Solutions: Paid Sick Days

Want to build a better economy? Stay home ;)

How do we build a better economic future so that best economic era in American history is yet to come? Go after all beneficial policies, large and small. Next in the series: Paid sick days for every worker:

• The Context

• Why a Paid Sick Leave Law is Good Policy

• So What’s the Hold Up?

• P.S. Discussion

The Context

Most of the basic worker protections we have in the US come from the Fair Labor Standards Act of 1938. The law is exactly as it sounds, it dictates the minimum treatment of workers. It includes the minimum wage, a forty-hour workweek, overtime pay of time and a half, and very strict rules on child labor that dictate when, where, and how long they are allowed to work.

At first, the Fair Labor Standards Act was all about expansion. Initially it only covered a a fifth of workers and then grew to cover nearly all of them. The minimum wage was raised frequently. But starting in the 1980s, its fallen into neglect. Some provisions Congress has occasionally updated, like the minimum wage. Others, like the wage and occupation rules that determine if you are eligible for overtime, have been summarily ignored.

So according to the federal government: if you want to give an employee sick days, you can, but you’re not required to (unless you are a federal contractor).

This voluntary provision leaves a lot of Americans without a single paid sick day. Here’s the share of private sector workers that have it in 2024: it’s 79% overall, but just 55% of part-time workers and 58% of the bottom quarter of earners. The Department of Labor estimates that’s about 28 million people.

Source: National Compensation Survey from the Bureau of Labor Statistics

But there’s movement: States have their own Fair Labor Standards Acts that can go above the federal minimums, like the 34 states that have a higher minimum wage than the federal $7.25. In vacuum of leadership left by the federal government, many states have passed mandatory sick laws. Researchers have studied the impact of those laws, and we’ve learned a lot.

Why a Paid Sick Leave Law is Good Policy

Paid sick day laws are a mandate from the government that every employer has to offer paid sick days to every employee.

1 Paid sick leave laws work as intended

Before thinking about how paid sick days themselves could benefit workers, its worth considering if a law mandating paid sick leave would actually work. It does! A ten-year study that looked at states before and after their mandate went into effect and found that access to paid sick days jumps. Most of these laws work on an accrual basis so part-time workers are covered as well, something like: workers accrue an hour of sick leave for every 30 worked, up to 5 days.

2 Paid sick days are actually quite cheap to provide

Sick days don’t cost that much for the employer to provide. The Bureau of Labor Statistics estimates that sick leave costs firms that voluntarily provide them about 1.0% of total compensation, or 39 cents per hour for the average worker. But, that estimate doesn’t take into account two costs that come from not having sick days:

• The cost of having a worker show up sick and

  • potentially getting other workers sick or

  • at the very least doing some sub-optimal work

• The cost of having a worker quit because they can’t come to work sick and having to hire to replace them

This summary article, which looks at a few dozen papers, finds that sick day policy is effective at reducing these working-while-sick costs, up to the point where it might save companies money. (That’s an academic journal article; if you want a more user friendly summary, this one is my favorite.)

Put differently: Providing paid sick days isn’t free to the employer, so if they were forced to pay for sick leave, employers would make up for it by either cutting wages or cutting other benefits. Well, the ten-year study looked at exactly this and found that neither wages nor typical hours (a way to cut pay without reducing the wage) had a detectable decline after a sick law went into effect. That means if there was a hit to wages, it either affected few enough workers that the average was unaffected or it affected a lot of workers but was so small it was indistinguishable from zero. They did find a decrease in overtime—the 1.5x pay for long hours—which means firms either needed it less or managed their workers better to use it less. So when forced to provide paid sick days, it didn’t come out of workers wages, meaning it must be cost effective to provide.

But here’s where it gets interesting!!!

After the sick day laws, some firms started offering more benefits. Sick days were basically a way to signal to workers that this was a good job. Once paid sick days were taken off the table as being a competitive part of compensation, they had to do other things, like offer short-term disability.

3 Paid sick leave laws make EVERYONE healthier

When people are sick, but they have to go to work, they accelerate the spread of infection. When people stay home while sick, they slow down the spread of infection. Since sick days enable more people to stay home, therefore in theory they should slow the spread of infection. And they do!

Keep in mind, this isn’t a benefit concentrated to workers who are sick but everyone in the community. City-wide rates of flu or flu-like viruses went down after a paid sick law went into effect. For all my Scrooges out there that couldn’t care less if people are sick, it’s worth pointing out that reducing health care consumption could be the biggest effect of this policy in terms of economic impact because health care is $.

4 Paid sick leaves laws really helps moms increases the number of workers

In addition to not having a federal floor for paid sick days, we actually also lack job protection for sick workers. You can’t work, you call in sick, you get fired—it’s all above board. A paid sick leave law includes job protection for those workers.

On one level, this shouldn’t differentially affect any particular set of workers. After all, everybody gets sick. But, there’s one group in the population that is far, far, more likely to get sick than others, and it’s children. Kids under six by some estimates get 6-10 colds a year and though most are just common viruses, children are also much more likely to have complications from viral infections too.

Paid sick leave laws really help moms. One seminal study found that it increased women’s employment by 1.2 points and their earnings by over $2,000. That money adds up! That’s the size of the current level of the Child Tax Credit!! In the study, they found that was large enough to push down overall poverty rates for moms. (With a bonus that mothers themselves also report better health).

If we want to make it easier to work and parent, sick days are a must. But even if you hate women and their children, this is still a good economic policy because it increases the number of people who work.

So what’s the hold up?

To review: paid sick leave laws make workers and communities healthier, increase the number of workers, the amount of money earned, and decrease poverty, all for the low cost of nothing to the federal government and marginal to employers.

What am I missing that we don’t have this law yet?

Well, more conservative commentators say the quiet part out loud: “[paid sick leave law] encourages irresponsible employees to game the system and dump tasks on their co-workers while still receiving full pay because they cannot be disciplined for using their leave.”AKA: the lazy ones will fake sick and leave the good, virtuous employees holding the bag.

What I point out when someone says this:

Paid sick leave laws in effect in the US today have increased employment. You assume laziness, but economists have found more work, more workers, and higher earnings. Keep your eye on the ball, you don’t have to like the workers to support policy that benefits the economy.

And if I’m feeling sassy I’ll say that about 80% of workers have paid sick days and the economy is doing fine. So it’s not sick days that you think will break the economy, but poor workers having them, because you don’t trust or like poor workers. But again, you don’t have to like the workers to support policy that benefits the economy.

But what about businesses???

Although the kneejerk response is to say businesses oppose it, that’s probably not true for most of them. In 2016, an internal presentation to a collection of state Chambers of Commerce was leaked. As the Washington Post reported at the time, the presentation contained the results of a survey of 1000 business leaders. And what made it newsworthy was just how many of them support a minimum wage increase—80%. Support for paid sick leave was also in the survey, supported by 70%. What the Post discovered was that The Chamber essentially close ranks if part of their membership is in opposition, even if its a small minority.

Certainly some businesses oppose paid sick days, but just a fraction of them.

More likely, it’s not paid sick days themselves businesses oppose, but rather the government requiring businesses to do…anything. Government doesn’t belong in business, businesses should be free to run their own business. And they’d probably point out that most people have sick days already, so just don’t bother with the policy.

Frankly, they’re wrong. Businesses have to follow certain rules to compete in our economy. The government is not a manager or a dictator, it’s a ref. The ref doesn’t decide who wins or loses, but what plays are allowed.

People agree with this, even if they don’t want to apply it. There’s probably a would be business out there that could thrive in the US, but only if it employs children to do it because 11-year-olds have just the right dexterity or don’t ask for raises or don’t take up too much space in a workshop so you can have twice as many at work. Too bad! Try opening your business 110 years ago! Children go to school today. Or, there’s a would be business empire that would sell used cars but strips them down for parts first and replaces them with broken parts, making twice as much money on a car than they would if they sold it intact. Sorry! We have lemon laws protecting consumers from that kind of chicanery.

Businesses can optimize for themselves, but they can’t optimize for the economy. That’s why the government ref sets out the rules. And it’s no contest: the economy is better when every worker has paid sick days.

P.S. Discussion

keds_economist

A post shared by @keds_economist

I posted a video about paid sick days to TikTok and instagram (shared above) and one message I kept getting over and over again was: “Corporations would never allow this,” or, “No hope of this for the next four years.”

Y’all. Exactly!

E X A C T L Y.

This is what I mean by saying the future is ours for the taking! There are some basic building blocks to a better economy and they do not have a champion. You hear people withdraw into cynicism, looking back dewey-eyed saying the best we can do is behind us. How could you possibly think the best is past when a fifth of workers out there are punished with reduced earnings for getting sick? No. The best is ahead of us and it’s because we have good policies we’ve never tried nationally. Like paid sick days.

Photo by Kelly Sikkema on Unsplash