Does Paid Sick Leave Improve Economic and Public Health Outcomes?

Pichler et al. (2026) examine whether governments should mandate paid sick leave and how such policies should balance worker protection against excessive absenteeism. They review international data and causal studies of U.S. sick-leave mandates. They find that expanded access increases sick-leave use but produces important benefits. Newly covered U.S. workers take about two additional sick days annually, while influenza-like illness falls by roughly 6–11 percent following mandates. Evidence shows little reduction in overall employment or wage growth, and one study finds women’s employment increases by 1 percentage point. They conclude that paid sick leave is likely welfare-improving, especially by reducing the spread of contagious illnesses at work.

Why This Article Was Selected for The Policy Scientist

This article addresses a consequential policy question: how paid sick leave can protect workers from income losses while reducing workplace disease transmission without creating excessive absence from work. The issue remains timely as governments reassess workplace protections following COVID-19 and confront substantial international differences in sick-leave coverage. Pichler, Ziebarth, and their collaborators have produced considerable research in this field, allowing the article to synthesize a mature body of evidence. Published in the Journal of Economic Perspectives, a leading economics journal, it draws on strong international data and numerous causal studies, including difference-in-differences analyses and a randomized field experiment. This evidence provides unusually strong empirical foundations for a review article and supports reasonable generalization across advanced economies, although institutional differences matter.

Full Citation and Link to Article

Pichler, S., Prinz, C., Thewissen, S., & Ziebarth, N. R. (2026). The economics of paid sick leave. Journal of Economic Perspectives, 40(2), 215–242. https://www.aeaweb.org/articles?id=10.1257%2Fjep.20251479

Central Research Question

The article examines the economics of paid sick leave, focusing on two related questions: when government intervention in the provision of paid sick leave can improve economic welfare and how such programs should be designed. The central economic trade-off is between two forms of potentially inefficient behavior. Generous benefits may encourage employees to take more time away from work than their health requires. Conversely, inadequate benefits may induce sick employees to continue working, reducing productivity and potentially transmitting contagious diseases to coworkers and customers.

This issue is particularly relevant in the United States because it lacks a universal federal paid sick leave requirement. Instead, 18 states, Washington, DC, and numerous local governments have adopted mandates. Other high-income countries generally guarantee paid sick leave but differ substantially in replacement rates, waiting periods, monitoring requirements, benefit duration, and financing. These institutional differences allow the authors to consider not merely whether paid sick leave should exist, but how governments can structure it to balance income protection, workplace productivity, disease transmission, and incentives to return to work.

Previous Literature

The analysis builds on several major strands of economic research. Summers (1989) provides an important theoretical foundation by examining the economics of mandated employee benefits. His framework demonstrates that mandated benefits need not substantially reduce employment when workers value the benefits and accept some of their cost through compensation adjustments. The article also draws on the classic insurance literature concerning adverse selection and moral hazard, including Pauly (1974) and Rothschild and Stiglitz (1976).

Research specifically examining sick leave provides increasingly strong empirical evidence. Pichler and Ziebarth (2017) study local U.S. mandates and find evidence that access to paid sick leave reduces the transmission of influenza-like illnesses. Pichler, Wen, and Ziebarth (2020) extend this work using state mandates and Centers for Disease Control and Prevention surveillance data. Maclean, Pichler, and Ziebarth (2025) examine 13 state mandates using detailed National Compensation Survey data, providing evidence about coverage, utilization, and employer costs.

The article also draws on research examining how benefit generosity changes employee behavior. Ziebarth and Karlsson (2010, 2014) study sick-pay reforms and demonstrate that employees respond to financial incentives. Pettersson-Lidbom and Thoursie (2013), using a randomized Swedish experiment, show that seemingly straightforward restrictions such as unpaid waiting periods can generate unintended behavioral responses. Together, this literature establishes that both access to paid leave and the precise structure of benefits affect employee decisions.

Data

Rather than analyzing a single original dataset, the article synthesizes evidence from numerous datasets, countries, and research designs. For international comparisons, the authors assemble consistently measured labor-force survey information from the United States, European Union, Canada, United Kingdom, Australia, Chile, Korea, and Japan. These data measure work absences caused by sickness and reveal substantial international variation. Sick-leave rates range from approximately 1 percent of contracted workdays in Korea, the United Kingdom, and the United States to more than 4 percent in France, Germany, and Chile.

The U.S. evidence is particularly extensive. Studies reviewed in the article use the Current Population Survey, American Time Use Survey, National Compensation Survey, CDC influenza surveillance system, and policy variation generated by state and local paid sick leave mandates. One especially large study uses 443,740 firm-job observations from the National Compensation Survey covering 2010–2022.

The international data provide unusually broad institutional comparisons, while the U.S. administrative and survey data permit more rigorous causal analyses. However, international comparisons alone cannot establish that differences in paid sick leave policies cause differences in employee behavior because countries differ in many other respects.

Methods

The article is primarily an economic and empirical literature review rather than a new causal analysis. It combines economic theory, descriptive international comparisons, reduced-form causal evidence, randomized evidence, and structural modeling.

Several studies reviewed employ difference-in-differences designs that exploit the staggered introduction of U.S. state and local mandates. This approach compares changes in jurisdictions adopting paid sick leave with contemporaneous changes in jurisdictions that have not yet adopted such requirements. Other evidence comes from policy reforms that change replacement rates or other program characteristics.

Particularly noteworthy is the Swedish randomized field experiment examined by Pettersson-Lidbom and Thoursie (2013), which provides unusually strong evidence about behavioral responses to sick-leave rules. The article also discusses structural and optimal social-insurance models. Maclean, Pichler, and Ziebarth (2020), for example, adapt the Baily-Chetty framework to evaluate the welfare consequences of sick-pay generosity. Collectively, these approaches are substantially stronger than relying exclusively on conventional multivariate regression because much of the central evidence exploits plausibly exogenous policy variation.

Findings/Size Effects

The evidence indicates that expanding paid sick leave produces measurable changes in both employee absence and public-health outcomes. Maclean, Pichler, and Ziebarth (2025) estimate that employees newly gaining paid sick leave take approximately two additional sick days during the first year of coverage. They estimate an extensive-margin elasticity of approximately 0.9: a 10 percent increase in access is associated with approximately a 9 percent increase in sick-leave use.

At the same time, greater access appears to reduce infectious disease transmission. Pichler and Ziebarth (2017) find that influenza-like illness declined approximately 6 percent during the first two years following mandates in eight U.S. cities. Using state-level mandates and CDC surveillance data, Pichler, Wen, and Ziebarth (2020) estimate an approximately 11 percent decline in influenza-like illness during the first year after implementation. Thus, increased absence is accompanied by a measurable reduction in contagious illness.

The labor-market effects appear comparatively small. Maclean, Pichler, and Ziebarth (2025) estimate that mandates increase average employer labor costs by approximately $0.06 per hour worked. Against an average hourly gross wage of $22.63, this represents roughly 0.3 percent of wages. Existing evidence provides little indication that mandates substantially reduce aggregate employment or wage growth. Slopen (2024) instead estimates approximately a 1 percentage-point increase in women’s employment, with larger effects among women with children and women without college degrees.

Worker valuations are also important. Maestas et al. (2023) estimate that employees would sacrifice approximately 16 percent of wages for ten days of paid leave, although ten days represent only about 4 percent of a 250-day working year. This suggests that employees may value paid time off considerably more than its direct wage cost.

Program generosity nevertheless creates behavioral responses. Among U.S. public school teachers, Cronin, Harris, and Ziebarth (forthcoming) find that a 10 percent increase in accumulated sick-leave credit increases the probability of taking sick leave on a particular school day by approximately 4.5 percent. This evidence reinforces the central trade-off: greater generosity provides insurance and facilitates staying home when ill, but it can also increase utilization.

The international evidence further suggests that policy design matters. Replacement rates, waiting periods, monitoring, and maximum benefit durations vary dramatically across countries. The correlation between national sick-leave rates and the two-week wage replacement rate is 0.66; for the four-week replacement rate, it reaches 0.93. These correlations are descriptive rather than causal, but they are consistent with stronger financial protection increasing work absence.

Conclusion

The evidence supports a nuanced economic case for paid sick leave. Unregulated labor markets may provide paid leave voluntarily, particularly when workers value the benefit and employers gain from improved recruitment, retention, or productivity. Nevertheless, individual employers and employees cannot necessarily account for the costs imposed on other people when contagious workers remain on the job. Disease transmission therefore provides one of the clearest economic rationales for government intervention.

The findings also indicate that the central policy question extends beyond whether paid sick leave should be available. Program design determines the balance among income protection, disease transmission, productivity, employer costs, and employee incentives. Waiting periods, replacement rates, monitoring requirements, benefit durations, financing mechanisms, and individualized credit accounts each generate different behavioral responses.

For the United States, the evidence reviewed generally indicates that expanded paid sick leave increases employee use while imposing relatively modest direct labor costs and producing substantial reductions in infectious illness. The strongest causal evidence therefore suggests that paid sick leave can generate benefits extending beyond the individual worker receiving it. At the same time, evidence that employees respond to benefit generosity demonstrates why program design matters. The article ultimately presents paid sick leave as a social-insurance problem requiring policymakers to balance protection against illness-related income loss and disease transmission with incentives that discourage unnecessary work absence.