Do Paid Sick Leave Mandates Increase Productivity?

Abstract

This paper exploits the staggered implementation of paid sick leave (PSL) mandates to assess their real effects on U.S. corporations. We find that mandatory access to sick pay leads to higher labor productivity and firm profitability. These performance improvements concentrate in industries that require more physical presence in the workplace, which suggests that PSL generates a positive health externality. The effects are also more pronounced for firms with more expensive labor force, indicating that employees who value sick pay benefits have high human capital, and in counties with higher social capital, where the risk of absenteeism may be less severe.

Keywords: Paid Sick Leave, Firm Performance, Employee Health, Human Capital

JEL Classification: G3, I18, J32, M5