President Obama announced many, many things during his State of the Union address that he’d liked to force taxpayers and businesses to do because he thinks they’re swell ideas. These ideas come with hardly a whisper of a reckoning with the great cost— in both money and opportunity—such ideas might impose on Americans. That’s not his jam. It might be his job, but it’s not his jam. Undergirding each of these ideas is an impression of a country that makes no effort to do any of the things he wants done. If you just listened to this speech, you’d think we greedy taxpayers never contribute any of our tax money to infrastructure. You’d think we live in a country that’s one lapsed federal regulation away from poisoning our children with bad water and laced Tonka trucks. None of that is true, but it helps to make the case. It also has the advantage of skipping over any accountability for the federal government for what it’s done with our money in the past.
You’d also think we live in a country where very few people get paid sick leave. Why else would the government need to impose paid sick leave on greedy private companies from the top down? The president:
Here’s another example. Today, we are the only advanced country on Earth that doesn’t guarantee paid sick leave or paid maternity leave to our workers. 43 million workers have no paid sick leave. 43 million. Think about that.
And that forces too many parents to make the gut-wrenching choice between a paycheck and a sick kid at home. So I’ll be taking new action to help states adopt paid leave laws of their own. And since paid sick leave won where it was on the ballot last November, let’s put it to a vote right here in Washington. (Applause.) Send me a bill that gives every worker in America the opportunity to earn seven days of paid sick leave.
It’s the right thing to do. (Applause.)
Though he’s right that there are people without paid sick leave, the impression he’s creating that we’re a workaholic country full of flu-ridden zombies staggering through workdays because we can’t afford to take off is not, strictly speaking true.
From the Bureau of Labor Statistics, which is part of the Labor Department, which is part of the Obama administration:
Paid leave was the most prevalent employee benefit provided by employers in private industry throughout the United States in 2012. Eighty-four percent of private industry workers received vacation, holiday, or personal leave.1 Seventy-two percent of workers received both paid holidays and paid vacations, and 61 percent were covered by sick leave plans. For employers, the cost for providing these benefits to employees was $1.98 per hour worked, and these benefits made up 6.9 percent of total compensation.2
The eligibility for paid leave has undergone change over the past 20 years. While fewer workers enjoy paid vacations, employers are increasingly providing access to sick leave, personal leave, and family leave. (See table 1.) Also, by comparison, the employer cost per employee hour worked for paid leave was $1.09 or 6.8 percent of total compensation in March 1992.
It’s also not true that we’re the only advanced country without such a guarantee. We’re right up there with such disasters as…Canada and Japan:
Obama exaggerated when he said the United States was “the only advanced country on Earth that doesn’t guarantee paid sick leave.”
While Canada and Japan have social insurance programs that would cover an extended leave for cancer treatment, they don’t have guaranteed paid leave for an illness that lasts a few days. And Obama made the claim in calling for “a bill that gives every worker in America the opportunity to earn seven days of paid sick leave.”
A 2009 report by the Center for Economic and Policy Research, a group funded by various labor groups and foundations, examined policies in 22 countries “ranked highly in terms of economic and human development.” It says in the first paragraph that the U.S. is “the only country that does not guarantee that workers receive paid sick days or paid sick leave,” but it goes on to say that neither Canada nor Japan has a policy for financial support for short-term leave, for an illness such as a five-day flu. Those countries do have social insurance that would cover some of the pay for an employee needing 50 days off for cancer treatment. Those are the two scenarios examined in the study.
The report says that 11 countries guaranteed full pay for an illness requiring five sick days. Others paid for some missed time, but not all five days (and in a few cases not even one full day), because of waiting periods before the financial support would kick in.
Though there are certainly people in the private sector without paid sick leave, the majority of workers do have it, and that number is going up. Note what’s going down, according to BLS, and see if you can spot a correlation: “While fewer workers enjoy paid vacations, employers are increasingly providing access to sick leave, personal leave, and family leave.”
The state and municipal campaigns the president mentioned to add paid sick leave to workers’ benefits have been successful in many places, which means employers then have to make decisions about how to compensate for these new costs. When mandates on what a business offers to its employees go up, other areas of compensation often go down. If you’re requiring businesses to deliver full health-care coverage and paid sick leave, employees will see a shift away from their paid vacation or their base pay.
An economic study of a San Francisco policy requiring paid sick leave (though less than the president demands) found that’s exactly what happened there:
The San Francisco policy hasn’t been without problems. Dube and his team found that to comply with the law, some employers have had to cut other compensation, such as vacation days. Stanford economist Nick Bloom told National Journal that, under a federal policy, this phenomenon could be more detrimental in a part of the country that’s not experiencing such economic growth.
Ironically, right after demanding that businesses add paid sick leave, the president bemoaned falling wages. Again, the more mandates you add, the more potential pay gets funneled to take care of those costs instead of giving them directly to an employee who could then choose to spend them as she pleased.
Studies of San Francisco’s law have shown it’s not terribly detrimental to existing employers, who are largely satisfied with the law. It doesn’t account, as these things never can really, for the potential businesses that never exist because of the growing burden on any business owner. There’s your opportunity cost, and it’s real. Margins matter a hell of a lot when you’re trying to get off the ground, especially in a place as expensive as San Francisco.
The economist Arindrajit Dube, mentioned above and reported on by National Journal, also notes that San Francisco’s booming tech economy is a special case:
“The extent to which there’s been any cost, in that it’s maybe slightly more expensive to employ people, it would not be very obvious, because we’re booming economically,” Bloom said. “Take parts of the Midwest that are still in heavy recession—they may struggle more if there’s a national sick leave policy.”
Indeed. And, the question is, how much of that opportunity do you want to lose, how much do you want to risk, in a place that’s been hard-hit by this economy since 2008? Especially, when as noted by the BLS, paid leave in all areas is growing, and more than 60 percent have access to short-term paid sick leave now. At the very least, let the people of those towns and cities decide on those risks for themselves instead of the federal government doing it for them.
It’s not exactly that this is a solution looking for a problem, but it’s a ridiculously gigantic and expensive solution to a problem that is increasingly being solved by Americans on their own. (And, of course, there’s always the case of people who don’t think forgoing paid sick leave is a problem, and would like to have the dadgum freedom to choose more take-home instead because ‘Merica, but try explaining that to a statist.) It’s a solution that will add to other problems, like unemployment, shrinking labor force, and wage stagnation. And, it’s a problem, by the way, that has been exacerbated by Obamacare’s mandates, which led employers to make many of their workers part-time employees who, wait for it, have lower wages and don’t get paid sick leave. Good plan, guys. Try more mandates. That’s probably the ticket.