The Economics of Paid Sick Leave

This article examines the economics of paid sick leave from both theoretical and empirical perspectives. Research on paid sick leave has evolved dynamically over the last decade, primarily driven by U.S. sick pay mandates, which have increased paid sick leave access from 63 percent to 77 percent in all U.S. jobs.

We begin by discussing the economic rationales for government regulation, particularly the negative externalities associated with contagious diseases when individuals work while sick. Then, we review economic modeling approaches to study optimal paid sick leave policies. After that, we discuss key trade-offs in the general design of paid sick leave schemes along with trade-offs when setting specific policy parameters.

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