Sick Leave Impact

The Impact of Paid Sick Leave on Worker Absenteeism:

Evidence from the US

Jie Chen

4/27/2016

Introduction

Paid sick leave is an important employer-provided benefit that helps people obtain health care for themselves and their dependents. Paid sick leave allows employees to leave work to seek care or recuperate at home without losing wages. The US is the only industrialized country in the world that does not provide paid sick leave for all employees. It is estimated that more than 40 million private sector workers in the US did not have access to paid sick leave in 2015. Although some US states and cities have passed regulations or are currently proposing legislation to guarantee paid sick leave, there is no federal requirement. On the

The relationship between financial incentives and absence is amply shown in earlier papers using natural experiments in European countries. Ichino and Riphahn (2005), Riphahn and Thalmaier (2001), and Riphahn (2004) exploit probationary periods or time to reach virtually “undismissable” status as a natural experiment which leads to high employment protection. The authors find that absence rates increase with employment protection in Italy and Germany. For Sweden, Henrekson and Persson (2004) use time series data for 1955–1999 to show that reforms that make sick pay more generous increase absence from work and vice versa. Likewise, Johansson and Palme (2002, 2005) use person-level data to evaluate the Swedish sick pay reform of 1991. The authors identify reactions to the incentives created by the reform: both the incidence and the duration of absence decreased when the cost of absence increased. Using a sick pay reduction in Germany as natural experiment, Puhani and Sonderhof (2010) find that the reform reduced the average number of days spent in hospital by almost half a day.

The American Public Health Association endorses and advocates for paid sick leave benefits as a public health policy. Although peer-reviewed studies on paid sick leave in US companies are limited, evidence suggests that benefits of paid sick leave are associated with lower risk of delaying and forgoing medical care

Denote by Y_1 the outcome conditional on participation and by Y_0 the outcome conditional on non-participation, so that the impact of participating in the program is

Δ= Y_1- Y_0.

For each person, only Y_1 or Y_0 is observed, so Δ is not observed for anyone. This missing data problem lies at the heart of the evaluation problem.

Let D = 1 for the group of individuals who got accepted into the treatment for whom Y_1 is observed. Let D = 0 for persons who do not receive the treatment. Let X denote a vector of observed individual characteristics used as conditioning variables. The most common evaluation parameter of interest is the mean impact of treatment on the treated,

ATT=E(Δ│X,D=1)=E(Y_1- Y_0│X,D=1)=E(Y_1│X,D=1)-E(Y_0 |X,D=1) which estimates the average impact of the program among those participating in