New York City just became the largest city in America to pass mandatory paid sick leave for employees. That means that every employer in the City has to compensate their employees when they’re home sick – whether they can afford to or not.
It sounds like a nice idea. It’s not. And as states and municipalities around the country consider similar legislation, it’s worth taking a critical look at the policy.
The issue here, to use Bill Clinton’s famous words from last year’s campaign, is that “A” word: arithmetic. Mandatory paid sick leave forces business owners who can't afford paid leave benefits to provide them.
That means employers will have to pay twice as much for the same service: they've got to pay for the sick person, and they've got to pay for the person covering for the sick person.
The Partnership for New York City concluded that it would increase citywide private payroll costs by almost $800 million a year.
Well, employers are going to make up that cost somewhere. And it’ll be by raising prices, cutting benefits or worse: curbing hiring or implementing layoffs.
It’s Economics 101: when the cost of labor increases, companies hire fewer workers. And a business struggling to survive in our weak economy is obligated to maximize efficiency.
Recent history serves as a cautionary tale. When mandatory paid sick leave was implemented in San Francisco, 30% of the city’s lowest-wage employees reported layoffs or reduced hours as a result.
When the State of Florida was mulling a similar policy, one independent study revealed that 40% of affected employees would see their compensation reduced in some way.
Here in New York City, almost 90% of private sector employees already have access to paid sick leave, and most others can use paid vacation days or personal days if they’re ill. Even the ones that don’t can call their boss and come to an agreement; or make agreements to switch shifts with a co-worker.
Mandatory paid sick leave requirements extend benefits to far too few workers at the expense of actual jobs for far too many others.
Perhaps the most damning aspect of this policy is that it hurts small businesses and start-ups the most, as those types of businesses rely heavily on just a few people, and often operate on razor-thin profit margins, or even at a loss.
And in a sluggish recovery, small businesses and start-ups and the types of businesses that we can least afford to punish.
The notion that government can assist employees at the expense of their employers may be attractive to some, but it’s a fiction nonetheless.
And with Obamacare’s health insurance mandate looming like the Sword of Damocles over businesses, and amidst the worst economic recovery on record, imposing even more regulations on our Nation’s employers will only serve to increase the cost of creating jobs.
It’s worth noting that Connecticut and Washington DC, which are the only two areas with statewide paid sick leave, rank 37th and 44th respectively in terms of statewide unemployment, well above the national average.
Mandatory paid sick leave hurts businesses, consumers, and the very workers it seeks to protect by raising prices, lowering employment and weighing down an already weak economy.