Paid Sick Leave: Let's Run the Numbers

The NYT has a piece examining efforts to require that employers provide workers with at least 7 days a year of paid sick leave. The article has a good discussion of why workers might need paid time off. It then includes the obligatory comments from small business owners who complain that this requirement will raise costs, which will then be passed on higher prices, which will then cut demand and put them out of business. Does this one make sense? Let's say that if we grant all workers 7 days a year of paid sick leave that the average worker takes 5 of them. This is equal to approximately a 2 percent increase in pay, assuming that there is no offsetting reduction in wages (a very strong assumption). If wages come to 40 percent of total costs, this implies a 0.8 percent increase in prices. If employers manage to offset half of the higher cost of paid sick time with lower wages then the increase in costs is down to 0.4 percent of sales.

--Dean Baker