Paid Sick Leave Costs Jobs

Mandates on small private businesses invariably raise costs and reduce efficiency.

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Eileen Applebaum wrote in a recent piece that attitudes are changing on mandatory paid sick leave ("Business Attitudes Toward Paid Sick Leave Are Changing," March 6). She goes on to cite newspaper editors in Philadelphia who no longer oppose the idea and business owners in San Francisco who don't mind a local law forcing them to provide the benefit.

Due respect, but the attitudes about heavy-handed government mandates among newspaper editors in Philly and folks in San Francisco can't really be generalized beyond those two groups. 

Her article mentions a law passed two years ago in our state of Connecticut, where small business owners overwhelmingly opposed it and where their experience tells a different story. In fact, the Hartford Business Journal reported just last month that according to a recent survey, many employers in Connecticut have adjusted to the mandate by cutting benefits, wages, hours, and jobs. 

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It is true, as Ms. Applebaum reports, that the U.S. Women's Chamber of Commerce endorsed the law. But that organization has a very particular viewpoint that is frequently out of the mainstream of the business community. Most business groups, including the National Federation of Independent Business, the country's leading small business advocate, warned loudly that the law would have a negative effect on employers and the economy.

In fairness, Connecticut is a rough place for business. In the past several years the governor and legislature have piled on higher taxes and more mandates of every dimension. So it's hard even for economists to quantify the effect of a single imposition. Ms. Applebaum points to state officials who say employment has grown since the passage of the law. But that isn't really true  According to the Connecticut Department of Labor, the state's unemployment rate jumped above the national average in July of last year and has remained there ever since. In fact, Connecticut is one of only two states with no net job growth in the past 22 years.

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What is true is that mandatory paid leave raises the cost of doing business, which as a matter of common sense can't be good for most employers and must certainly depress employment. It's also true that such burdens fall hardest on small businesses that don't have the resources to match their corporate cousins. So, a family restaurant with 50 employees (Connecticut's threshold), for example, loses four percent of its workforce when two people call out sick.  Paid leave forces the owner to compensate those workers and then spend more money to get their jobs done.

There are only a few ways for small business owners to handle the situation: let the work go unfinished, which results in lower productivity, reduced service or lost sales; shift another worker from his or her task, which has the same results; pay another worker overtime to do two jobs or hire a temporary worker to fill in for the sick employee. In both of those cases the employer is essentially paying twice for the same labor.

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No one doubts that the world would be more perfect if everyone could be paid for their sick time. But that's not the real world. Small business owners operate on very thin margins and many are barely hanging on. Indeed, 20 percent of National Federation of Independent Business's members last year reported that they paid themselves no income at all so they could stay open. And since small business owners have a much more intimate relationship with their employees than big corporations, their investment isn't merely financial but personal. Usually they'll accommodate their workers without government supervision.

Mandates on small private businesses invariably raise costs and reduce efficiency. They also cost jobs, which raises the moral question of whether politicians, academics, and activists who are pushing paid leave are really doing much good for the people about whom they care.

Andrew Markowski


Connecticut State Director for the National Federation of Independent Business