SCEPA Economist Returns to NYC Council on Behalf of Paid Sick Days

At 11:00am today, SCEPA Faculty Fellow Rick McGahey will testify before the New York City Council's Civil Service and Labor Committee on the economic effects of expanding paid sick leave. His written testimony on behalf of Int. 0001-2014.  

Statement on the Economic Effects of Expanding Paid Sick LeaveRick McGahey
Hearing of the Civil Service and Labor Committee
Of the New York City Council
February 14, 2014

Dr. Richard McGahey

Milano School of International Affairs, Management, and Urban Policy
and the Schwartz Center for Economic Policy Research (SCEPA), The New School

My thanks to Chairman Miller and members of the committee and Council for this opportunity to testify. I am here to strongly support legislation expanding paid sick days to New York City workers at firms with five or more employees and to strengthen the law in other ways.

I am a labor economist with a PhD in Economics, currently teaching in The New School's policy program. I have a long history working on labor policy issues, having served as Chief Economist for the U.S. Senate Committee on Labor and Human Resources, and as Economic Policy Advisor to Senator Edward Kennedy (D-MA). In the federal executive branch, I was nominated by President Bill Clinton and confirmed by the Senate as Assistant Secretary for Policy at the U.S. Department of Labor.

My empirical conclusions are based, in part, on written testimony I submitted last year in support of the original legislation.

The legislation under consideration expands New York's historic paid sick days legislation to include workers at businesses with five or more employees and strengthens the law in other important respects. The legislation is unlikely to create any significant negative economic impact, and, in fact, could create positive economic gains for businesses and provide significant benefits to workers. I have four points supporting the legislation:

 

First, studies of other cities with similar legislation don't find adverse economic impacts. For example, San Francisco, where we have the longest policy record to analyze, had faster economic growth since the legislation was passed than other counties in its region that do not provide paid sick leave. The San Francisco law, in effect since February 2007, does not exempt firms of any size, granting a minimum of five days of paid sick leave to all workers.

San Francisco's program has gone into effect with what the Urban Institute called "minimal impacts" on businesses. The Senior Vice President for Policy of the San Francisco Chamber of Commerce recently described the law's impact as "minimal," and a 2011 study found that over 90 percent of San Francisco businesses reported little or no impact from the law. A 2013 study of Seattle's law giving paid leave to workers in all firms with four or more employees had similar findings, concluding that "the preliminary data provide no evidence of widespread negative economic impacts."

Second, economic research on modest increases in employee benefits, especially the minimum wage, do not show negative effects on job creation. Since a minimum wage increase would be more costly than paid sick leave, and there is no evidence that modest minimum wage increases negatively affect the economy, we should not expect negative job impacts from the paid sick leave legislation.

Third, there is a pro-business case for paid sick leave, in terms of increased productivity and reduced labor turnover. Workers with paid sick leave can be more loyal, work more productively, and do not get their co-workers or customers sick. Also, national data shows us that workers do not use all of the sick days they are allotted, so the actual use of sick days is likely to be less than the statutory maximum amount.

Finally, basic public policy principles teach us that employment legislation should be as uniform as possible for all workers and businesses. Complex carve-out schemes for certain sized firms or specific sectors require more bureaucracy, create an uncertain operating environment for business, and encourage firms and industries to lobby and pursue exceptions rather than tending to their core business activities. And since many employers already provide this benefit, public policy should encourage those good employers who create higher quality jobs. Policy shouldn't create incentives for low-quality jobs, and foster competitive forces that undercut employers who have good labor practices.

In conclusion, there are strong economic arguments in favor of expanding paid sick leave, and there is little empirical evidence that paid sick leave will harm the economy.

• In cities that have enacted paid sick leave, including cities requiring firms with fewer than five employees to provide the benefit, implementation has been straightforward, with minimal impact on businesses.

• Empirical evidence from increases in the minimum wage, a more costly benefit, strongly suggests that an expanded policy of paid sick days will not have discernible effects on employment.

• Paid sick leave would likely benefit workers and businesses, through increased productivity and decreased turnover.

• To encourage good quality jobs and support good employers, the policy should be as uniform as possible, with no significant carve-outs for specific sectors or firm size.

I also want to commend the legislation's elimination of the economic trigger mechanism that would have suspended implementation of the original law. Such triggers are bad policy.

We don't suspend laws governing minimum wages, worker health and safety, or anti-discrimination rules when the economy turns down. Those provisions, like paid sick leave, are basic minimum standards that should apply to all work, regardless of the business cycle. Labor standards should be applied consistently to help businesses plan, but more importantly, to provide basic decency on the job. Although the original trigger was a one-time event, it was bad policy, and amending the law to remove it is the right thing to do.

Thank you for the opportunity to testify on this important issue.

References

Ross O. Barthold and Jason L. Ford, Paid Sick Leave: Prevalence, Provision, and Usage among Full-Time Workers in Private Industry, Bureau of Labor Statistics, February 29, 2012. http://www.bls.gov/opub/cwc/cm20120228ar01p1.htm
Shelley Waters Boots, Karin Martinson, and Anna Danziger, Employers' Perspectives on San Francisco's Paid Sick Leave Policy. Washington DC: The Urban Institute, March 2009.

David Card and Alan Krueger, "Minimum Wages and Employment: A Case Study of the Fast-Food Industry in New Jersey and Pennsylvania." American Economic Review, 1994, vol. 48, no. 4, pp. 772-793.

Arindrajit Dube, T. William Lester, and Michael Reich, "Minimum Wage Effects Across State Borders: Estimates Using Contiguous Counties." Review of Economics and Statistics, 2010, vol. 92, no. 4, p. 961.

Kevin Miller and Sarah Towne, San Francisco Employment Growth Remains Stronger with Paid Sick Days Law Than Surrounding Counties. Washington DC: Institute for Women's Policy Research, September 2011.

John Schmitt, Why Does the Minimum Wage Have No Discernible Effect on Employment? Washington DC: Center for Economic Policy Research, February 2013.

U.S. Department of Labor, Bureau of Labor Statistics, Employee Benefits Survey, Paid Time-Off Benefits, March 2012. Tables 32, 33, 34. ' http://www.bls.gov/ncs/ebs/benefits/2012/benefits_leave.htm

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