Mandatory Sick-Leave Pay Not the Cure-All City Promised

Original Article:

  • Author: Michael Saltsman

  • Publication Date: August 2013

  • Newspaper: The Seattle Times

  • Topics: Paid Sick Leave

On September 1st, Seattle will recognize the one-year anniversary of its first-in-the-northwest mandatory paid leave law. Proponents—including Councilmember Nick Licata and Mayor Mike McGinn—will no doubt take the opportunity to praise the law whose passage they strongly advocated. But  a new study suggests that it hasn’t been the cure-all that the city was promised.

Following Seattle’s law taking effect just under a year ago, the Employment Policies Institute surveyed roughly 300 businesses in the city about their experience with the new law. In order to focus on businesses more likely to be newly providing paid leave to their employees, EPI limited the scope of its survey to service industry employers, with a specific focus on the restaurant industry.

Roughly two-thirds of the surveyed businesses began providing paid sick leave to comply with the law. Of this number, over half (56 percent) noted that the law would increase their cost of doing business in the city. (More than one in four said it would cause a big increase in costs.)

These additional costs caused businesses to take a number of steps to make ends meet. Specifically, 15.7 percent raised prices; 17.3 percent either required employees to pay more for benefits or eliminated benefits altogether; and 18.3 percent reduced hours or cut jobs.

Overall, one in five surveyed businesses reported taking at least one cost-saving or revenue-increasing measure—with employees often taking feeling the brunt of the law’s new costs.

Proponents said that costs like this were supposed to be offset by employer benefits like reduced turnover. But two-thirds of those who started providing paid leave said that they did not anticipate the law would reduce turnover in their workplace. One-third even indicated concern that the law would increase unscheduled absences in the workplace—absences that might not be connected with an illness.

The law was passed on the premise that sickness in the workplace was a serious problem in Seattle. In fact, more than 8 in 10 businesses said that it was “not serious at all” prior to the law’s passage.

Unfortunately, that there was exaggeration and obfuscation related to passage of a paid leave law should not come as a surprise. Businesses and employees in other cities that have passed mandatory paid leave laws have faced similar hardships—and often the lowest-wage employees are the first to feel the squeeze from such laws.

Ironically, it was a pro-mandate advocacy group that was the first to document that paid leave laws are actually harming the people they’re supposed to help. A 2011 study from the Institute for Women’s Policy Research (IWPR) found that nearly 30 percent of San Francisco’s lowest-wage employees reported layoffs or reduced hours at their place of work following the mandate’s passage in that city.

A separate survey released by the Urban Institute found that some employers in San Francisco had scaled back on employee bonuses, vacation time, and part-time help to adapt to the law’s costs, while there was little improvement in employee turnover. And another study released in February of this year documented how Connecticut’s first-in-the-nation paid leave mandate forced some employers to cut employee hours, wages, and even jobs.

In other words, there’s a growing body of evidence that shows that mandatory paid sick leave laws, no matter how well-intentioned, aren’t the cost-free endeavors their supporters make them out to be. Admittedly, Seattle’s paid leave law has only been in effect for about a year, and more research needs to be done to ascertain exactly how much the law will cost the city’s businesses. Unfortunately for the city’s employees, many of them are already finding out first-hand.

Michael Saltsman is the research director of the Employment Policies Institute, a D.C.-based non-profit research organization dedicated to studying public policy issues surrounding employment growth.