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Market-Based Solutions to Vital Economic Issues
Research
Nov 2, 2021

For Better or Worse? The Economic Implications of Paid Sick Leave Mandates

Abstract

Public calls for a national paid sick leave policy continue to grow in the United States. In the absence of a federal policy, many localities and states enacted their own paid sick leave mandates. We document an average increase of 1.9% in employment following the implementation of a paid sick leave policy. As predicted, workers with ex ante lower access to paid sick leave drive the employment effect, a result which holds with county-quarter fixed effects. Several non-mutually exclusive mechanisms can explain our findings. Following the implementation of a mandatory paid sick leave policy, we find a decline in labor turnover which has implications for labor productivity and, hence, labor demand. We also find results consistent with an increase in the labor supply. Finally, paid sick leave mandates are associated with an increase in household income, creating positive spillover effects on local markets and greater demand for local goods and services.


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