Rethink paid sick-leave laws

Original Article:

  • Author: Maxford Nelsen and Michael Saltsman

  • Publication Date: August 2014

  • Newspaper: The Philadelphia Inquirer

After vetoing a city ordinance to require Philadelphia employers to provide paid sick-leave benefits, Mayor Nutter announced in June the formation of a task force to examine implementation of a citywide policy.

If the task force will be honestly evaluating mandatory paid sick leave as public policy, it should take a clear-eyed look at the experience of the other jurisdictions that have adopted such requirements. The evidence isn’t nearly as rosy as proponents suggest.

A new report from the Washington state-based Freedom Foundation examines the 10 most significant studies about the effect of mandatory paid sick-leave laws in the four jurisdictions that have been studied: San Francisco, Washington, D.C., Connecticut, and Seattle (two studies were conducted by the Employment Policies Institute, where one of the authors is research director). Careful evaluation of the data from these jurisdictions yields surprising conclusions about the most-cited arguments in favor of these laws.

For instance, proponents claim that sick-leave mandates reduce “presenteeism” (i.e. coming to work sick), thus benefiting businesses, customers, and employees alike.

Everyone wants sick people to stay home, but the data suggests sick-leave mandates do not decrease illness in the workplace. For instance, a survey of San Francisco employers conducted a year after implementation of the city’s sick-leave ordinance by supporters at the Institute for Women’s Policy Research (IWPR) found just 3.3 percent of employers reported that presenteeism decreased as a result. A similar percentage reported worsened presenteeism, while most employers reported no change.

Researchers at the University of Washington (UW) found similar results when they queried employers about the consequences of Seattle’s sick-leave ordinance. All told, of the five studies examining whether paid sick-leave policies reduce the number of sick employees in the workplace, four say it does not. The only study claiming to find a reduction did not give employers the option to report otherwise.

But what of the claim that paid sick-leave mandates save businesses money by reducing employee turnover? In Philadelphia, IWPR claims that the sick-leave ordinance would save employers $52 million annually, “largely due to savings from reduced turnover.”

The core of IWPR’s analysis, however, rests on several misinterpreted studies. One is decades old and deals with health insurance, not paid sick leave. Other studies even dispute IWPR’s foundational notion that turnover is inherently bad. Not surprisingly, there is scant evidence in the jurisdictions studied linking mandatory paid sick leave to employee turnover reductions.

In UW’s study of Seattle’s ordinance, for instance, two employers reported decreased turnover, four experienced increased turnover, and 243 saw no change. One San Francisco employer pointed out the obvious: If everyone’s forced to provide paid leave, there’s no reason for employees to stay with one business over another.

If there are no tangible employer benefits, that just leaves employer costs. But proponents typically argue that, since employers support paid sick-leave mandates, any costs must be minimal.

Every study that has examined the question has found a majority of employers support mandatory sick leave a year or so after its passage. But in every case, a majority of employers surveyed already had the economic flexibility to voluntarily provide paid sick leave and had to make few or no changes to comply. In fact, the percentage of businesses opposing the mandate corresponds closely to the percentage of firms that had to create or overhaul paid sick-leave policies.

Unsurprisingly, newly affected employers with less flexibility were most likely to report having to deal with increased costs by raising prices and decreasing employee pay and benefits. Even after taking mitigating action, some employers report decreased profitability. And it wasn’t just employers who reported consequences: In San Francisco, nearly 30 percent of the lowest-paid workers reported layoffs or reduced hours at work following passage of the city’s mandate.

If paid sick-leave regulations do not reduce the number of people working while sick and instead reduce opportunities for employees, then the promised benefits to public health and worker productivity will fail to materialize. Mayor Nutter’s task force would do well to remember that when it comes to mandating paid sick leave, a wide gulf exists between intentions and results.