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San Francisco sick leave followup

Five years ago today, we discussed San Francisco's sweeping Proposition F, imposing huge sick-leave administrative requirements on small employers, including families that hire babysitters. So how has it worked? Press coverage, building off of a left-wing thinktank survey, has been uniformly positive, with one employer admitting that the law imposed an additional $110,000 cost on him, but that he still liked the law. The Monitor didn't interview anyone who opposed the law, but the fact that two thirds of employers claim to support the law means that one third don't, and it's the marginal effects of the law that are important for public-policy purposes, yet no one has measured those.

The study is further double-edged, as it shows that many employees are not aware of the law, suggesting that the full cost has yet to be realized; too, the study does not interview the unemployed workers who do not have jobs because the sick-leave law made them unprofitable to hire. One reason that the law's effect may be muted is because there doesn't seem to be enforcement of the more draconian aspects of the law—which can change on a dime through public or private enforcement. Moreover, the press coverage does not mention that San Francisco's unemployment rate has more than doubled since the law was passed. Of course, there are confounding factors in the rise in the unemployment rate (I wouldn't contend that Prop F is the sole cause of the rise), but surely a $1000/employee/year increase in mandated benefit expense has some effect.

As I've noted before, these sorts of mandates are not free to employees. If San Francisco mandates an additional $1000/year in benefits to employees, employers are simply going to pay employees $1000/year less in wages. The effect will be heaviest on low-skill workers, who may be unprofitable to hire at the high combination of San Francisco's high minimum wage and benefits requirements, and thus lose jobs. These effects are very real, but aren't going to be captured in surveys. The press and the academic community have fallen short on the job here.

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Published by the Manhattan Institute

The Manhattan Insitute's Center for Legal Policy.