Mandated Sick Pay: Coverage, Utilization, and Welfare Effects

NBER Working Paper No. 26832

Issued in March 2020, Revised in March 2020

NBER Program(s):Economics of Aging, Health Care, Health Economics, Labor Studies, Public Economics



This paper evaluates the labor market effects of sick pay mandates in the United States. Using the National Compensation Survey and difference-in-differences models, we estimate their impact on coverage rates, sick leave use, labor costs, and non-mandated fringe benefits. Sick pay mandates increase coverage significantly by 13 percentage points from a baseline level of 66%. Newly covered employees take two additional sick days per year. We find little evidence that mandating sick pay crowds-out other non-mandated fringe benefits. We then develop a model of optimal sick pay provision along with a welfare analysis. Mandating sick pay likely increases welfare.

Acknowledgments

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Document Object Identifier (DOI): 10.3386/w26832