Third and State Recap: Marcellus Jobs, Pa.’s Budget, Paid Sick Days & a Misleading Health Care Stud

Over the past two weeks, we blogged at Third and State about Pennsylvania’s state budget, Marcellus Shale job creation, paid sick days legislation in Philadelphia, and a thorough debunking of a misleading study on the Affordable Care Act.

IN CASE YOU MISSED IT

  • Last week, Pennsylvania enacted a 2011-12 state budget, with deep cuts to schools, health care and human services, while leaving most of a $785 million surplus on the table. Sharon Ward had an overview of the budget and also posted this media statement calling it a budget that does less with more. Michael Wood, meanwhile, shared the Pennsylvania Budget and Policy Center’s year-end Revenue Tracker.
  • On paid sick days, Stephen Herzenberg blogged about Philadelphia Mayor Michael Nutter’s veto of a bill that would have allowed every worker in the city to earn paid sick days.
  • On the Marcellus Shale, Stephen wrote about a recent Keystone Research Center policy brief on the actual job contribution of the Marcellus boom and also reflects on the attacks it generated from the natural gas industry and its allies. He also wrote about a statement from Lieutenant Governor James Cawley repeating widely-circulated figures that  risk a misleading impression of job creation in the state’s Marcellus Shale industries.
  • Finally, on health care, Chris Lilienthal highlights a recent blog post from Ron Pollack at Families USA that thoroughly debunks a misleading study about the impact of the Affordable Care Act on employer-provided health coverage.

More blog posts next week. Keep us bookmarked and join the conversation!

Philadelphia Mayor Vetoes Paid Sick Leave Bill

( – promoted by John Morgan)

A blog post from Stephen Herzenberg, originally published on Third and State.

Some bad news out of Philadelphia Tuesday – Mayor Michael Nutter vetoed legislation that would have allowed every worker in the city to earn paid sick days.

As Lonnie Golden, a professor of economics and labor studies at Penn State Abington, and I wrote in an op-ed earlier this month, a paid sick days law would be good for business, good for the economy and good for public health in Philadelphia.

The public seems to agree. Seven in 10 Philadelphians supported the bill, according to a recent poll.

As we wrote in our op-ed:

Paid sick days are good for business and the community, as well as for families. Businesses save because worker turnover declines, lowering hiring costs and eliminating lost productivity as new workers get up to speed.

The cost of hiring is high compared to paying for sick days because managers and human-resource professionals who recruit earn more than lower-wage workers. Businesses also save because paid sick days reduce worker resentment and improve worker-manager relations.

The community benefits because, when sick workers stay home, disease doesn’t spread to other workers or to customers. Workers also obtain more timely medical care and recover faster, reducing lost productivity and holding down health-care costs.

Hopefully, City Council will agree and override the Mayor’s veto when it reconvenes in September.

Third and State This Week: Preserving Tobacco Funds for Health Care and Fasting for PA’s Vulnerable

This week, we blogged about the latest job numbers, efforts to preserve tobacco settlement dollars for health care services, paid sick days legislation and more.

IN CASE YOU MISSED IT

  • On health care, intern Emma Lowenberg blogs about an effort by consumer health advocates to urge the state Senate to preserve Pennsylvania’s share of tobacco settlement funds for health care purposes.
  • On the state budget, Chris Lilienthal writes about the “Fast for PA’s Vulnerable,” an effort by Harrisburg faith leader Stephen Drachler to draw attention to the impact of budget decisions on Pennsylvania’s most vulnerable by abstaining from solid foods.
  • On unemployment and the economy, Emma sums up the May jobs report by turning to the expert analysis of four leading economists.
  • And on workplace issues, Steve Herzenberg shares a recent op-ed he coauthored with economics and labor studies professor Lonnie Golden on the benefits of paid sick days in Philadelphia.

More blog posts next week. Keep us bookmarked and join the conversation!

Paid Sick Days Can Help Make Philadelphia a High Road City of Opportunity

( – promoted by John Morgan)

A blog post from Stephen Herzenberg, originally published on Third and State.

Last week, I wrote that when you look at the positive benefits and the low costs of Philadelphia’s proposed paid sick days legislation, it could end up paying for itself.

As I wrote that, I could almost hear a collective gasp from neoclassical economists: “If it paid for itself, employers would already do it!”

Employers in the standard economic model are assumed to be all knowing (they have “perfect information”) about the present and all possible futures. When it comes to whether to offer paid sick days, for example, it is assumed that employers can estimate the turnover savings that would result as well as any productivity benefit.

If you embrace the standard model, all employer behavior is the result of a profit-maximizing calculation. Thus, the difference between employers that offer paid sick days and those that don’t is that the profit-maximizing calculation comes out differently for the two groups. One group of employers finds that paid sick days pay for themselves. The other group finds that paid sick days don’t pay for themselves. (Six out of 10 workers are at employers that offer paid sick days without a mandate and four out of 10 workers are at employers that don’t provide paid sick days.)

Now I’m an “institutional economist” who rejects the perfect information assumptions of standard economics. I also reject the standard view of how businesses make decisions as implausible, which means we need another explanation.

I also happen to direct a small business that employs eight people, and we offer paid sick leave. The idea that we do because we’ve done some precise calculation that it’s good for business is, well, laughable. We do believe that it’s good for business, but that belief is more an expression of our organizational philosophy and approach, rather than something we can “prove” mathematically. If we’re going to expect employees to go the extra mile when we have proposals due or a major event on the calendar, we need to be understanding when employees are sick or facing a family crisis.

So let me offer a different explanation to the standard economists’ view about what distinguishes employers that provide paid sick leave from those that don’t. What distinguishes these employers is that they have different “business strategies” and associated organizational and human strategies.

By and large, businesses that provide sick leave buy into the idea that treating employees fairly pays for itself. These businesses may also see paid sick leave as part of a reciprocal relationship in which employer and employee recognize each other’s needs. Businesses that provide paid sick days may also have a bit more technological and organizational sophistication: they know that tracking paid sick days is a one-time $100 adjustment to a time sheet or payroll service contract; they have the experience and confidence to know that “sky is falling” claims about the astronomical costs of administrating paid sick days are silly.

So here are two questions:

  • Does Philadelphia – or any city or state – want more businesses with enlightened approaches that lead them to provide paid sick leave or more with business strategies that mean they don’t provide paid sick leave?
  • Which of the following is more likely to get you more businesses with enlightened approaches: (1) advanced and effectively enforced labor standards, including paid sick leave, or (2) having low standards?

Ideally, advanced standards should be accompanied by technical assistance that help businesses shift their strategies in ways that make complying with standards a natural outgrowth of operating practices. For example, the city could give Philadelphia’s Sustainable Business Network (SBN) a contract to manage a “sustainable small business partnership” that promotes advanced organizational practices across the board at employers with less than 50 workers. The mix of carrot and stick, technical assistance and mandate, is more effective than either alone. Our shorthand for this common sense and pragmatic combination is “pave the high road and block the low road.”

In the environmental area, the idea that high standards promote innovation and economic competitiveness is gaining ground, helped by mainstream support from the likes of Harvard Business School professor Michael Porter. In the labor area, there’s not as much embrace of the idea that advanced standards can drive innovation. There is more embrace of the idea that 19th century labor standards gets you something other than 19th century capitalism.

But when it comes to people as well as to the environment, Philadelphia wants to be ahead of the curve in adapting enlightened workplace standards. That’s how to attract and grow entrepreneurs and committed workers who can make Philadelphia a center for innovation and growth.

Third and State This Week: Teacher Salaries, Legislative Updates & Paid Sick Leave in Philadelphia

This week at Third and State, we blogged about teacher salaries and a paid sick leave bill in Philadelphia City Council, along with providing legislative updates on efforts to cut unemployment benefits in Pennsylvania and advance a state budget with deep cuts to education and human services.

IN CASE YOU MISSED IT:

  • On workplace issues, Steve Herzenberg takes apart an analysis by an economist for the National Federation of Independent Business that vastly overstates the impact of a paid sick leave bill now before Philadelphia City Council.
  • On unemployment insurance, Mark Price reports on the defeat of an anti-worker unemployment compensation bill in the state House, and has a follow-up post with data on income in York County to explain what is at stake when politicians tinker with unemployment.
  • On the state budget, Chris Lilienthal writes about House passage of a state budget that cuts $1 billion from public schools and reduces Governor Corbett’s budget by $471 million for health and human services for women, children and people with disabilities.
  • Finally, on education, Steve Herzenberg highlights a project that is educating Americans on the relatively low teacher pay in this country compared to the most successful educational systems in the world.

More blog posts next week. Keep us bookmarked and join the conversation!

Using NFIB Economist’s Estimates on Paid Sick Days: It’s Not Cricket

A blog post from Stephen Herzenberg, originally published on Third and State.

As a kid living near Manchester in the north of England, my first love was cricket. The sport (it is a sport) comes up nowadays when I use the phrase “it’s not cricket” – as in, it’s not acceptable, it’s not done.

In a report circulated to Philadelphia City Council and the media (but not online that I can find), Dr. William Dunkelberg estimated the cost to employers of enacting paid sick days legislation in Philadelphia. Even if you oppose paid sick days, you shouldn’t use the Dunkelberg estimates because, well,  “It’s not cricket.”  The estimates are so transparently inflated that folks who live in a fact-based world shouldn’t use them.

Dr. Dunkelberg, the Chief Economist of the National Federation of Independent Business, conducted an analysis of implementing paid sick days, concluding that it would cost $350 million to $752 million to implement, and would reduce employment by 4,000 jobs.

So what’s wrong with this estimate? (This post draws from a more extended critique of Dunkelberg online.)

The most basic mistake is that Dr. Dunkelberg double counts the maximum cost of paid sick days. He assumes that workers will take all their legally permitted paid sick days each year, costing $350 million. He then says that some of the absent workers will be temporarily replaced. The maximum cost of this, if every worker is replaced, would be another $350 million. So that gets you to $700 million. Add $52 million in compliance costs at businesses that already have paid sick days and you get Dunkelberg’s $752 million figure.

But wait a minute. If workers aren’t sick, they get their job done at a cost to the employer of $350 million. If those workers are out sick and temporary replacements are hired, the work still gets done but somehow it costs the employer an additional $700 million? Wrong. The additional cost is $350 million – $700 million minus $350 million equals $350 million. I keep asking myself, am I missing something here? He can’t possibly have made this kind of mistake, can he? He can and he did.

Beyond this, consider two assumptions that drive Dr. Dunkelberg’s high-cost estimate.

First, he assumes that all workers take all of their sick leave. Evidence from national surveys and San Francisco indicates that people actually take a third to 40% of their permitted leave.  Many workers view paid sick days as insurance – to be saved up in case they are needed, not used as personal days or extra vacation. Using the 40% figure, $350 million becomes $140 million.

Second, let’s consider how much employers actually hire replacements. Data from San Francisco indicate that employers do so less than 10% of the time. That means the additional, out-of-pocket, labor costs (for employers currently without paid sick days) fall to less than $14 million, a far cry from $700 million.

To be fair, there will be some lost productivity when workers are not replaced. It’s hard to say how large this will be. Many workers who are occasionally out sick “get their work done” anyway. (I don’t notice my work disappearing when I’m out.) Where that is not possible (e.g., nursing home care, customer service jobs, hotel housekeeping), other workers may pick up the slack. Based on this, the $14 million might climb to somewhere between $50 million and $100 million.

But wait, we haven’t even considered yet a series of positive benefits from paid sick days:

  • Reduced turnover and recruitment and training costs
  • Improved worker-supervisor relations and higher levels of work effort and commitment as workers’ reciprocate for paid sick days
  • Reduced health problems due to contagion of other workers and of customers or clients

When you take all of these factors into account, there is a solid analytical and empirical reason for believing that implementing paid sick days would pay for itself – or better.

Bottom line, when carefully scrutinized, William Dunkelberg’s analysis of the costs of the proposed Philadelphia paid sick days ordinance is simply not credible. Regardless of whether you think paid sick leave is a good idea or not, if you agree with me about the Dunkelberg study, I hope you won’t use it. Because using something you know is wrong, “that’s not cricket.”

Come back next week for another take on why advanced labor standards such as paid sick leave can be good for the economy.