$MALL BIZ $UCCE$$ VS THE PAID $ICK LEAVE (PSL)!

MI State Sen Jim Ananich recently re-intro-ed legislation that would require bizes to allow 1 hr of Paid Sick Leave (PSL) for every 30 hrs worked. Assuming a 40 hr work week, this amounts to 8.7 paid sick days per yr. The proposed sick leave may be used for the worker’s own health, a med appt, for preventative care or for a family member. It also allows sick leave for legal/other services needed b/c of domestic violence/sexual assault. According to 2015 study by the Institute for Women’s Policy Research (IWPR), 1.6M MI workers (46.6%) are NOT afforded ANY PSL.  (B-4 reading further please consider this Scope’s Addendum.)

 

Sen Ananich said that “[n]o one should have to make the . . . decision of choosing b/t their personal or family health or a paycheck” (Mlive, 2/5/15). The bill’s proponents believe PSL will allow employees to better address their own sicknesses as well as family duties thereby increasing their work productivity. Opponents fear the costs from the leave time, lost productivity and costs from PSL administration and tracking. (Crainsdetroit.com 1/21/15).

 

Nationally, 40%± of private sector workers have NO access to paid sick days (Bloomberg, Debate over Mandated PSL Heats Up, 3/10/14). The US is the ONLY nation in the western hemisphere that does NOT afford its workers such leave. Currently, the US allows for unpaid sick leave, which puts it on par with Angola & Mozambique (World Policy Center). Fed legislation (similar to that of MI) aka the Healthy Families Act is now in subcommittee. Proponents say PSL helps low-wage workers who generally lack access to this benefit. Opponents say that it would hurt employers in labor-intensive industries (who hire many part time and seasonal workers) & will greatly impact small bizes vs big bizes who usually provide PSL (Bloomberg).

 

As we know small bizes backbone the US economy. They significantly impact MI’s economy representing over 98% of ALL employers and are responsible for over 50% of the state’s private sector employment. A small biz (by definition) employs fewer than 500 employees. W/I recent yrs (past the Great Recession), the # of small bizes (and those employed by them) have continued to shrink. In 2000 there were 190,730 small MI bizes (with employees). By 2013 there were 169,053 small bizes (with employees) or a loss of 11.6% of ALL small bizes. Given MI’s $8.15 min wage, here is the impact of the PSL Act on 3 differently sized small bizes (based on employee #s).

 

T-1: Avg Cost of PSL Based on 3 Differently Sized Workforces
Details 1-19 Workers (A) 20-99 Workers (B) 100-499 Workers (C)
Avg # of Workers 9.5 Workers 39.5 Workers 199.5 Workers
Avg PSL a 69.6 hrs per Worker 69.6 hrs per Worker 69.6 hrs per Worker
MI Min Wage $8.15 $8.15 $8.15
Avg Yearly Cost $567.24 (1 Worker) $567.24 (1 Worker) $567.24 (1 Worker)
Cost of PSL $5,388.78 (9.5 Workers) $22,405.98 (39.5 Workers) $113,164.38 (199.5 Workers)
a Avg PSL = 8.7 days x 8 hrs per day = 69.6 hrs per employee

 

T-1 (above) clearly tells us what the impact of the PSL Act will be, based hypothetically on 3 differently sized firms based on # of employees; Firm A (with 1-19 workers), Firm B (with 20-99 workers) & Firm C (with 100-499 workers). To calculate costs for the PSL, we avged the # of workers in each firm and used that avg in our calculations.

  • Firm A with 1-19 employees (is represented by its avg of 5 workers). PSL will cost the firm $567.24 a yr for each full use of 8.7 days. Assuming that ALL of Firm A’s 9.5 workers use ALL of their PSL, the PSL would cost Firm A $5,388.78.

 

  • Firm B with 20-99 employees is represented by 5 workers (its avg). Its cost, if ALL workers took their full PSL would be $22,405.98.

 

  • Firm C showing 100-499 employees is represented by its avg of 5 workers. Its cost, if ALL workers took their full PSL would be $113,164.38.

 

T-2: Total Cost of PSL for Small Bizes (Firm D, Firm E & Firm F)
Details 1-19 Workers

(Firm D)

20-99 Workers

(Firm E)

100-499 Workers

(Firm F)

PSL per Worker (See T-1) $ 567.24 $ 567.24 $ 567.24
Avg # of Workers per category 9.5 39.5 199.5
Total # of Small Bizes (2013 data) 169,053 169,053 169,053
% Workers based on # per Category

for 169,053 Workers (‘13) a

18%± 17%± 15%±
Total Cost of PSL per Yr b $ 163,978,097 $ 643,925,683 $ 2,869,616,690
a  Small Biz Profile: Michigan by US Small Biz Admin, Office of Advocacy, 2013. % of workers in Each Class or    

   Firm of Workers. 18%+17%+15%=50%±. The other 50%± comes from firms with at least 500 Workers.

b Refers to the total cost of PSL for Small Bizes (169,053 in total, 2013 data) for Firm types D, E & F

 

T-2 explains the total cost of PSL incurred by 3 small bizes represented by Firm D, Firm E & Firm F, based on the reality of 169,053 workers being employed by small bizes in MI. This table assumes that each worker will take full use of his/her PSL. The total $$ impact for the small bizes is $163.98 M for Firm D (18% of 169,053 small bizes belong to Firm D [which has an avg of 9.5 workers]), $643.93 M for Firm E (17% of 169,053 small bizes belong to Firm E [which has an avg of 39.5 workers]) & $2.87 B for Firm F (15% of 169,053 bizes belong to Firm F [which has an avg of 199.5 workers]). WOW! WOW!! WOW!!!

 

So what’s the verdict? Will forcing bizes to allow their employees PSL be more helpful OR more harmful? So far, the results are inconclusive. Several cities and states have already passed a mandated sick leave law. A San Francisco study conducted by the IWPR found that 85% of the 727 employers reported NO negative impact on profitability; & that the avg worker used only 3 PSL days for the year. A Washington DC study from the Office of the District of Columbia Auditor found that the PSL mandate “neither discouraged [bizes] from locating in the District nor did it encouraged business owners to move their businesses from the District.” A report from the Employment Policies Institute stated that in Connecticut, 31 of the 156 bizes (19%) surveyed had either reduced paid leave or employee benefits prior to the PSL mandate taking effect. 38 (24%) however said that they would hire fewer employees as a result of the law. While the jury is still out on the overall public good of PSL, there can be very little question that it potentially is a very, very expensive solution for bizes and especially for small bizes that may well lessen their number. The emotional sway is understandably for the PSL act w/o further discussion. The economics of the situation however, cannot be forgotten nor can the possible consequences to our economy’s backbone, small biz. PUBLIC GOOD or PUBLIC BAD? STAY TUNED!

 

ADDENDUM

 

Our PSL discussion assumes that sick leave days are honestly and properly used. That is, they are NOT used for holiday shopping or as extra vacation days. Their improper usage augers in a whole separate discussion.

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About bernacmd

For over 24 years, University of Detroit Mercy Marketing Professor Michael Bernacchi, Ph.D., J.D, has produced "uNDER tHE mIKE-rOSCOPE", a newsletter discussing current "marketing and advertising¹s bends, trends & ends." A well-know fixture in Detroit and national media, UDM's marketing guru has made several appearances on CNN's "Talk Back Live," the Voice of America worldwide radio network (VOA), ABC, CBS, NBC, MSNBC and on the pages of Sports Illustrated, Time, TV Guide, the New York Times, USA Today, the Wall Street Journal and the Washington Post, to name a few. At University of Detroit Mercy, he has taught courses in Marketing Management, Consumer Behavior, Marketing Communications, Research and Corporate Social Responsibility and Sports and Entertainment Marketing. Michael Bernacchi can be reached at 313-993-1116 or bernacmd@udmercy.edu. Please appropriately attribute the following for their work on uNDER tHE mIKE-rOSCOPE: Yen Ju Lee Robert Rouse Vidhyasagar Natarajan Eric Baumgardner & Ian Young
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