WSJ Op-ed Misses On Paid Sick Days

By Robert Drago

Since the implementation of a paid sick days mandate in San Francisco, followed by Washington DC, and most recently the state of Connecticut, the popularity of paid sick days laws is growing. This has caused concern in the business community. In the latest salvo, Michael Saltsman discussed Institute for Women’s Policy Research (IWPR) findings regarding San Francisco’s experience with a paid sick days ordinance. The piece includes numerous mischaracterizations of the facts. Interpreting the Bureau of Labor Statistics finding that 80 percent of private sector employee have “some type of leave” as making up for paid sick days (only 62 percent have that), is misleading: vacations are typically scheduled weeks or months in advance; one’s own illness or that of a child usually cannot be scheduled. IWPR’s finding that only 3 percent of employers reported that fewer employees came to work while sick needs to be balanced against the 25 percent of employees who said that they were better able to care for their own or their families’ health needs.  Among all demographic and racial/ethnic groups, black (29 percent), Latino (31 percent), low-wage (30 percent), women (27.5 percent), and workers over 55 (34 percent) were most likely to say they were better able to care for their own or their families’ health needs as a result of the paid sick days law.

The finding that 30 percent of low-wage employees reported adverse hours or layoffs effects also requires context: According to the San Francisco Office of Labor Standards Enforcement, the city also raised the minimum wage and mandated health insurance around the same time as the paid sick days ordinance, and the expense of health insurance (particularly for low-wage employers) far outweighs any conceivable impact from paid sick days. Further, the surveys were administered late in 2009 (for employers) and early in 2010 (for employees), and those were not exactly great times for the U.S. economy.

Finally, the most important piece of context missing is that the median employee in San Francisco with paid sick days reported using three days per year. For someone working 5 days per week for 52 weeks per year, that represents 1.2 percent of annual earnings. That figure is around one-twentieth the size of the  percentage increase in the federal minimum wage during and just after the Great Recession (rising from $5.85 to $7.25) and no serious economist believed that increase in labor costs had any ill effects on the economy. The ostensible “downside” of paid sick days discussed by Mr. Saltsman is in fact a mirage.

 

Dr. Robert Drago is the Director of Research at the Institute for Women’s Policy Research. Prior to joining IWPR, Dr. Drago held positions as Senior Economist with the Joint Economic Committee of the U.S. Congress and Professor at the Pennsylvania State University in the departments of Women’s Studies and Labor Studies.

Bad Economics Meet Paid Sick Days in Philadelphia

by Robert Drago

A new study for the National Federation of Independent Businesses (NFIB) estimates that Philadelphia’s proposed paid sick days legislation would cost employers between $350 million and $752 million annually. Both the factual basis and the assumptions underlying this study are seriously flawed.

The totals derive from two presumed costs: the amount for new paid sick days coverage, estimated at between 34 and 42 cents per worker hour in direct labor costs, and 38 cents per worker hour in compliance costs for employees who already have paid sick days.

Consider the new paid sick days coverage. The NFIB study assumes workers will use all of the days allowed—9 days annually for larger employers, 5 days annually for small employers. Their figures imply an estimated overall average of 8.35 days per year. However, from a recent, random sample of employees in San Francisco, which has had similar requirements since 2007, the average employee uses 3 days per year. This estimate agrees well with IWPR analysis of national data from the National Health Interview Survey (3.1 days used on average). Given the fact that workers use only 3 days per year, new sick days costs are overestimated by 64 percent in the NFIB study. The actual hourly cost range, using NFIB’s methods, is thus about 12 to 15 cents per hour.

The second source of costs is compliance expenses for employers who already offer paid sick days. Although it is not known exactly how many days most employers in Philadelphia offer at present, the Bureau of Labor Statistics estimates that the national average is 8 days per year for private-sector employees with one year of job tenure. It seems reasonable to assume that employees in Philadelphia with access to paid sick time use around 3 days per year, as do workers in San Francisco. These statistics suggest that there is likely to be little or no additional paid sick days use by employees who already have access to paid sick days. While there might be some start-up costs to bring company policies in compliance with the law, these will be a one-time cost.

The NFIB, however, claims the annual compliance costs will be 38 cents per hour for employers that already provide paid sick days. At that rate, an employer would be hiring one full-time employee at $15 per hour to track paid sick days for every 40 current full-time employees (the result of dividing $15 by 38 cents). An hour per week per employee to track sick time use seems like a serious overstatement. If the task of monitoring sick days use after passage of the proposed law took one extra hour per week per 40 employees (who already had paid sick days before the law was passed), a more realistic estimate, compliance costs would fall to about one cent per hour.

Using the NFIB’s own methods, with known facts and more reasonable assumptions, the hourly costs for new coverage drop to 12 to 15 cents per hour, and the costs of compliance for employers already providing paid sick days drop to one cent per hour. This suggests a far lower cost for implementation of the law than the NFIB study states, especially for businesses that already provide employees with paid sick days or an equivalent benefit.

It is almost enough to give one pause over the objectivity of the entire NFIB study.

Robert Drago is the Director of Research at the Institute for Women’s Policy Research.