Labor Market Effects of U.S. Sick Pay Mandates

Overview

To date, sick pay mandates have been implemented in seven states and dozens of cities across the U.S. They require that employees must have the right to earn, accumulate, and take sick days, typically up to seven days per year. Some critics are concerned that these mandates cause substantial wage reductions for employees, as well as job losses. P4A researcher Nicolas R. Ziebarth of Cornell University and colleague Stefan Pichler of ETH Zurich published an examination of these sick pay mandates in the Journal of Human Resources. The research assesses the causal labor market effects of nine city-level and four state-level pay mandates.

Findings

The research team used employment and wage data from the Bureau of Labor Statistics from 2001 to 2016 to compare the labor market dynamics of the cities and states with mandates to “synthetic” control cities and states over time. They assessed mandates in nine cities (San Francisco, Washington, D.C., New York City, etc.) and four states (Connecticut, California, Massachusetts and Oregon).

The findings do not suggest that either employment or wages significantly and systematically increased or decreased after a mandate was introduced. The research cannot exclude modest reductions in wage growth and employment with absolute statistical certainty, but also does not find any evidence for them either.

Implications for Policy and Practice

The U.S. is one of three OECD countries without universal access to paid sick leave. Opponents of sick pay mandates are mainly concerned with negative employment or wage effects. Yet, there is no strong evidence of systematic and disruptive labor market effects when cities and states mandate that employees have the right to earn and take sick days. Concerns of massive labor market disruptions are vastly overstated.

Together with research showing that influenza-like disease rates decrease as a result of the mandates (Pichler and Ziebarth, 2017, Journal of Public Economics), this finding suggests that the mandates can be an effective tool to increase workers’ health and well-being.