Since the start of his academic career, Stefan Pichler has been interested in health economics: in particular, he is analyzing the relationship between public health and the economy. In his research, the associate professor at FEB’s department of Economics, Econometrics and Finance (since November 2021) focuses on applied health and labor economics. Stefan analyzes the interactions between social security systems, labor markets and population health. In his work, he focuses on the economic consequences of infectious diseases and is an expert on sick leave. In recent research together with Johanna Catherine Maclean (George Mason University) and Nicolas R. Ziebarth (ZEW Mannheim), Pichler and his co-authors study the coverage, utilization, and welfare effects of mandated sick pay in the US.

Due to the coronavirus pandemic, the question of sick pay was discussed worldwide. In the US, the pandemic brought bipartisan support for mandated paid sick leave for the first time in history. However, unfortunately, these days seem to be gone, and policy makers nowadays hesitate to mandate sick pay at the national level. Thus, the states decide themselves, whether to mandate paid sick leave or not. Currently less than 20 out of the 50 states have a statewide law for paid sick leave. In the remaining states, only some cities mandate paid sick leave. All companies that are not located in one of these states or cities can decide themselves whether and to whom they would like to provide paid sick leave. In their research, Stefan and his colleagues study what economic and societal consequences the introduction of paid sick leave has. Do mandates really lead to employees taking up more sick leave? What are the outcomes of mandated paid sick leave for employees and employers?

Low usage, high value

After analyzing the available data from the National Compensation Survey, the researchers discovered that despite the policy change, workers only use the available sick leave to a low extent. Of the seven days that are available to them per year, they only take an average of two sick days per year. Yet, survey data demonstrates that employees highly value the option of paid sick leave, and would be even willing to give up part of their wage to obtain paid sick leave. The initial reluctance of workers to take up sick leave can be partly explained by the strong work ethic in the US. However, the fear of losing the job is an important factor, as well. ‘People working in the low wage sector often cannot afford to lose their job, so out of fear of becoming unemployed; they tend to refrain from calling in sick. This is problematic because many low-wage jobs involve close costumer contacts; think of restaurant staff, retail workers and health-care aides. During the pandemic it has become clear to all of us, that having healthy workers working in these jobs is essential to reduce the spread of infectious diseases’, Pichler explains.

Low costs, high benefits

Pichler, Maclean and Ziebarth’s research demonstrates that the employers’ costs of mandated sick pay were small – only about 20 Dollar cents per hour worked for workers newly getting access to paid sick leave. This is partly because the take-up of paid sick leave is low, but even with a higher take-up the value of sick pay to the workers is much higher as compared to the costs for the employer. ‘Taking the full seven days would translate to less than one dollar of additional wage per hour worked, that’s more sizable than the 20 cents, but still not as costly as companies would expect it to be.’ Pichler thus concludes that the benefits clearly outweigh the costs. ‘Paid sick leave is needed to prevent the spread of infectious diseases. If fewer employees get sick, this will not only benefit the workers themselves, but also lead to a safer environment at the workplace for employees and consumers’, the associate professor states. ‘Companies generally underestimate the negative side effects of employees bringing viruses to work, but trough covid the awareness of the positive externalities of preventing the spread of diseases has increased.’  

More information:

Mandated Sick Pay: Coverage, Utilization, and Welfare Effects

Johanna Catherine Maclean, Stefan Pichler, and Nicolas R. Ziebarth

NBER Working Paper No. 26832

Questions? Please contact Stefan Pichler.