This summer, because of a 2014 referendum passed by nearly 60 percent of voters, Massachusetts became the latest state to require all businesses with 11 or more employees to provide paid sick leave.
The policy sounds compassionate. Nobody wants to worry about losing a job or not being able to pay the bills during difficult times. And none of us want to see our friends or neighbors have to worry either.
But Americans need to understand the tradeoffs that come with such mandates and recognize how such laws can unintentionally hurt those voters most want to help.
Most businesses and workers aren’t affected by such leave regulations because most employers offer paid leave even where they are not required to by law. According to the Bureau of Labor Statistics, three-quarters of full-time private industry workers have paid sick leave, though this understates the true portion of workers with paid leave, since many businesses offer broader “personal leave” that can be used for illness as well as other time off.
Of course, part-time workers and those with lower incomes are less likely to have paid sick leave benefits. Although news stories suggest that these groups will be the big winners from the new mandate, they are also the people who will end up paying the mandate’s costs.
Employers forced to implement the new mandate will now face new costs. Not only will they now have to pay absent workers, but they also face increased workplace disruptions and new administrative burdens. Those costs have to be made up somewhere. Perhaps some will be able to pass the costs on to customers, but many will have to lower other employment costs. As a result, they may try to consolidate staff — employing fewer, more productive workers and outsourcing some jobs. Or they may reduce their employees’ take home pay. That mean some part-time workers may find their jobs eliminated; some may not see another raise; and others may find their hours reduced. They have a new benefit, but may also have few dollars in their paychecks.
Already an average of 30 percent of the total employment costs for each worker go to benefits and taxes, rather than take-home pay. Piling on mandates shifts more compensation to benefits. Some may shrug their shoulders, but particularly those with lower incomes may prefer higher pay over more leave time. And why shouldn’t they have that option?
This is a point that tends to be missed by the media covering the debate about sick leave. The media often describes government mandates as a gift to workers, but they neglect the fact that government mandates also take some things away. Every time the government mandates a new benefit, it means workers have fewer opportunities and less control over how they are compensated.
Women ought to be particularly wary of how such mandates play out in the real world. A recent New York Times piece highlighted how so-called family friendly policies put in place overseas resulted in fewer jobs for women and lower take-home pay. Rather than helping women “lean in,” they were often a drag on women’s economic progress.
Questioning the need for government mandated paid leave, however, doesn’t mean one has to accept the status quo. Policymakers should consider how to help those who face true hardship due to a lack of paid leave and make it easier for businesses to provide this support. Senator Marco Rubio recently proposed providing tax credits for businesses that offer employees paid time off, which would make it easier for employers with tighter budgets to offer paid leave time. Policymakers ought to also consider ways to target financial support to those who most need it. Expanding the earned income tax credit, for example, so that workers who have to take time off for an extended illness or the birth of a child can replace lost income, might alleviate hardship, but without destroying job opportunities.
In a perfect world, everyone would have plenty of options for high-paying jobs with generous benefits. But in the real world, there are tradeoffs between income and benefits, and higher employment costs mean fewer jobs. Voters deserve to know this and should recognize that sometimes proposals that sound compassionate, actually aren’t.
Carrie Lukas is the managing director of the Independent Women’s Forum.