President Barack Obama’s Labor Day executive order will provide seven days of sick leave to employees of federal contractors, good news for some 300,000 American workers. Now the president wants Congress to approve legislation extending that benefit to the private sector.
Several states and cities have already taken this step, and there is some research suggesting what effects can be expected. Connecticut was the first state to require employers to offer paid sick leave (five days) back in 2011. The Center for Economic Policy Research studied what happened.
“For most employers, having to provide paid sick days for employees turns out to largely be a nonevent,” says Eileen Appelbaum, a senior economist at CEPR.
According to the CEPR study, about 47 percent of establishments said there was no change in costs; 19 percent said costs increased less than 2 percent; and 11 percent said costs increased more than that.
“The main way they handle [required paid sick leave] is by temporarily assigning the work to other employee, or they put the work on hold,” says Appelbaum. “If you’re talking about a restaurant or retail establishment, they allow employees to swap shifts.”
One percent of businesses reduced wages to cover the cost; 10.6 percent reduced employee hours; 15.5 percent increased prices; and 1.3 percent said they reduced quality of service to accommodate the paid sick-leave requirements.
On the other hand, in the Connecticut case, 88.5 percent of employers were already providing sick leave to all or some of their workers, so the impact on businesses that were not previously providing paid sick leave is harder to assess.
A study of Seattle’s paid sick leave law by the city’s auditor and researchers from the University of Washington found that about 16 percent of employers said their profitability suffered, but most employers didn’t have a concrete estimate of how much it cost them. Among the few who did, the average was 0.41 percent of revenue, though that was not a statistically valid sample size, the authors wrote.
The Institute for Women’s Policy Research conducted a study in San Francisco after that city adopted a paid sick leave law.
“Only about 14 percent of employers saw a negative impact on profitability,” says Jessica Milli, study director for IWPR.
Max Nelson, labor policy analyst with the Freedom Foundation, is critical of many of these studies. He says one thing that paid sick leave doesn’t seem to be doing is keeping sick employees from coming to work.
“About four of the five studies that have been done look at workplace illness in the wake of a mandatory paid sick leave law have found no reduction,” he says.
And on the subject of decreasing profitability, “the money’s got to come from somewhere,” he says.
One reason why several studies find a limited cost of offering paid sick leave may be that workers don’t often use sick days.
“Workers are definitely not using all of their paid sick days,” Milli says. “Rather, we think they’re mainly using it as kind of an insurance policy” for serious situations.
There are three states and 19 cities that require paid sick leave. According to the White House, 44 million private-sector employees don’t have any paid sick leave.
We’re here to help you navigate this changed world and economy.
Our mission at Marketplace is to raise the economic intelligence of the country. It’s a tough task, but it’s never been more important.
In the past year, we’ve seen record unemployment, stimulus bills, and reddit users influencing the stock market. Marketplace helps you understand it all, will fact-based, approachable, and unbiased reporting.
Generous support from listeners and readers is what powers our nonprofit news—and your donation today will help provide this essential service. For just $5/month, you can sustain independent journalism that keeps you and thousands of others informed.