 1 challenge of running a business in California - the thirdconsecutive year it was ranked the top challenge. Although 51.2percent cited workers' compensation as their biggest worry this year,that number is down from 66 percent in 2005.

The California economy (34 percent), state and local regulations(32 percent), health care costs (31 percent) and increased taxes (31percent) rounded out the top five challenges small business ownerssaid they face. The availability of skilled labor has risen to thesixth spot (27 percent), an increase of eight percentage points since2004.

"Small businesses are an extremely important source of new jobs inCalifornia, and I am heartened that they are set to increase theirstaffing level this year," said Keitaro Matsuda, senior economist,Union Bank of California. "As those companies begin to hire additionalworkers, however, they are likely to find it more difficult to locatethe best-suited individuals for the positions available, because theCalifornia labor market is becoming increasingly tight."

The percentage of employers offering retirement plans, such as a401(k), continued to decrease over the past several years.Seventy-five percent of small business owners polled confirmed thatthey do not offer a retirement plan - a six percentage-point increasefrom the 2004 survey results.

In regards to workers' compensation insurance, 29 percent of smallbusiness owners stated that their 2005 insurance premium (peremployee) increased - down 17 percentage points from last year'ssurvey. More than half (56 percent) indicated that their premiumsremained the same while 15 percent stated that their premiumsdecreased which is up by seven percentage points from the previousyear.

The Small Business Survey was conducted through individualinterviews of nearly 2,000 small business owners from Jan. 9, 2006 toJan. 24, 2006 throughout California.

Based in San Francisco, UnionBanCal Corporation (NYSE:UB) is abank holding company with assets of $49.4 billion at December 31,2005. Its primary subsidiary, Union Bank of California, N.A., had 315banking offices in California, three in Washington, and one in Oregonat December 31, 2005. The company's Web site is located atwww.uboc.com.