Sunday, September 9, 2012

Impact of Mandatory Paid Sick Leave on Employers and Employees

While some of the potential costs and benefits of mandatory paid sick leave are discussed in other posts, this one will consider other ways in which employers and employees may be affected.  The Institute for Women's Policy Research (IWPR) conducted a study of the mandatory paid sick leave program in San Francisco which reports that a small percentage of firms were adversely affected in various ways.  However, it is also reported that two-thirds of firms did not have to make any changes to their existing policy.  Given that the mandate should have little impact on these firms, it seems to make sense to focus on the firms that did have to make changes.    For example, 70.6% of firms reported that their profits remained about the same.  Since 2/3 of firms did not have to make any changes, of course there profits remained about the same.  Once one focuses on the 1/3 of firms that did have to make changes, 65.4% of firms affected reported reduced profitability.  Similarly, 43% of employees experienced reductions in other forms of compensation.  When one adjusts the impact of the San Francisco program to reflect the industrial composition of Orange County, it is found that 54% of firms affected (those that need to make changes to their paid sick leave policy) are likely to experience a noticeable reduction in profits while 40% of employees that are not currently provided with paid sick leave will incur some reduction in other forms of compensation or reduced hours as a result of mandatory paid sick leave.  Clearly, based on IWPR's review of San Francisco's experience, this will have a significant impact on employers and employees in Orange County.

What size firms will be most affected?  It should not be a surprise to learn that large corporations are much more likely to halready ave paid sick leave plans.  According to the latest available figures from the Bureau of Labor Statistics, 82% of firms with 500 or more employees offer paid sick leave as do 66% of firms with between 100 and 500 employees, 55% of those between 50 and 100, and 50% of firms with fewer than 50 employees (all the figures apply to firms in the private sector).  Thus, most of the firms impacted by mandated paid sick leave will be small businesses.

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