A Critique of "An Economic Assessment of Mandated Sick Leave Legislation (#080474) in the City of Philadelphia"

Authors: 
Stephen Herzenberg
Publication Date: 
May 24, 2011

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William Dunkelberg, the Chief Economist of the National Federation of Independent Business (NIFB), has just released a study of the cost of implementing paid sick days in Philadelphia.1 This policy brief analyzes the Dunkelberg study and finds that it has a combination of limitations and errors that makes it of little value for policymakers considering enacting paid sick days.

  • It contains a mistake that doubles the estimated potential maximum cost of the bill.
  • It makes an implausible assumption about how many paid sick days workers will actually take and fails to use readily available data on how much workers actually use paid sick time. (Many workers don’t take all their permitted sick days because they view them as insurance available in cases of more serious illness.)
  • It fails to capitalize on arguably the best source of information—actual experience following the paid sick days ordinance implemented in San Francisco in February 2007.
  •  It overstates the adverse effect on jobs by using a questionable methodology that exaggerates the sensitivity of employer demand for labor to the implementation of paid sick days.
  • It does not consider potential cost-saving benefits for employers that would result from paid sick days. These include reduced turnover because paid sick days leads to fewer discharges and quits, and greater worker effort and productivity due to an improved employment relationship.
  • It neglects the potential costs of “presenteeism”—low-productivity performance by sick workers on the job—and the cost of the workplace spread of communicable illnesses.
  • It includes implausibly high estimates of the cost of compliance with a paid sick days ordinance.

Dunkelberg also analyzes the cost of an ordinance which requires five days of paid sick days for employers with 10 or fewer employees and nine days for employers with 11 or more employees. The current Philadelphia proposal, based on proposed amendments to be voted on in City Council session, provides for a maximum of four days of paid sick days for employers with 10 or fewer employees and seven days for employers with 11 or more employees. With these amendments, even if one accepted Dunkelberg’s analysis, his cost estimates would thus be inflated by more than 25%.

The text below explains the limitations and errors in Dunkelberg’s analysis in more detail. (The text discussion does not map one-to-one with the list above because information from San Francisco is weaved in as appropriate not presented in a standalone sub-section.)

The last section of the paper includes a broader discussion of Dunkelberg’s static, short-term approach, which is the same basic perspective that has been used to argue against all advancements in labor standards starting with prohibitions on child labor. The last section offers a longer-term and dynamic perspective on the relationship between advanced labor standards, such as paid sick days, and economic growth.

Of course, the impact of paid sick days on the economy should not be exaggerated on the positive side just as it should not be exaggerated on the negative side. Properly understood and implemented, nonetheless, paid sick days can be part of Philadelphia’s rebranding as a center of innovation, a magnet for attracting and retaining young and skilled labor, fueled in part by 21st century rather than 19th century employment policies and practices.

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