Valuing Good Health in Austin, Texas: The Costs and Benefits of Earned Sick Days
- ID: IWPR #B371
Policymakers across the country are increasingly interested in ensuring that workers can earn paid time off to use when they are sick. In addition to concerns about workers’ ability to respond to their own health needs, there is growing recognition that, with so many dual-earner and single-parent families, family members’ health needs also sometimes require workers to take time off from their jobs. Allowing workers with contagious illnesses to avoid unnecessary contact with co-workers and customers has important public health benefits. Earned sick time also protects workers from being disciplined or fired when they are too sick to work, helps families and communities economically by preventing lost income due to illness, and offers savings to employers by reducing turnover and minimizing absenteeism.
The Austin City Council is considering amending Title 4 of the City Code to add a new chapter (4-19), an ordinance that would allow employees to earn up to 64 hours (eight days) of earned sick time per year. Using the parameters of the proposed legislation and publicly available data, the Institute for Women’s Policy Research (IWPR) estimates the anticipated costs and some of the anticipated benefits of the law for employers providing new leave, as well as some of the benefits for employees.
This briefing paper uses data collected by the U.S. Bureau of Labor Statistics, the Centers for Disease Control and Prevention, and the U.S. Census Bureau to evaluate the costs and benefits of Austin’s Earned Sick Time ordinance. It estimates how much time off Austin workers would use under the proposed policy and the costs to employers for that earned sick time. This analysis also uses findings from previous peer-reviewed research to estimate cost-savings associated with the proposed policy, through reduced turnover, reduced spread of contagious disease in the workplace, increased productivity, minimized nursing-home stays, and reduced norovirus outbreaks in nursing homes. This study is one of a series of analyses conducted by IWPR examining the effects of earned sick time policies.
Key provisions of Austin’s Earned Sick Time Ordinance
● All private sector employers shall provide a minimum of one hour of earned sick time for every 30 hours worked by an employee, with the option of capping an employee’s leave at 64 hours (8 days) per year.
● Earned sick time shall begin to accrue at the commencement of employment.
● Employees can use sick time as soon as it is accrued.
● Unused earned sick time can be carried over to the following calendar year, but employers may limit use and carry-over of earned sick time to 64 hours in each calendar year.
● Employers already offering equal or more generous earned sick time, paid time off, or any other type of paid leave that can be used for the sick leave purposes defined in the law would be unaffected. Employers who aren’t currently meeting the minimum standard stipulated by the ordinance can comply by adjusting their paid time off policies to meet the requirements of the Act.
● An employer is not required to provide financial or other reimbursement to an employee upon separation from employment for accrued earned sick time that the employee has not used.
Who will access and use earned sick time?
● In Austin, approximately 211,000 private sector workers currently lack access to earned sick time specifically, and 87,000 workers currently lack paid leave benefits of any kind (including vacation) and would be eligible to receive new leave under the proposed ordinance.
● Employees are estimated to use an average of 2.7 days annually out of a maximum of eight that may be accrued, excluding for maternity.
○ Workers covered by the earned sick time ordinance are estimated to use an average of 1.7 earned days for their own medical needs and the rest to address family members’ medical needs and for doctor visits.
○ Workers will use all of their eight earned sick days after they give birth to or adopt a child.
How much will earned sick time cost businesses?
● Annually, Austin employers are expected to expend about $34.3 million in providing new earned sick time for employees. This cost of the law for employers—which accrues due to increased wages, including benefits and administrative expenses—is equivalent in size to a $0.21 per hour increase in wages for employees receiving new leave, or about $7.56 per week for covered workers (Table 1). Covered workers work on average 7.3 hours per day.
● Covered workers who give birth are expected to use all of their available earned sick time, for an additional annual cost of $483,000 (Table 1).
What benefits will earned sick time produce?
● Providing new earned sick time is expected to yield benefits of $38.8 million annually for employers, largely due to savings from reduced turnover. The anticipated benefits for employers are expected to have a wage equivalent of a savings of $0.23 per hour, or about $8.55 per week for covered workers (Table 1).
● Savings to business from reduced presenteeism totals about $2.8 million. In addition, savings from reduced spread of flu within workplaces, when employees go to work while ill, are about $1.5 million annually (Table 1).
● When estimating anticipated benefits for employers against costs for employers from the act, $4.5 million is expected in net savings for employers, equivalent to $0.99 per worker per week for covered workers (Table 1).
● The community will spend about $3.8 million less annually on health care expenses mostly as a result of reduced short-term nursing home stays and emergency department use. The community will save about $141,000 per year as a result of reduced norovirus outbreaks in nursing homes and long-term care facilities.
The estimates presented in this briefing paper assume that all workers eligible for leave under the new policy would know about their new earned sick time. On the contrary, during the early years of the program, it is likely that many workers will be unaware of their new leave benefits and not take any time off under the new law. In particular, workers may not be aware of the multiple uses allowed by the law. Thus, both costs and benefits in the early years of a new program may be considerably lower than these estimates.
Table 1. Summary of Annual Costs and Benefits of Austin’s Earned Sick Time Ordinance
Other benefits of earned sick time not measured
While data are currently lacking to calculate the full economic impact of having access to earned sick time, it is certain that there are many other benefits, in addition to those discussed above, that accrue to workers, their families, employers, taxpayers, and society as a whole and these benefits are currently not captured in the estimates presented above. These include reduced workplace injuries, increased use of preventive care services, more timely treatment of illnesses, and improved employment and earnings stability, among others (see Milli, Xia, and Min 2016 for a more detailed discussion of these benefits).
Table 2. Costs of Austin’s Proposed Earned Sick Time Ordinance
Table 3. Cost Savings from Not Paying Ill Workers for Unproductive Time on the Job
Table 4. Cost Savings from Reduced Turnover
Table 5. Cost Savings from Reduced Spread of the Flu within Workplaces
Note: Cost and benefit values in constant 2015 dollars.
Table 6. Cost Savings from Reduced Norovirus Outbreaks in Nursing Homes
Table 7. Cost Savings from Reduced Short-term Nursing Home Stays
Table 8. Cost Savings from Reduced Emergency Department Visits
Data and Resources
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Funding for this study was provided by the Ford Foundation and the Annie E. Casey Foundation. This briefing paper was prepared by Jessica Milli, Ph.D.
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 For a comprehensive review of the research literature on the effects of paid sick leave policies, see Milli, Xia, and Min (2016).
 See IWPR’s Paid Sick Days issue page at https://iwpr.org/issue/work-family/paid-sick-days/.
 The proposed ordinance allows employers already offering other paid time off benefits to employees to modify their existing policies to include the use of sick time. Previous IWPR estimates suggest that 211,000 private sector workers in Austin do not have access to leave specifically for personal or family illness, and these workers would gain access to earned sick time after the ordinance is passed Milli (2017). However, many of these workers have access to other forms of paid time off, thus only 87,000 would gain access to new leave under the ordinance.
 The cost of treating patients infected with norovirus is paid in great part with Medicaid and Medicare funds.
 It can be difficult to inform workers of changes in their employment benefits. For instance, three years after California’s new paid family leave program went into effect, only a quarter of workers knew about their new right to take paid leave (Milkman 2008), despite the requirement that employers notify their employees of their right to paid family leave.