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| Author: | Ziebarth, N.R. Karlsson, M. |
| Title: | A natural experiment on sick pay cuts, sickness absence, and labor costs |
| Journal: | Journal of Public Economics
2010 : DEC, VOL 94:11-12 p. 1108-1122 |
| Index terms: | sick leave statutory sick pay labour costs health labour supply Germany |
| Language: | eng |
| Abstract: | This study estimates the reform influence of a decrease in statutory sick pay levels on sickness absence behavior and labor costs. German federal law reduced the legal obligation of German employers to provide continued full wage pay for up to six weeks per sickness episode. In 1996 statutory sick pay was reduced to 80% of foregone gross wages. Within the reform's target group of private sector employees this measure increased the share of employees having no absent days between 6 and 8%. Quantile regression estimates imply that employees with no more than 5.5 annual absence days reduced their days of absence by about 12%. Extended analyses suggest that in industries enforcing the cut, behavioral impacts were about twice as large. It is shown that the direct labor cost savings effect resulting from the cut in replacement levels clearly exceed the indirect effect thanks to the decrease in absenteeism. Our calculations about the total labor cost decrease are strongly in line with official data which suggest that total sick pay provided by employers decreased by 6.7% or 1.7 billion per year. |
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