EPST Fact Sheet 9-14-14

Many workers are responsible for caring for a family. They face dailychallenges of being both good parents and hard-working, effectiveemployees. In recent decades, more and more children are growing up infamilies where all the adults work. Yet, some of our employmentpolicies do not reflect this modern reality. This brief examineschallenges faced by working families and the role that earned paid sicktime can play in helping families meet those challenges. It alsodescribes the effect of such laws on businesses and the broader economy.

BalancingWork and Family

Nearly all workers experience family illness, personal health issues,or the need to care for a sick child. Yet, many workers, particularlylow-wage workers, lack family-friendly protections like earned paidsick time, which requires employers to offer earned paid time off inorder to address a health issue. (See EarnedPaid Sick Time –Frequently Asked Questions)

Changes in the U.S. labor force have increased the need forfamily-friendly policies because time available for caregiving hasdecreased. For instance, women have entered the labor force in growingnumbers and families find themselves relying on more than one wageearner to get by.1In fact, the share of families where allparents, single and two parent households, work full-time increased to82 percent in 2012.2Thisis up almost one-third since1976.3Combined with growing child care concerns, many workershave elder care responsibilities.4The number of householdswith both kids under 18 and adults over 64 continue to rise.5This trend will likely increase as millions of baby boomers enterretirement.6

EconomicEffects of Earned Paid Sick Time onFamilies

About 1 in 3 workers in Massachusetts do not have access to earned paidsick time.7This lack of protection can lead to job loss anddelayed career advancement.8For many individuals, the earlyyears of careers coincide with the years in which they start theirfamilies, when family responsibilities are often the mostdemanding.9This is particularly significant for low-incomeworking women, since they are often the primary caregiver, and havefewer resources to help manage work and family.

In order to better address the struggle of balancing work and familyand level the employment playing field, several cities and states haverecently passed earned paid sick time laws and many more areconsidering these proposals. Earned paid sick time gives employees theright to earn paid time off in order to address pressing health issues.These policies have been found to support workers in a few importantways:

  • Allowsfamilies to meet basicneeds. Many families livingpaycheck to paycheck rely on a tight familybudget to make ends meet. When a worker, particularly a low-wageworker, or their child, becomes ill and has to take time off, lostwages can become a critical shortfall in that budget. For example, 3.5days of lost pay is equivalent to an average low-incomefamily’s monthly grocery budget.10
  • Increases long-termemploymentand earnings prospects.Workers who do not earn sick time are at riskof losing their jobs when they need to care for themselves or theirfamily members, which imposes costs to their long-term economicstability.11The added economic security provided by earnedpaid sick time is especially important in an economy where long-termunemployment rates are still stubbornly high.12As of July2014, the average duration of unemployment was about 31 weeks.13
  • Prevents unnecessaryhealthcare expenses. Without accessto earned paid sick time, families aremore likely to send their child to school sick and/or seek medicaltreatment at an emergency room because they could not get thetime offduring normal business hours, when most doctors’ offices areopen.14Providing earned paid sick time can reduce emergencyroom visits and other medical expenses since it makes it easier forfamilies to get primary and preventive care.15Also, it canprevent the costs of delaying health services, such as from untreatedillnesses, and future costs associated with long-termillnesses.16In Connecticut, which has a statewide earned paidsick time law, nearly 20 percent of employers reported that they hadfewer sick employees show up to work and saw about a 15 percentreduction in the spread of illnesses as a result of the law.17

EconomicEffects of Earned Paid Sick Time onthe Economy

In addition to working families, businesses are important stakeholdersin the earned paid sick time debate. Some opponents of earned paid sicktime express concerns that such laws could have negative economiceffects. One way to examine those issues is to look at data from twocities, San Francisco and Washington D.C., which have the longeststanding earned paid sick time laws in the country (San Francisco in2007, and D.C. in 2008). The following graphs look at general economictrends and do not prove causation. We also do not control for otherfactors, such as barriers to enforcement and compliance. However, ifthere were significant negative effects, it is likely that they wouldhave shown up in the following data.  

Effectson Wages

The data from San Francisco and D.C. do not suggest that earned paidsick time policies adversely affect wage growth. Overall wage growthhas been stronger in San Francisco and Washington D.C. than in the U.S.since these laws have passed.

 image1
Source: Bureauof Economic Analysis, Regional Economic Accounts, CA34wage and salary summary

Effectson Jobs

Similarly, we find no overwhelming evidence of adverse effects on jobgrowth in cities with earned paid sick time. Specifically, SanFrancisco and Washington D.C. are currently experiencing faster jobgrowth as compared to the U.S. On the whole, cities with earned paidsick time policies have higher job growth, compared to surroundingcounties.18

 image2
Source: Bureauof Economic Analysis, Regional Economic Accounts, CA34wage and salary summary

Effectson New Business Establishments

Additionally, we find no overwhelming evidence that earned paid sicktime laws have discouraged the formation of new businessestablishments. San Francisco and Washington D.C. has experiencedhigher business growth between 2008-2012 as compared to the U.S. Infact, San Francisco County has had more growth than its neighboringcounties, particularly in the industries that were previously leastlikely to offer earned paid sick time, such as retail and foodservice.19Similarly, a 2013 audit of WashingtonD.C.’s earned paid sick law found no evidence that the lawdiscouraged owners from establishing new businesses.20

 image3
Source:  U.S.Census Bureau, County Business Patterns, TotalEstablishments, 2008-2012


Costsand Savings for Businesses

There are some costs and savings associated with earned paid sick timepolicies. Specifically, providing earned paid sick time to employeeswho do not have this benefit will likely increase compensation costsfor employers. In 2013, the cost of earned paid sick time for allbusinesses in the U.S. averaged 0.9 percent of total employeecompensation for both the U.S. and New England.21Forrestaurants and other service companies, where low-wage jobs areconcentrated, the average cost was even lower — 0.5 percent. This lowpercentage is likely due to some employers not providing earned paidsick time.22However, employers from San Francisco andWashington D.C., which both have earned paid sick time laws, reportthat costs are minimal.23Specifically, the majority of smallbusinesses in San Francisco surveyed reported that they did not makeany changes following implementation. Similarly, businesses in Seattle,which implemented its own citywide earned paid sick law in 2012, foundcosts to be modest and smaller than expected.24

Earned paid sick time can lead to healthier workplaces, reducedturnover, and more satisfied and productive workers, all of whichtranslate to better bottom lines.25For instance, the costs ofreplacing an employee earning $30,000 or less (more than half of theU.S. workforce) are on average 16 percent of their salary.26Overall, when workers feel supported by their companies, they arehappier with their jobs, more loyal to their employers, and have abigger commitment to their company’s success.27

Additionally, evidence shows that most workers use sick leave only whennecessary. For example, a majority of employers (86 percent) surveyedin Connecticut, where there is a statewide earned paid sick leave law,reported no known cases of abuse and found that most workers did notuse the entire lot of sick days earned.28Employers in SanFrancisco and Seattle reported similar findings.29Workers whohave access to earned paid sick time use about 4 days per year forillness and about 1.3 days to care for sick family members.30However, workers vary in their need for paid sick time. Half of workerswith access to earned paid sick time do not use a single day, whereasothers need about a week, in some years.31

Finally, research finds that employees without earned paid sick timeare more likely to come to work ill, which increases the risk ofaccidents, spreading illness to co-workers, driving up health careinsurance costs, and decreasing productivity overall, all of which costemployers money.32In fact, the cost of people coming into worksick in the U.S. is estimated at $160 billion each year.33

Thisresearch was funded inpart by the Annie E. Casey Foundation. We thank them for their supportbutacknowledge that the findings and conclusions presented in this reportarethose of MassBudget alone, and do not necessarily reflect the opinionsof theFoundation.

1TheExecutiveOffice of the President of theUnited States, The Council of Economic Advisers (2014)http://www.whitehouse.gov/sites/default/files/docs/updated_workplace_flex_report_final_0.pdf:2

2Ibid.,5

3Ibid.,5

4EconomicPolicyInstitute (2011)http://s4.epi.org/files/temp2011/BriefingPaper319-2.pdf:5

5TheExecutiveOffice of the President of the United States,The Council of Economic Advisers (2014)http://www.whitehouse.gov/sites/default/files/docs/updated_workplace_flex_report_final_0.pdf:5

6Ibid.,5

7MassBudget(2014)http://www.massbudget.org/report_window.php?loc=Earned_Paid_Sick_Time.html

8TheWhite HouseSummit on Working Families (2014)http://workingfamiliessummit.org/issues/;
U.S.Government Accountability Office (2007) Women and Low-Skilled Workers:Efforts in other countries to help these workers enter and remain inthe workforce http://www.gao.gov/new.items/d07989t.pdf:2

9Bhushan,N. (2012). Work-Family Policy in the United States. Cornell Journal ofLaw and Public Policy. http://www.lawschool.cornell.edu/research/JLPP/upload/Bhushan-final.pdf: 681

10EconomicPolicy Institute (2011)http://s4.epi.org/files/temp2011/BriefingPaper319-2.pdf:7 (Figurebased on average consumer expenditures for a household earning$40,000–$49,999 a per year, U.S. DOL 2008)

11Gault,B.,& Lovell, V. (2006). The costs andbenefits of policies to advance Work/Life integration. The AmericanBehavioral Scientist, 49(9), 1154.

12CenterforAmerican Progress (2014)http://www.americanprogress.org/issues/economy/report/2014/06/19/92398/drivers-of-job-creation/:2

13U.S.Department of Labor, Bureau of Labor Statistics (2014)Table A-12. Unemployed persons by duration of unemploymenthttp://www.bls.gov/news.release/empsit.t12.htm

14InstituteforWomen’s Policy Research (2012)http://www.iwpr.org/publications/pubs/paid-sick-days-in-massachusetts-would-lower-health-care-costs-by-reducing-unnecessary-emergency-department-visits:1

15Ibid.,1

16EconomicPolicy Institute (2011)http://www.epi.org/files/temp2011/BriefingPaper319-2.pdf:5

17CenterforEconomic and Policy Research (2014)http://www.cepr.net/documents/good-for-buisness-2014-02-21.pdf:15

18BellPolicyResearch (2011)http://bellpolicy.org/sites/default/files/PaidSickLeave_1.pdf:5

19Petro,J.(2010). Paid Sick Leave Does Not Harm BusinessGrowth or Job Growth. Drum Major Institute for Public PolicyPublication. 1

20Officeof theDistrict of Columbia Auditor (2013)http://dcauditor.org/sites/default/files/DCA092013.pdf:19

21U.S.Bureauof Labor Statistics (2014)http://www.bls.gov/news.release/pdf/ecec.pdf:10, 14

22Ibid.,10

23BellPolicyResearch (2011)https://bellpolicy.org/sites/default/files/PaidSickLeave_1.pdf:3

24CityofSeattle – Office of City Auditor (2014)http://www.seattlemet.com/data/files/2014/4/attachment/194/PSSTO_UWReport_wAppendices_copy.pdf:5

25InstituteforWomen’s Policy Research (2012)http://www.iwpr.org/publications/pubs/valuing-good-health-in-massachusetts-the-costs-and-benefits-of-paid-sick-days-2:1, 2

26CenterforAmerican Progress (2012)http://cdn.americanprogress.org/wp-content/uploads/2012/11/CostofTurnover.pdf:2

27Heyman,J.,Earle, A, Hayes, J. (2007) The work, family, andequity index: How does the US measure up?http://www.mcgill.ca/files/ihsp/WFEI2007FEB.pdf:6

28CenterforEconomic and Policy Research (2014)http://www.cepr.net/documents/good-for-buisness-2014-02-21.pdf:9

29InstituteforWomen’s Policy Research (2011)http://www.iwpr.org/press-room/press-releases/new-report-san-francisco-paid-sick-days-legislation-benefits-employers-and-employees;City of Seattle – Office of City Auditor (2014)http://www.seattlemet.com/data/files/2014/4/attachment/194/PSSTO_UWReport_wAppendices_copy.pdf:38 

30CenterforAmerican Progress (2012)http://cdn.americanprogress.org/wp-content/uploads/issues/2012/08/pdf/paidsickdays_factsheet.pdf:3

31InstituteforWomen’s Policy Research (2007)Testimony before the Senate Health, Education, Labor and PensionsCommittee, Feb. 13, 2007. http://www.gpo.gov/fdsys/pkg/CHRG-110shrg33446/html/CHRG-110shrg33446.htm

32WorldHealthOrganization. (2010)http://www.who.int/healthsystems/topics/financing/healthreport/SickleaveNo9FINAL.pdf:4, 6, 18

33CenterforAmerican Progress (2012)http://www.americanprogress.org/issues/labor/news/2012/11/16/45152/myth-vs-fact-paid-sick-days/

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