Estimating the Compensation Differential for Paid Sick Leave Benefits

By Shawn Du. Princeton University. 

In this paper, we seek to estimate the wage compensation differential for paid sick leave in the United States using national-level data from the 1996-2010 data from the Medical Expenditure Panel Survey (MEPS) household component. The standard theoretic labor models suggest that wages are a function of paid sick leave benefits, other job characteristics, employee characteristics, other immeasurable worker characteristics. Testing this simplified theory, we find that estimates were significant but wrong-signed (from the perspective of our theory); workers who gained access to sick pay had also exhibited an increase in wages, and vice versa for those who lost access to sick pay. As such, we find that state-level data may, or perhaps more specific data may be needed to pin down causality, where exogenous policy variation can be captured.

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