The impact of paid sick leave laws on consumer and business bankruptcies

Abstract

This paper examines how missed income due to illness impacts household fragility. Specifically, it shows that paid sick leave laws, which provide households insurance against illness-related income shocks, reduce consumer bankruptcy. Using a panel dataset at the county-quarter level, this paper exploits the geographic and temporal variation in the adoption of paid sick leave laws to implement a difference-in-differences and event study analysis. It finds that paid sick leave laws reduce consumer bankruptcy filings by approximately 11%; this effect is seen within three quarters of the law's implementation and remains constant in magnitude and significance thereafter. As paid sick leave laws may come at a cost to businesses, this paper also examines the impact of such laws on business bankruptcy filings-it shows that paid sick leave laws have little to no impact on business bankruptcy filings.

Is paid sick leave bad for business? A systematic review

“…Most studies assessed national samples, while four studies used state data, 8,12,24,25 often in comparison to other states, and five studies used local data 9,18,23,48,49 . Fourteen of the studies included the passage of a state or local mandate as a stimulus for studying associations with PSL 12,15,16,19–21,23–28,35,42 . Outcomes were measured in terms of the individual unit of analysis except for eight studies that used the organization 16,23,24,40,41,44,47,48 and seven studies considered the region as the unit of analysis 12,19–21,26,28,35 …”

“…Table 1 includes the article characteristics including study design, data source, population, setting, unit of analysis, and whether or not the paper substantively focused on legally mandated PSL. Thirteen studies were quasi-experimental in nature, 12,[18][19][20][21][22][23][24][25][26][27][28][29] generally utilizing a difference-in-differences approach. The remaining studies were observational in nature, many using panel and longitudinal data for analysis.…”

“…15,36 Additional data sources include the National Health Interview Survey (NHIS), 27,[37][38][39] National Core Indicators (NCI), 40,41 the Centers for Disease Control (CDC), 16,21,42 and The Shift Project. 25,29 Ten other panel data sources were used 16,19,20,26,28,[43][44][45][46][47] along with 12 unique data sets collected independently by the study's authors.…”

“…9,18,23,48,49 Fourteen of the studies included the passage of a state or local mandate as a stimulus for studying associations with PSL. 12,15,16,[19][20][21][23][24][25][26][27][28]35,42 Outcomes were measured in terms of the individual unit of analysis except for eight studies that used the organization 16,23,24,40,41,44,47,48 and seven studies considered the region as the unit of analysis. 12,[19][20][21]26,28,35 The following is a focused discussion of study findings with regard to the specific proximal and distal business variables.…”

“…12,15,16,[19][20][21][23][24][25][26][27][28]35,42 Outcomes were measured in terms of the individual unit of analysis except for eight studies that used the organization 16,23,24,40,41,44,47,48 and seven studies considered the region as the unit of analysis. 12,[19][20][21]26,28,35 The following is a focused discussion of study findings with regard to the specific proximal and distal business variables. These findings are highlighted in Table 2: studies appear in the favorable column if the study findings are favorable to business; conversely, they appear in the unfavorable column if the study findings are unfavorable to business conditions.…”