Report: Paid Sick Leave Mandate Brings More People Back to Work

CHAPEL HILL – The COVID-19 pandemic has drawn attention to the issue of paid sick leave like nothing else perhaps. Although health experts recommend workers stay home when they are not feeling well, about a quarter of civilian workers in the United States are not paid if they stay home sick. Temporary measures requiring employers to pay sick leave related to COVID-19 expired at the end of 2020.

The United States is the only advanced economy in the world without full federal paid sick leave. It is well documented that paid sick leave can reduce communicable diseases, such as influenza and possibly COVID-19. The debate over a national mandate revolves around what it would cost companies and how it could affect the overall economy and the very employees it is supposed to help.

[Editor’s note: This report is from the Kenan Institute of Free Enterprise and is reprinted with permission.]

What do sick leave mandates really mean for jobs? To find out, researchers at UNC Kenan-Flagler Business School explored employment data before and after local or state sick leave policies came into effect. As of 2019, 11 states and 32 localities had policies requiring companies to provide paid sick leave to all local employees. The researchers expected sick leave warrants to increase compensation costs and, therefore, decrease demand for labor. However, they found the exact opposite.

“We were surprised to find that employment grew by an average of 1.9% after the implementation of a paid sick leave mandate,” said doctoral student Turk Al-Sabah, co-author of the new study. “This effect was strongest among low-skilled workers and workers in industries with poor access to paid sick leave – employees who sick leave mandates would more likely affect.”

Understand cause and effect

For the study, the researchers used Quarterly Workforce Indicators (QWI) data from the US Census Bureau from the first quarter of 2013 to the first quarter of 2019 to measure employment, terminations and earnings in the private sector at the level of the county. QWI data is collected from state unemployment insurance records and covers over 95% of U.S. private sector jobs. And because QWI’s employment measure is based on the total number of jobs per workplace, it can be used to examine the impact of paid sick leave mandates.

“Many studies have not been able to fully capture their impact as it can take several years for the effects on employment to become apparent, and most of the mandates have been implemented in recent years,” said Paige Ouimet, professor of finance and co-author of the study. “Plus, whenever you see any effect on the use of a warrant, you need to find smart ways to be able to conclude whether the warrant is the source of the effect or whether it is just the effect. ‘a correlation between the timing of the law and changes in local economies. “

To do this, the researchers used a study design known as the difference-in-difference approach, which absorbs confounders present in the county at the time the data was collected. Additionally, they were able to control for differences between counties over time and explore the relative difference in post-law employment earnings among workers who were less likely to have access to pre-term sick leave and , therefore, were more sensitive to the new law. compared to their less affected peers. This allowed researchers to make more solid causal claims, which earlier studies could not do.

What is behind the increase in employment?

When the analysis found that sick leave mandates were increasing the number of jobs, the researchers deepened their research to find out why. It turns out that several factors are likely at play. One is retention: Employees working in places with sick leave mandates were more likely to stay in their current job rather than jump to a new job. This makes workers more productive, which in turn leads companies to hire more employees.

“It also means that companies in areas with sick leave mandates were more likely to have more experienced workers,” Al-Sabah said. “We found evidence that GDP per employee increased, which would be consistent with an increase in productivity.”

Researchers have also found that paid sick leave increases labor supply. They think it’s because people are more willing to enter the workforce if they are guaranteed paid sick leave, rather than staying out of the workforce for fear of being made redundant. they get sick.

“Another contributor was the higher household income that comes with paid sick leave,” Al-Sabah said. “This effect has been particularly strong for people at the lower end of the salary scale and may result in increased spending in their local communities, which in turn increases the demand for employees in this area.”

Political implications

Ouimet says the new findings suggest the government can implement policies such as paid sick leave warrants without necessarily imposing dramatic and negative economic costs.

“The debate over paid sick leave is similar to the debate over the minimum wage,” Ouimet explained. “Raising the minimum wage benefits people receiving lower wages, but the question is whether this has negative employment impacts that also affect these low-wage workers? For paid sick leave, our study has shown that there is indeed a positive effect on employment.

The analysis found no increase in business closures after mandates have been implemented, implying that businesses are not disproportionately affected by sick leave mandates. However, the researchers would like to better understand the economic cost to firms by broadening their analysis to capture changes in profitability at the firm level. This would provide information that would be important to take into account when developing sick leave policies.

This Kenan Insight is based on the conclusions of the article “For better or for worse? The economic implications of paid sick leave mandates ”, by doctoral student Turk Al-Sabah and Professor Paige Ouimet from UNC Kenan-Flagler Business School.

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