Paid Sick Days: Benefits for Employers, Workers, Families, and Public Health Testimony of Kevin Miller, Ph.D., Institute for Women’s Policy Research Before the Labor Committee of the New Hampshire House of Representatives regarding House Bill 662-FN, an act relative to paid sick leave for employees February 3, 2009
Chairman Goley, Vice Chairman Kelly, and members of the Committee, Thank you for the opportunity to address the question of how a paid sick days policy would benefit employers, workers, families, and the general public in New Hampshire. The Institute for Women’s Policy Research has been conducting research, data and policy analysis, and cost-benefit estimates regarding paid sick days for almost a decade, since the issue first drew the attention of policy makers. Our research has been presented to the U.S. Congress, state legislatures, and local governments. Our cost-benefit analyses and other research have contributed to the adoption of paid sick days standards in San Francisco, the District of Columbia, and Milwaukee and continue to inform policy making across the country. Over 250,000 workers in New Hampshire do not have paid sick days.1 Of those employees who do benefit from a paid sick days policy, many cannot utilize paid sick days to care for a child or other family member. A recent survey conducted by the National Opinion Research Center on behalf of the Public Welfare Foundation found that of workers who lack paid sick days, 68% had been to work while sick with a contagious illness such as the flu (Smith 2008). When employees go to work sick, a phenomenon known as presenteeism, a variety of risks and costs are created. The Benefits of Paid Sick Days Though IWPR has not conducted an in-depth, state-specific cost-benefit analysis for New Hampshire, I want to share with you the general methodology and findings of the analyses we have conducted. These analyses involve estimating the costs of a paid sick days policy for
IWPR analysis of Bureau of Labor Statistics data.
employers, while also estimating the benefits employers are likely to receive from providing paid sick days. I will then discuss benefits for workers and their families as well as for public health. Cost-Benefit Analysis Of course, providing paid sick days results in direct costs to employers. Employees who are able to take paid sick days will occasionally do so, costing employers money for wages, benefits, and administrative costs. However, on average workers who benefit from a paid sick days policy take only 1.8 sick days per year for their own health, and those allowed to utilize paid sick days to care for a family member take less than one day per year to do so. This means that on average, under the proposed paid sick days law here in New Hampshire, employees would take the equivalent of fewer than three paid sick days per year even if employers chose to provide a greater number. It should be noted, however, though in an average year over half of workers with paid sick time take no sick days.2 The primary benefit to employers from a paid sick days policy is reduced turnover costs. Employees with paid sick leave are less likely to voluntarily leave an employer, by three to six percentage points (Cooper and Monheit 1993). Having paid sick days also reduces involuntary turnover by protecting workers from being fired for unauthorized work absences when sick or caring for a sick family member (Earle and Heymann 2002). The costs of replacing an employee are substantial. Estimates range from 1.5 times an employee’s annual salary for a middle manager (Phillips 1990) to over $6,000 for a retail worker making $7 an hour (Johnson and Tratensek 2001). In addition to the cost of recruiting a new employee, the low productivity of new hires, drains on the productivity of colleagues and supervisors, human resources processing time, training, and the lost productivity between the departure of an employee and the hiring of a replacement are all real costs to employers (Phillips 1990). Even in supposed low-skill jobs such as retail, new employees may result in a decrease in sales as they learn about the employer’s products or services (Johnson and Tratensek 2001). In our most recent cost-benefit analysis, for the city of Milwaukee, costs to employers of implementing the paid sick days policy were estimated to be $23 million. Savings from reduced turnover were estimated at $36 million, yielding a substantial net benefit for employers (Lovell 2008). Other Benefits to Employers and Workers Though reduced turnover alone is estimated by IWPR to more than make up for the costs incurred by employers in implementing paid sick days, there are other real benefits for employers who provide paid sick days for their employees. One such benefit is a decrease in the spread of disease to other employees by who go to work sick. Such presenteeism has been increasingly identified by employers as a problem (CCH Incorporated 2004), and for good reason. Many diseases are highly contagious; the flu alone causes 10-12% of all illness-related employment absences (Keech, Scott, and Ryan 1998). Sick
IWPR analysis of 2004 National Hospital Interview Survey data.
workers with the flu are estimated to work at only 50% their normal levels of productivity (Nichol 2001), resulting in lost productivity for employers. Another risk created by presenteeism in the workplace is increased chance of workplace injuries. Studies have shown a substantial increase in the likelihood of workplace injuries when workers are sick or distracted (Trikoff et al. 2006). Workplace injuries may result in lost productivity, medical costs, and potential workers’ compensation claims, all costs borne by the employer. In addition, serious injuries may result in substantial loss of earnings for workers and their families. The direct benefits to workers from paid sick leave are clear – workers with paid sick leave are able to stay home when sick in order to better recuperate, resulting in better health outcomes. Since their wages will not suffer from choosing to stay home, workers with paid sick days will be less financially vulnerable to a sudden illness. Workers who do not currently have paid sick days are disproportionately located in low-wage and part-time positions; only one in five lowincome workers have access to paid sick days (Lovell 2004). These workers are particularly vulnerable to interruptions in income. Public Health Benefits Employers, their workers, and their workers’ families are not the only beneficiaries of paid sick days policies. While sick workers can infect their coworkers, they can also sicken customers or patients, a particularly relevant concern in the food service and hospitality industries. Workers in these industries have a very low rate of paid sick days coverage, with 78% lacking paid sick days.3 Providing workers in these industries with paid sick days would reduce presenteeism, resulting in a reduction in the risk of sick workers spreading infections to their coworkers and customers. Preventing the spread of disease is crucial for businesses where workers handle food or interact closely with customers. In one dramatic example of the risks of presenteeism, a Chipotle restaurant in Kent, Ohio, shut down for a day after an outbreak of norovirus, also called the stomach flu. Five hundred customers and workers were infected after a sick employee came in to work. It is estimated that the outbreak cost the community between $100,000 and $305,000 in lost productivity and other costs, in addition to the income lost by Chipotle during the restaurant’s daylong closing (Hirsh 2008). Half or more of norovirus outbreaks can be traced to food service workers, despite the fact that many states prohibit sick workers from handling food. Without paid sick days, these workers may not be able to afford to take time off from work. The spread of disease is also a serious concern in sectors other than food service and hospitality. Workers in schools and child care centers interact closely with children throughout the day, and presenteeism in these settings puts children at risk for contracting contagious diseases and potentially spreading infection to their families. Workers in hospitals and nursing homes are in a similar position, though their patients and residents may be particularly vulnerable to infection due to compromised or weakened immune systems.
IWPR derived this figure from analysis of the March 2006 national compensation survey, adjusted for job tenure eligibility using the annual average of the 2006 Job Openings and Labor Turnover survey.
Conclusion Aside from cost, a frequent concerns about paid sick days laws is that they will motivate businesses to relocate. However, an IWPR analysis of employment in San Francisco before and after the passage of their paid sick days ordinance found that San Francisco’s job growth remained strong relative to surrounding counties, suggesting that the policy did not have an adverse effect on employment, nor did it motivate businesses to move elsewhere (Lovell and Miller 2008). In conclusion, the benefits of paid sick days outweigh the costs. The savings from reduced turnover alone are estimated to be more than the direct costs of providing paid sick days, and the benefits to workers and public health are substantial.
CCH Incorporated. 2004. “Unscheduled Absenteeism Rises to Five-Year High.” HR Management: Ideas and Trends Newsletter (592): 145-148. Cooper, Philip F. and Alan C. Monheit. 1993. “Does Employment-Related Health Insurance Inhibit Job Mobility?” Inquiry 30 (Winter): 400-416. Earle, Alison and S. Jody Heymann. 2002. “What Causes Job Loss among Former Welfare Recipients: The Role of Family Health Problems.” Journal of the American Medical Women’s Association 57 (Winter): 5-10. Hirsh, April. 2008. Outbreak in Ohio: Cost of the 2008 Norovirus Incident in Kent. Policy Matters Ohio: Cleveland, Ohio. <http://www.policymattersohio.org/pdf/OutbreakInOhio2008.pdf> Johnson, Walter E. and Dan M. Tratensek. 2001. “Employee Turnover.” Do-It-Yourself Retailing 180 (6). Keech, M., A. J. Scott, and P. J. J. Ryan. 1998. “The Influence of Influenza and Influenza-Like Illness on Productivity and Healthcare Resource Utilization in a Working Population.” Occupational Medicine 48 (2): 85-90. Lovell, Vicky. 2004. No Time to Be Sick: Why Everyone Suffers When Workers Don’t Have Paid Sick Leave. IWPR Publication B242. Washington, DC: Institute for Women’s Policy Research. <http://www.iwpr.org/pdf/b242.pdf> Lovell, Vicky. 2008. “Valuing Good Health in Milwaukee: The Costs and Benefits of Paid Sick Days.” IWPR Publication B261. Washington, DC: Institute for Women’s Policy Research. <http://www.iwpr.org/pdf/Milwaukee.pdf> Lovell, Vicky and Kevin P. Miller. 2008. “Job Growth Strong with Paid Sick Days.” IWPR Publication B264. Washington, DC: Institute for Women’s Policy Research. <http://www.iwpr.org/pdf/B264_JobGrowth.pdf> Nichol, Kristin L. 2001. “Cost-Benefit Analysis of a Strategy to Vaccinate Healthy Working Adults Against Influenza.” Archives of Internal Medicine 161 (3): 749-759. Phillips, Douglas J. 1990. “The Price Tag on Turnover.” Personnel Journal 216 (12): 58-61. Smith, Tom W. 2008. “Paid Sick Days: A Basic Labor Standard for the 21st Century.” National Opinion Research Center and the Public Welfare Foundation. Trikoff, Alison M., Rong Le, Jeanne Geiger-Brown, Jane Lipscomb, and Gary Lang. 2006. “Longitudinal Relationship of Work Hours, Mandatory Overtime, and On-Call to Musculoskeletal Problems in Nurses.” American Journal of Industrial Medicine 49 (11): 964-971.