Mandated Sick Pay: Coverage, Utilization, and Welfare Effects

This paper evaluates how sick pay mandates operate at the job level in the United States. Using the National Compensation Survey and difference-in-differences models, we estimate their impact on coverage rates, sick leave use, labor costs, and non-mandated fringe benefits. Sick pay mandates increase coverage significantly by 18 percentage points from a baseline level of 66% in the first two years. Newly covered employees take two additional sick days per year. We find little evidence that mandating sick pay crowds-out non-mandated fringe benefits. Finally, we develop a model of optimal sick pay provision and illustrate the trade-offs when assessing welfare.

Maclean, Catherine, Stefan Pichler and Nicolas R. Ziebarth (2021), Mandated Sick Pay: Coverage, Utilization, and Welfare Effects, ZEW Discussion Paper No. 21-083, Mannheim.