Economics of Sick Days

Ezra Klein is one of those bloggers, like Matt Yglesias or Andrew Sullivan, that sometimes make me want to just give up. Yesterday he started a new blog at the Washington Post, and promptly put up fifteen posts on his first day – and not the one line variety, either. Today, he brings us this chart from the Center for Economic and Policy Research:


This is Klein’s explanation:

You’re seeing two things here. The light blue line measures paid sick days. This is what you use if you need to take three days off because you have a fever. The dark blue line is paid sick leave. This is what you use if you need to take three months off because you have cancer. Every other country on the list offers at least one. Most offer both. The United States is alone in guaranteeing neither.

Why does this matter? Because sick people without paid sick days go to work anyway, infecting others and increasing the virulence of epidemics. Or, when it comes to things like the common cold, they simply get more people sick, which sucks for them.

As a father whose daughter is in her first year of pre-school, I’m more sensitive to this phenomenon than when I was younger. I’ve gotten sick at least five times this year – which is about five times more than normal – and I try to avoid going to my classes when I’m sick to avoid infecting other people (even though I’m paying about $100 per hour for those classes). 

So why don’t we require paid sick days here in the United States? Of course, there’s always an ideological argument – that’s government intrusion into the private sphere – but the argument you hear more often is that it imposes costs on businesses, particularly small businesses. Well, what’s wrong with that? A government mandate would affect all companies equally, so it shouldn’t make it any harder to compete in general. For small business owners, it would take away the unpleasant choice between minimizing costs and treating your employees right; the people hurt would be the ones who are willing to minimize costs on the backs of their employees, and the ones helped would be the ones who are not. (For the record, my company has paid sick days – but we’re in an industry that generally treats its employees well, so I’m not claiming any particular virtue.) Put another way, it takes away the competitive advantage of employers who do not treat their employees well. For anyone worried about American competitiveness overall, look back at that chart.

But then the higher costs of paid sick days would be passed on to consumers, just like a tax, which would reduce consumption and represent a drag on the economy, just like any other tax. Yes – but this is just a question of externalities. We already pay that tax, just in different forms. We pay it in the health care costs of treating the sick; we pay it in shortened lifespans of people who die (in extreme cases) from contagious illnesses; we pay it in reduced quality of life due to being sick; and we pay it in parents staying home from work (paid or unpaid) to take care of children too sick to go to school or day care. 

The difference is that in a free market, when you let each company decide not to have paid sick days, that company only internalizes a fraction of these costs: the fraction associated with lower productivity of its own infected employees, and possibly with the premiums of its health care plan – but many of these companies don’t have health care plans anyway. So, like with all externalities, if the firm doesn’t face the full costs of its production, you get too much of the thing it produces – in this case, sickness.

By James Kwak

62 thoughts on “Economics of Sick Days

  1. “The difference is that in a free market, when you let each company decide not to have paid sick days, that company only internalizes a fraction of these costs: the fraction associated with lower productivity of its own infected employees.”

    What other costs are there? I dont buy your externality argument…you haven’t exactly shown what the “external costs” are. Me getting sick and infecting my co-workers affects me and my co-workers…not society at large. My employer bears the full cost of not encouraging me to stay home…because it has a sicker less productive workforce. I may be missing something, but I don’t see how society at large is hurt by me coming into work with a cough.

    My company dumping toxic waste into the town’s water supply…that’s an externality. My company risking the health of its workforce by not giving ample sick-leave…that’s not an externality. That’s just an optimisation problem.

    On the other hand, a government deciding that 50 days is the right amount of time to endorse, is just as arbitrary as a government deciding that 8 weeks vacation is better for society than 2 weeks. I’d rather each company try to work out its own policies, such that on aggregate, the society ends up with an optimal level of paid sick leave. How does that chart look when you aggregate what each company implements as its own internal policy?

  2. Right after I graduated high school I spent 3 years in the construction business. I had no paid sick time and no health benefits. Taking a few days off to recover from illness or to spend time with my family after the birth of our second daughter was costly and financially stressful.

    I now have a great job with healthcare, sick leave, etc. but I have not forgotten what it feels like to be without those benefits. I strongly believe for America to remain competitive we need to have a healthy educated workforce. We have a lot to be grateful for as Americans, but this is one area we seem to be behind on.

  3. It is an interesting and necessary part of Klein’s argument and your own here that the competitiveness issue is considered only inside a hermetically sealed universe consisting exclusively of today’s most industrialized countries.

    Look more widely around the world and ask yourself how many benefits of this sort are enjoyed by workers in India, China, Korea, Brazil, etc.

    I would have thought that Klein, as a smart guy in the currently imploding journalism profession, might have noticed how quickly a heavily unionized edifice built on piling up more and more institutionalized benefits can be decimated by a combination of low cost competition and new technology.

    In the context of global economics, his argument is parochial.

  4. “In the context of global economics, his argument is parochial.”

    Oh goody! Because I’m the kind of guy that loves to kill Americans, I’m thrilled that epidemics spread like wildfire due to lack of sick leave and – even better! – tens of thousands die every year because they lack health care. Our streets run red, figuratively. And that’s how it should be, in a globalized world. What arrogance to expect a standard of living higher than that of Indians in India.

    Did’ya know that child malnutrition in India is over 40%? Get cracking USA! You have a long way to fall. Compared to India, even China has a long ways to go in devastating and destroying the health and welfare of Chinese children. But since this is a race to the bottom, eventually we will all get there.


  5. Not only do they go to work sick, they send their kids to preschool sick. That’s why all the preschool kids end up sick too.

    And, even well moms don’t get time off to be with sick kids. Arranging last-minute day care for a sick child can be a nightmare.

  6. Actually, the thing that always bothers me about sick days is that they are most often used by people who are not sick. There are those who will only use sick days when they are sick and there are those who will use every last sick day they have during the year even if they were not actually sick even once.

    It’s analogous to the sub-prime fiasco. Most who’ve gotten into trouble with those loans were exploiting the financial system for their own gain. And, they probably took their maximum sick days off during the year in order to spend some of their newly refinance money.

    But, if you wish to continue to believe that everyone thinks and behaves ethically, as you do, then feel free. We are just now beginning to feel the effects of the reality that a large portion of our society will willingly exploit anything for their own benefit and to the detriment of others.

  7. BTW, I know some parts of the US do have a sick policy mandated, San Francisco requires sick time, according to the HR document on the wall in my office.

    In the recent talk about swine flu, I was looking at how woefully prepared we are as a society for something like a return of the 1918 Spanish Flu epidemic, or even the Hong Kong Flu epidemic. Most of our office buildings are sealed; we breathe recycled air and work in close proximity to others.

    Our sick leave policies encourage people who are ill to go to work, which will bring pathogens into offices. My current employer has the combined sick leave/vacation policy, so there is a strong negative incentive to take sick time, you lose a vacation day.

    Add in insurance policies with punitive co-pays, and people are less inclined to get medical care early, and you have a good environment for a virus.

  8. Someone should write a song for their children to sing: Gloriously: NY
    bankers pass their debt onto the common and slink away from defense of
    capitalism, during crisis periods, when capitalism might need a
    defender. NY banks then want to privatize their profits. Privatize their gains during the good years. Have one bad year in the cycling of
    capitalism and there is Paulson as their front man, to unload their
    debt onto others.

    Chorus: In a hurry to offload their debt obligations, and in a hurry
    to be private again.

    DOw 14000 soon?

    perhaps the financial crisis has been fixed according to various indicators such as libor and yield curves as written in more detail very compelling

  9. I agree that some of the costs are borne by your employer. But some are not. For example, if your employer doesn’t offer a health care plan, then any health care costs not borne by the employee are externalities – Medicaid, Medicare (unlikely, I know), any health plans employees have, for example through their spouses, emergency room visits, etc. Then there’s the fact that people spend less than 25% of their time at work – so the more people at your workplace get sick, the more people they will infect outside of work – those are 100% externalities.

  10. I need to see more data on this. For example, my brother lives in Japan. It’s true that they seem to send home children and even cancel classes in school much quicker than the US. However, adults also wear masks. Lots of adults. I’d like to know how helpful this practice is in controlling sickness in the workplace. Also, I wouldn’t mind seeing a study of hand washing procedures, etc., in each country.

    I don’t have any real problem with sick pay when people are sick, but it can also be considered by many as vacation days.

  11. Do you some reason to believe that China, India, Brazil and other developing countries don’t have legally mandated sick leave policies? I don’t know for sure, but wouldn’t surprise me at all to find out that they would lie somewhere in the middle of the chart above.

  12. No sick days, no sick leave, and which of the above get health insurance from their employer?

    Get sick, miss work, get fired, lose coverage, go bankrupt due to medical bills…

    Why not include vacation time on that chart? Oh wait – that is also zero in the US. No wonder I never get to see my kids. This so called “protestant work ethic” is horsehockey.

  13. data? nobody really knows.

    surely masks help if the sick party wears the mask as pathogens live in saliva. otherwise it’s a mixed story. at the very least the mask needs to be clean (ie a new one every trip) and affixed well, and touching your hands to your eyes will make the mask kind of worthless too.

    hand washing procedures are probably helpful as well, but few people wash their hands thoroughly enough and with hot enough water for long enough anyway.

  14. Many companies/businesses already offer paid sick days. I would so far as to say most do in fact!

    A smart individual would purchase disability insurance that would protect them against being out of work for an extended period of time as in the cancer example sited above.

    I see no reason for more government mandates.

    Regarding your externalities with respect to Medicaid and Medicare…well you’ve stumbled upon the crux of the matter. Why is government paying for these services in the first place?!?

  15. Your hyperbole doesn’t help the flawed argument you espouse.

    That chart above is deceptive because it graphs “mandated” sick days and sick leave, but doesn’t graph the actual value.

    Meaning just because our government chooses to leave this decision with each business doesn’t mean that NO ONE offers these benefits.

    In fact most do!

    What else do you want the government to control?

    It is simply amazing to see the degree to which people who should otherwise know better (those that know even the slightest bit of economics) espouse such socialist nonsense.

  16. Clearly then you should seek better employment not just simply plead for the government to help you.

    You want to be able to see your kids more? I suggest you get a better job.

    These types of policies will make hiring Americans even more expensive and even less competitive. Companies will simply choose to hire abroad and those that can’t will be force dot raise prices.

  17. While it is true that many companies offer paid sick days, the point is that the externalities are born in a disproportionate manner.

    We should ask ourselves if a general policy on preventing sick people from going to work makes sense, and then whether we can find a policy that will keep it from being abused. (Yes, and maybe.)

    We should then ask whether it represents a unreasonable restraint on the personal freedom of business owners. And the answer, in my opinion, is that no, it does not. And considering the other restrictions on things that companies can do to their employees which have passed constitution muster, it would seem that the courts would agree.

    One of the benefits, as James said, of making this a universal policy is that it eliminates the competitive advantage of externalizing the cost of sick and contagious employees.

    I would be very interested however, in hearing suggestions from commenters on how to implement this policy while minimizing abuse. And at what level of abuse does it become a bad idea.

  18. Oh, of course that is government interference in the market.
    Maybe the government should recant its policies to date and we can all go back to the good old days of 80 hour work weeks, child labor, indentured servitude, and slavery.
    After all, these types of policies made hiring Americans even more expensive and even less competitive…

  19. In the UK, many companies (my sample comes from personal experience) ask job applicants how many days’ sick leave they have taken over the past few years.
    A US firm expanding abroad might be surprised that more sick days are taken, where such rights are guaranteed (this is presumption) but it should not interpret any differences as clear evidence of a sickly pool of candidates.
    To those fearing the costs this imposes on businesses – my first example shows the perils of claiming days for trivial matters, and besides, productivity is key to affluence, not small entitlements (one week’s work isn’t much).

  20. There are more illnesses than physical. Just because someone isn’t laid up ill in bed all day doesn’t mean they don’t deserve a day off once in a while.

    Which employee is more productive, one that takes care of themselves, giving themselves a stronger immune system (needing less sick days) or someone who doesn’t take care of themselves and uses 5 sickdays a year? I would argue if you have a stronger immune system, you are eating better. Eating better and taking care of yourself often leads to stronger brain function and memory.. ergo, stronger worker. I’d bet that those who use their sickdays for being “sick” are less productive year-round, but this is purely speculation on my part.

  21. Even in good jobs, paid sick leave is generally pretty stingy, except in the cushy government or education sector.

    Also, disability insurance is usually only useful if you’re incapacitated for a year plus. For example, your standard plan typically involves a 90 day waiting period before you begin collecting benefits. Not to mention it pays somewhere around 50% of your salary…

    Additionally, not everyone is 1. “smart” [or very risk averse] or 2. can afford the extra insurance premiums.

  22. I’m intrigued by Kwak’s notion that *employers* are the ones responsible for internalizing the costs of illness. Suppose producers and laborers were free to instantly make and break contracts–the producer pays the whole contract price, the laborer delivers the work. When the laborer gets ill, shouldn’t he be the one to carry the liability for not fulfilling the contract? This seems most natural.

    A laborer should demand higher contract prices to offset the costs associated with illness (missed work); in turn, producers should offer to assume some of the risk by paying for sick days. The employer hopes that advances in medical technology will keep the number of used sick days lower than the number offered in the contract.

  23. Your company’s workforce is society. This isn’t some stock of inventory which if you store wrong you’ll get a little bit of extra shrinkage and therefore you’ll choose to store it properly up until the marginal cost of storage equals the marginal cost of shrinkage. These are other market participants. Little tiny self-contained businesses with which employers have to negotiate to set a price for a good (in this case a unit of labor).

    This example is an externality from the labor market into the goods market. My employees have a disutility for coming in sick or getting sick from a coworker. In a perfect labor market this could be priced in but would require future knowledge about how likely the worker was to get sick and a full ability for them to sell each unit of labor to the employer highest marginal utility for it (probably some other conditions as well). Since these conditions aren’t met, both participants in the market have some market power. One possible way to exploit that power (on the part of the employer) would be to force employees to work even when the marginal utility of the wage they’re getting is lower than the cost to of that wage (for instance if I was sick and would rather stay home). Compared to the compassionate employer who let them stay home, if I do this, I can capture surplus and move it over into my product market, either taking extra profit or becoming more competitive by handing some of the surplus to my customers. Either way, this arbitrage between the markets is an externality where I as owner take a mispricing in the labor market and drive advantage in whatever market I’m in. The sad thing is, because they’re in different markets, taking advantage of the arbitrage doesn’t change the labor price to restore equilibrium, I can keep exploiting it over and over again.

    Normally we don’t have government try to correct the imperfections in the labor market (or other markets) because the cure is worse than the illness. However, if we can design a government intervention in a market that would reliably bring it closer to equilibrium and the current state and the cost of that intervention is less than the cost of the government program (in terms of administration costs, not cost to incumbents plus admin costs… that would be double-counting costs to incumbents), that is a net good to society.

    I don’t know how this happened (actually, I do, certain parts of society are really happy to feed the misconception), but people seem to be taking the wrong message from equilibrium theory… it’s not that markets absent government intervention are in equilibrium and thus we should keep the government out and everything will be hunky-dory. It’s that equilibrium, if we can get it, is optimal for society (but its hard to get). Government can be one thing to distort markets out of equilibrium, but lots of other things can as well.

    We can argue that other countries are all too happy to screw their workers so we should too or we’ll be at a disadvantage, but don’t pretend the labor market as it exists is efficient.

  24. Oh James, please don’t try to be more like Andrew Sullivan! There *is* a trade off between quality and quantity, you know. Don’t think for a minute that more = better.

    As for the substance of the post, I might slap a [citation needed] on the claim that we as a society could reduce health care spending by a statistically significant amount or increase GDP by having government-mandated sick pay policies.

    What percentage of health care spending comes from contagious infections? What’s the productivity cost of the flu? What percentage of contagious infections are contracted in the workplace (rather than all the other places people interact) thus making these costs avoidable?

    You’ve identified an externality. Does it therefore follow that anything aimed at the externality addresses the externality, and does so effectively?

  25. trae: “It’s that equilibrium, if we can get it, is optimal for society (but its hard to get).”

    Ever heard of suboptimal equilibria? Funny how you never do (or of the equivalent in smaller words), either from politicians or economists. Aren’t they fairly common?

  26. Yes, but the answer is not to lower ourselves to their level, but to bring them up to ours. That’s where the free trade people have it wrong.

    We know for instance that China is hardly the model we want to emulate, thus we don’t want to aspire to the same theoretically low level of sick days.

    Sure, there’s the “competitive” argument, but my counter argument is you can’t have “free trade” with countries that aren’t free. The theory is with free trade we’ll lift up China so they’ll match us, but without a democratic government and legislative protections, there’s nothing to guarantee that. We could be just sucking our jobs away to help build their totalitarian government.

    Now I’m being hard on China to make my point, but the idea we should lower our standards to compete with countries that aren’t operating on a level playing field is in my opinion, misguided.

  27. There is no basis for the statement “most often used” – but it makes your position clear. I am willing to accept a small percentage of misuse for a greater benefit. I certainly don’t expect everyone believes of acts ethically – or even honestly.

    As to trying to equate someone who takes a sick day they aren’t entitled to with the financial crisis, it’s not even close, much less analogous. Of course, your implication is clear – those that are in trouble (which are a “large portion” of individuals, not banks) are the ones who are exploiting the system.

  28. As long as the minimum wage burger flipper doesn’t sneeze H1N1 swine flu in my Big Mac – there aren’t any social costs.

  29. Employers have good information on labor performance – they know that when they contract for labor what the expected productivity rate is. So, the wage rate already takes into account “sick time” – as well as other factors that affect productivity.

    The question isn’t should the laborer be compensated for sick time – it is already included in the average wage rate. It a question of public health and risk.

    It’s in the public interest to isolate sick people from public contact. It’s in the employer’s interest to maximize output, regardless of social impact. Since public health is a statistical outcome – not every sick person who goes to work infects the public – the individual worker and individual employer have incentives to disregard public health and risk infecting others.

    There may be other ways to distribute costs and incentives to keep sick people at home, but the simple one is sick pay.

    This is demonstrated when you see management and workers in close physical proximity (such as white collar). Much higher probability that sick time is provided as a benefit.

  30. “Normally we don’t have government try to correct the imperfections in the labor market (or other markets) because the cure is worse than the illness.”

    That certainly is the current mantra, but I’m not sure it stands up to any sort of empirical analysis. Some of us might argue it’s exactly when the government ISN’T messing around that things are worst.

    Personally I think a lot of people to who’s advantage it would be to not have government intervention have been repeating these so called “facts” about government intervention for so long that everyone believes it’s true. In short, we’ve all been brainwashed that:

    government = bad
    free markets = good

    I don’t think this has been a conspiracy (though certainly people have worked together at times), but rather a lot of people with the same agenda all coincidentally working toward the same end. That is, not surprisingly if you make a lot of money, you are against being taxed more (even if you don’t specifically talk to the other guys). Similarly, if you own a business, you want less intervention (even if you haven’t worked directly with other businesses). Subsequently people with common goals push the same talking points, which tends to be “less government” and “why government is bad”.

    Of course the monied and business interests due to their cash flows have more to spend toward pushing their agendas, therefor it creates an illusion of greater voice than there really is. Eventually said greater voice turns into a sort of propaganda/brainwashing, which as far as I’ve seen we’ve all fallen prey too.

    Anyway, maybe free markets are better than government intervention, but as long as people quote it like a religion without any nuance, I’m inclined to believe that I should take its munificence with a grain of salt.

  31. 95% of the things Mr. Kwak says I agree with. Mr. Kwak is a fine human being for thinking of his daughter’s health and others. But frankly, I think this is not a big problem and WE HAVE BIGGER FISH TO FRY. The externalities are not that big. Companies that offer sick days will get better workers, companies that do NOT offer sick days will attract less skilled workers—that is a type of cost the companies will face and the SMART companies will think of that when they make their contracts. Those employees that don’t get sick days will have more incentive to bust their butt at work, get more education, and pick up the type of skills they need for the job that offers sick days. Sick days are constantly abused, so much so that it has become a joke in popular culture that when the weather is good “today is a good day to play hookey”. Do I feel sympathy for those who are sick and work??? Yes. I was a semi-truck driver for some years. Believe me, I know the feeling. I just think you have to pick your battles—sick days rank somewhere around 1000th on America’s list of current probs.

  32. You have an interesting point about the public’s interest, so let me ask this: if a producer can afford to maintain quarantined work zones to prevent the spread of communicative illnesses, should that firm be exempt from paying some or all sick time (assuming mandatory sick pay).

  33. I think there is a very slightly more in-depth dynamic going on here.

    1) Markets in equilibrium = good
    2) It’s easy to come up with examples where governments would distort otherwise efficient markets from equilibrium
    3) If a market is not in equilibrium it must be because of one of these government interventions
    4) Government = bad

    This ignores the fact that equilibrium is hard and rare and pretty much no markets achieve it. It is, however, the dominant paradigm in pop-economics today and one that is very dangerous to society.

  34. Clearly the rest of the class-warrior Socialist welfare nanny-state world/universe has not gotten the message.

    Here in the USA, if you are such a hopeless, loser slacker as to drop dead on the job, please make damn sure you do so _after_ you punch out.

  35. You really are amusing aren’t you.

    No one, as far as I know, has a gun to anyone’s head forcing them to work.

    Slavery has absolutely nothing to do with this argument so I’m not sure why you bring it up. Probably knowing full well the deficiencies in your reasoning you are instead trying to illicit an emotional response.

    Regarding child labor laws you’re correct those should be done away with. As well as laws demanding parents school their children.

    I believe people are intelligent enough to make their own decisions regarding who they work for etc. I don’t believe the government should be in the business of coddling everyone.

    Again, if you are dissatisfied with your job there is no one else to blame but yourself.

  36. Again why does everyone assume the government MUST mandate EVERYTHING!

    Why do you want to submit your life to these morons in Washington!

    Most employers already offer sick days and sick leave and guess what … it didn’t require a MANDATE!!!


    It seems like every person who thinks they “know it all” just wants to impose their “enlightened view” on the rest of society simply because they believe it will be better for everyone.

    Stop espousing these interventionist policies with their plethora of unintended consequences and arbitrary infringements on personal liberty.

    If Mr. Kwak wishes to start a business and offer paid sick days and paid sick leave he is more than welcome!

  37. Our government (all three branches) has long forgotten the limits that the Constitution imposes on them and have instead sought to control every aspect of our lives.

    The last thing this country needs is another government bureaucracy to enforce this sick day mandate.

    People that are very sick stay home. I don’t see offices as being disease infested hell holes, but perhaps all the commentators on this blog work in sweat shops.

    I truly think this topic is of relatively minor importance and for people to immediately deduce that somehow the government MUST step in IMMEDIATELY to solve this URGENT issue is absurd.

    It speaks a lot to the nanny state the US has become.

  38. I would agree that it’s not a matter of top priority. However, I would disagree with your statement that the U.S. has become a nanny state. The truth is that it is much more complicated than that, and rejecting an idea because of it doesn’t fit into an ideology doesn’t make much sense to me. Nor do I think it would necessarily require another government bureaucracy to administer it, but that was what I was asking for comments on.

    There is a temptation among those of a libertarian (or constitutionalist) bent to apply libertarian theory without any empirical thinking whatsoever. I know, because I grew up as a libertarian. I now believe it to be something of a false idol. I believe (and I apologize if I am ascribing it to you incorrectly) that libertarianism works fine as a theory until it is applied to actual human behavior, which is often irrational. At which point it sometimes works and sometimes doesn’t. Health care is one area where libertarianism has traditionally not worked, because it begins with a flawed premise; namely, that Americans are willing to let people suffer and die from preventable or curable health problems. And when that premise is nullified, the whole libertarian approach to health care falls apart. This is also true in regard to labor policy.

    The reality on the ground, in a larger sense, is that political power and circumstance will never allows us this utopian state that the libertarians dream of, and the sooner we begin to understand that and actually work toward a more just society, the better off we will be.

  39. I think AMo is right, and so tomorrow, because I don’t like my job, I’m going to quit it and go work for Goldman Sachs. I hear they have a fantastic bonus structure. And since my tax dollars are going to pay for it, I’m sure I won’t have any problem making this happen.

    It funny, really. I don’t understand why every American doesn’t just go and get the perfect job. And if someone comes into my workplace with swine flu and I get it and I die, well, I sure should have seen that coming. And if my health insurance rates go up because we have a massive epidemic of a preventable disease, well that sure sounds like I should have forced the management at my massive corporate workplace to institute better sick leave policies, and since I failed to do that, because I was afraid that I would lose my job and health care coverage and house and that my kids might starve, well, I guess I was being a huge sissy about the whole thing and so I deserve to die anyway.

    That seems to be your path of reasoning, if I am not mistaken.

    Unfortunately, most of us have yet to assume complete control of our destinies.

  40. The point in having a government policy is not to force the burden on employers, but rather to eliminate the competitive advantage of making your sick workers come to work. There are undoubtedly companies who would like to do this, but who cannot because their competitors don’t, and so they would be left at a comparative disadvantage. And so, even though all the parties might like to do this, they cannot, because they have no way of enforcing the agreement. In fact, without a government policy, they might be vulnerable to an anti-trust action.

    If all businesses are required to do this, then all of the costs will be transferred to society through higher prices, and there will be no burden at all. The question then becomes, how high can these policies drive prices before it becomes inefficient. And this requires empirical study.

  41. This would be a very nice time for a sea change in how human beings relate to one another? Can’t we agree on some fundamentals? Screw national healthcare. How about global healthcare? Real global healthcare — the kind where people don’t starve, and all that other “pie in the sky” stuff. A world minimum standard for shelter, medicine, food. Economists — put that in your model and calculate it. Do we have enough of the basics to go around? Take your mind of all the other resources for a second. Do we have enough to provide the entire population of this planet with shelter, warmth, food, and medical care? If we don’t, let’s work on that immediately. If we do, let’s make a plan. Take your numb lips from the teat of the NBER, CEPR (real CEPR) NSF, etc, and figure out the important stuff. Get your self respect back. Take an hour a day, talk to your peers and figure out a better way. That doesn’t mean signing on as an advisor for something that looks like a charitable organization; it means working with others to do what you know in your heart needs to be done.

    Keep it simple. 3 basics: Food, shelter, and medical care for all. That’s it. Is it really that hard? You probably won’t even need to sacrifice the big flat panel tv. Food, shelter, and medical care for all. Food, shelter, and medical care for all.

  42. An analogue from public health is the public cost of parents refusing to have their children vaccinated. Most states have an ‘opt out’ policy on the basis of religious beliefs. By choosing not to vaccinate their children, they put other people’s children at risk (and adults too). having 2-4% of the relevant population unvaccinated increases the risk of epidemics as individuals respond differently to vaccines. Diseases such as measles rubella, chicken pox and even polio have reappeared in U.S. and U.K. with mortality rates higher than expected (remember all these diseases have high mortality rates in population with no prior exposure).
    Encouraging ill people to go to work (because they cannot afford to forego wages) does have public health consequences not born by either the employer or the ill employee.
    As usual, those worshiping at the church of economism pay no attention to well established public health knowledge.

  43. James, I’m not disputing that half of workers don’t have paid sick days. I’d like to know: what is the greatest the cost of this externality can be? How much of our health care spending goes to treating contagious disease among the working age population? How much of this spending could be saved by paid sick leave? (Is there a credible study connecting greater flu incidence to inferior sick pay policy?)

    If you’re making a political argument, I’m sure what you’re saying plays well to the voters in Biloxi. But if you’re making an economic argument I don’t think you’re there yet.

  44. As a self-employed person, no one pays for my sick days; I do not feel my clients should subsidize my sick days.

    I feel this way because my income is adversely affected when I take time off.

    Same for bigger businesses – but employees, who have paid sick days, do not feel the burden.

    The government may not guarantee either sick leave or sick days – but in my work, most of my clients offer sick days. Those on the lower end of the spectrum, who work at Walmart, etc., may not get the sick days. But I’m not sure the government needs to poke its nose into that issue.

    I though that the FMLA existed to help people through long-term medical situations – no?

  45. Did the government mandate you offer them?

    I thought everything required government mandates, laws, regulation, etc!

  46. To Pete Muldoon’s response:

    Firstly your use of unlikely hypothetical situations doesn’t bode well for your argument.

    Secondly, I find it incredible that people feel so strongly that this is a problem. There has not been any evidence showing that the fact that the US government doesn’t mandate paid sick days or sick leave makes us any less healthy.

    Where is that evidence?

    Thirdly, do you expect me to have sympathy because you choose, completely willingly (or has someone enslaved you), to work at a job that doesn’t offer the benefits you feel that you deserve? Well, I cannot feel sympathy for people who have made decisions in their lives and then complain of the outcomes of those decisions.

    If you truly don’t like your job and you feel you are worth more then you should seek other forms of employment. Or perhaps better yet be your own boss. Start a business and offer your employees 100 sick days a year or whatever you’d like.

    My only opinion on this matter is that I don’t believe the Gov. should be writing laws concerning this issue. We shouldn’t look to those countries on that chart as good examples of how to run ours.

  47. A few points:

    “There are undoubtedly companies who would like to do this, but who cannot because their competitors don’t, and so they would be left at a comparative disadvantage”

    A company offering sick days and sick leave as part of their benefit package HAS a competitive advantage in that they can hire the best workers since they offer a better employment package (assuming the pay is equal). With better employees the company can be more profitable etc. etc.

    So I don’t see how offering this actually hurts. The ONLY case is in that of low skilled workers (i.e. no skills) were the cheapness of the labor is the only criterion on which selection is made. So here the solution is not to mandate sick days or sick leave, if people want these types of perks they need to seek better employment and for that they need to improve their skill set etc.

    “If all businesses are required to do this, then all of the costs will be transferred to society through higher prices, and there will be no burden at all.”

    What do you mean “no burden at all”! You just said the preceding sentence that “the costs will be transferred to society”, that is the burden!

    If a manufacturing plant in the US has to maintain a certain minimum wage, provide health care to its workers, and offer sick days and sick leave and daycare and massage treatments and etc. etc.

    How long will these manufacturing jobs stay in America? Not very!

    Your employment package (salaray + benefits)is directly commensurate with the value you add. Thus low skilled workers (of which supply is great and value added is small) will have less benefits than high skilled workers.

    Is this unfair? Well…no! Everyone is entitled to what they’ve earned not what the believe they “should” be entitled to.

    This problem is exactly analogous to GM and the UAW. The UAW wants benefits that are NOT commensurate with the value they add to the product. That along with managerial incompetence destroyed the automaker.

  48. It’s funny how some people are actually against sick days as if everything comes down to dollars and cents ALL of the time.

    We are due for a flu epidemic and the best way to spread flu (and other less serious air borne diseases) is to financially pressure people to go to work when they are sick. That means sick people on public transit, sick children at daycare and at school, sick people at work. Most importantly, it means sick and infectious people preparing and serving your food at restaurants and fast food outlets.

    People are not machines. Yes, the economy and money are important but people are animals and animals, when worked too hard or put under too much stress or put into contact with other sick animals, get sick. The economic cost of a greater number of sick people over time as well as a greater risk of flu epidemics going out of control ought to be equal to or greater than the cost of sick days. Most if not all the countries listed on the graph have an overall standard of living (beyond simply the size of one’s pay packet) that is greater than that of the average American. Does this not tell you something? You have the right to work sick but you do not have the right to make everybody else sick just because you insist on working when your body is shutting down.

    Since corporations have been unable or unwilling to fix this obvious problem, it is necessary for the government to step in and regulate. If the economic crisis has taught us anything, it is that private enterprise is not some sort of magic potion to cure all ills, but rather a imperfect system that requires government intervention in order for it to operate properly.

  49. Nostalgia for the 1400 Century is so cutting edge, dude!! Righteous!!!
    Life was so much better when the average life span was 25, because we were so FREE back then.
    I’m going to order you some bumper stickers that read: Quarantines are Slavery.

  50. Do you truly believe what you are saying:

    “Since corporations have been unable or unwilling to fix this obvious problem, it is necessary for the government to step in and regulate. If the economic crisis has taught us anything, it is that private enterprise is not some sort of magic potion to cure all ills, but rather a imperfect system that requires government intervention in order for it to operate properly.”

    Firstly many of the corporations you talk about already DO offer sick days and sick leave. If you don’t have it at your job then you probably don’t have a very good job which is who’s fault exactly?

    No one has a gun to anyone’s head forcing them to work. That’s the bottom line. People need to take responsibility for themselves. If your company doesn’t offer sick days or sick leave I’ll advise two things:

    1) Rainy day fund (i.e. savings!) for when you need time off from sickness and won’t be making money.

    2) Disability insurance for anything very serious.

    You see was that so difficult?

    People need to stop crying like babies asking for Mama and Papa government to “fix” everything with regulations and laws.

    For every 1 government regulation that has had positive effects I can name you 10 that have been complete failures.

  51. Not to dwell on the obvious, but colds and flues are contagious, so you don’t “just” infect your co-workers by going to work sick.

    Atul Gawande wrote a nice piece in the New Yorker a while back on the near impossibility of preventing exposure to the trail of virus-laden snot cold sufferers smear over themselves and everything they touch (

    So infecting your co-workers also means infecting the people they live with and commute with. I’m sure these folks (and *their* employers, co-workers, customers, teachers, etc.) would appreciate less free-riding on the public health investments of others by employers who try to eke 100% performance out of workers operating at 10% capacity.

    As for the argument that we should simply direct sick people to wear protective masks to work (as is common in Japan), the evidence suggests that this tactic is ineffective:

  52. It is true that quarantines of any kind tend not to be useful means of controlling disease outbreaks in society, because people can infect others during asymptomatic incubation periods. However, being sick affects productivity so to the degree to which a sickness propagates throughout the interpersonal network of a company is likely to affect its bottom line. There may be secondary effects, such as customers deciding not to buy products from the company because their employees are all sick.

    An estimate of an average number of sick days that a company in a particular business should have could be made from public health records, and this could be the basis of predicting amounts of sick days and sick leave. Like many governmental regulations, these need not be canonized in statute but could be left to Department of Labor or HHS to specify year after year.

    Indeed, it seems to me that the only market true approach to the problem is to fire employees immediately who are sick, thus protecting the company from productivity losses of any kind.

    Obviously, that’s silly, especially for knowledge-based or skill-based industries. It might make sense for businesses which use unskilled labor. No doubt some do this kind of thing.

    I think we should simply apply a social cost to such companies, and stigmatize them. They are a blemish on our national pride.

  53. With Governement mandated sick days, we lose more competitive advantage than just the number.

    Companies might have different standards for sickness, or for taking off. They might give you extra vacation days, and allow you to use them however you like. Having someone verify that you are sick in order to take off sounds really stupid.

    Meanwhile, with the internet, there are a lot of non-traditional companies where people work from home. How do these people take their benefit?

    In more traditional settings, they might use other strategies, like allowing people to trade work hours or make up their time later.

    All of this would be much more difficult with a government mandated policy.

  54. No Surprise that GM had to sink like the Titanic.. Just the pain and hard work of 300 Million Taxpayers going down the drain.. Whose responsible for that?

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