The Impact of Paid Sick Leave: Evidence from Temporary Disability Insurance in Rhode Island

During the past decade, there has been a surge of support for policies to provide paid sick leave. In 2004, Congress introduced the Healthy Families Act, which would make sick leave available to workers at firms with more than 15 employees. While legislators have not enacted this policy, the Obama administration has supported the measure publicly (U.S. Senate, 2009). At the state level, California, Connecticut, Massachusetts and Oregon have passed mandates for sick leave benefits.

Despite recent interest in paid sick leave in the U.S., there is relatively little research to help guide policy. A substantial literature studies the impact of providing income benefits for permanent injuries or illness through the Disability Insurance (DI) program (Bound, 1989; Gruber, 2000; Chen and van der Klaauw, 2008; von Wachter et al., 2011; Maestas et al., 2013, Kostol and Mogstad, 2014; Autor et al., 2017). Estimates from these studies are unlikely to serve as good predictions of the impact of providing short-term sickness insurance. In terms of sick leave for temporary conditions, a number of studies examine European countries and estimate effects of benefit reform on work absenteeism (Johansson and Palme, 1996, 2002, 2005; Henrekson and Persson, 2004; Pettersson-Lidbom and Thoursie, 20Ftanf13; de Paola et al., 2014). These studies of Europe provide important insights on moral hazard, but they do not examine impacts on a number of additional worker outcomes plausibly affected by sick leave.

This paper sheds light on the impact of paid sick leave using novel administrative data to measure economic and health outcomes. We study Rhode Island where workers can access up to 30 weeks of paid leave for temporary illness or injury through the Temporary Disability Insurance (TDI) program. Using a regression discontinuity design based on eligibility thresholds for TDI, we find no significant impacts on measures of economic self-sufficiency such as subsequent earnings and social program participation, nor do we find detectable impacts on health expenditures. We do find positive and significant effects on a worker’s future TDI program applications. In addition, we find that coworkers are subsequently more likely to receive paid leave through TDI when an initial worker was qualified around the eligibility threshold. This pattern of results for the use of TDI paid sick leave suggests that receipt of benefits affects beliefs and knowledge about the program.

Overall, these findings contribute to an emerging literature examining U.S. sick leave policies for temporary and non-work related injuries.[1] Prior studies related to our work include Pichler and Ziebarth (2017) and Ahn and Yelowitz (2017). We innovate relative to these studies in two main dimensions. First, we are the first to use comprehensive administrative data to study workers and their outcomes over time. Second, we rely on an RD strategy to estimate causal effects of paid sick leave whereas the prior work relies on difference-in-difference type approaches.

[1] In the U.S., worker’s compensation (WC) insurance provides paid leave for work-related injuries. For studies of this type of leave program, see Meyer (1995) and Neuhauser and Raphael (2004).