The Economics of Paid Sick Leave

Stefan Pichler (), Christopher Prinz, Stefan Thewissen and Nicolas Ziebarth ()
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Stefan Pichler: University of Groningen
Christopher Prinz: OECD
Stefan Thewissen: Nyenrode Business University
Nicolas Ziebarth: Center for European Economic Research (ZEW Mannheim) & University of Mannheim

No 18853, IZA Discussion Papers from IZA Network @ LISER

Abstract: This article examines the economics of paid sick leave from both theoretical and empirical perspectives. Research on paid sick leave has evolved dynamically over the last decade, primarily driven by the spread of U.S. sick pay mandates, which have increased paid sick leave access from 63 percent to 77 percent in all U.S. jobs. We begin by discussing the economic rationales for government regulation of paid sick leave, particularly the negative externalities associated with contagious diseases when individuals work while sick. After that, we discuss the key trade-offs in the general design of paid sick leave schemes, along with the trade-offs when setting specific policy parameters. Finally, we review economic modeling approaches to study optimal paid sick leave policies.

Keywords: paid sick leave; statutory sickness insurance; medical leave; work disability; work incapacity; long-term absenteeism; presenteeism; paid time off; social insurance; externalities (search for similar items in EconPapers)
JEL-codes: H75 I12 I18 J22 J28 J32 J38 J88 (search for similar items in EconPapers)
Date: 2026-08
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