Mandatory Benevolence: The Growing Push for Paid Sick Leave

In an editorial from October 24, the Casper Star Tribune attacks alleged wage discrimination. Citing statistics that women in general earn less than men, the newspaper predictably calls for more government intervention as the universal solution. That solution, says the Tribune, would be "fair schedules and paid sick leave so that workers with care giving responsibilities are not unfairly disadvantaged".

The demand for government-funded or regulated sick leave pops up from time to time. The tax-paid version is part of a broader system of general income security programs widely used in Europe. It has not yet become part of the American welfare state.

That, however, does not mean that the intention behind the reform has not set roots here. It has. The Casper Star Tribune editorial is clearly part of a nationwide campaign to force employers to provide benefits that are run as government entitlements in other countries.

Paid sick leave is the front issue of this campaign. Built in part on a 2013 research report from the Economic Policy Institute, this campaign alleges that as many as 40 percent of the private-sector work force do not enjoy the benefit of paid sick leave. With this and similar factoids in their arsenal, government expansionists then move from state to state pushing for more government intervention. In July CNN reported:

San Diego city council was one of two cities — the other being Eugene, Ore. — to pass new laws mandating paid sick leave on Monday. … Massachusetts recently placed a referendum on its November ballot asking voters to require sick leave statewide. In April, New York City started requiring businesses with more than 15 employees to offer paid sick leave to workers.

As with all government interventions into the daily operations of America's businesses, this regulation creates more problems than it solves. To begin with, it creates a demand, basically over night, that businesses make more money off the daily work their employees do.

Suppose Jack hires Jill to fry burgers at his fast-food restaurant. He pays Jill $8 and offers her to work 40 hours per week. This pays Jill $320 per week, which is what Jack expects that her work will produce in terms of revenue, after deduction of other operating costs.

Like most people, Jill takes 2-3 sick days per month. She has built this into her personal finances, thus keeping a couple of hundred dollars in her bank account for the days when she wakes up with fever and a sore throat.

In comes government, mandating that Jack pay for Jill's sick leave. Two days per month means Jack has to squeeze $128 more per month out of Jill's work. How is he going to do that? By forcing her to fry more burgers when she is at work. In other words, she has to increase her productivity by more than ten percent.

That does not sound like much, does it? But the next problem with making income security mandatory is that employees will have an incentive to be away from work more. This unfortunate side of the mandatory-benefits regulation is something that government expansionists tend to disregard. But the research is irrefutable, especially from countries that have elaborate income security programs in place. Three examples:

• In 1991 three British economists established that "financial incentives" play a big role in worker absenteeism;[1]
• A 2002 study by two Swedish economists showed that the cheaper it is for employees to be away from work, the more they will be away from work;[2]
• A 2010 report showed that the propensity of Italian workers to be away on sick leave is strongly related to the absence of costs, both financial and otherwise;[3]

Instead of forcing employers to become income security institutions of sorts, government should leave it to employers and employees to manage issues such as sick leave privately. It is not only in line with good principles of individual and economic freedom, but it also makes more sense from a practical viewpoint. Employers know who among their employees can be trusted with the responsibility to manage his own sick days, and who is inclined to misuse that same trust.

Paid sick leave is just the first of many ideas for regulated income security that government expansionists have in mind. Rest assure that the next one is paid parental leave, then paid leave to care for elderly family members, paid leave for personal recreation, etc.

Where does the Casper Star Tribune stand on these issues? Do they want an endless stream of new government mandates, creating a full-fledged welfare state by regulatory proxy? Or do they have time to stop and tell us:

When is government big enough?

[1] Barmby, Orme and Teble: Worker Absenteeism: An Analysis Using Microdata; The Economic Journal, Vol. 101, Bo. 405 (March, 1991)

[2] Johansson and Palme: Assessing the Effect of Public Policy on Worker Absenteeism; Journal of Human Resources, Vol. 37, No. 2 (Spring, 2002)

[3] Scoppa: Worker Absenteeism and Inentives: Evidence from Italy; Managerial and Decision Economics; Vol. 31, No. 8 (December, 2010)