By Blaine Stum
Writing for the Washington Policy Center, Chris Cargill estimates that the supposed cost of an earned sick and safe leave ordinance that he has apparently seen before anyone else (including City Council and staff……) would be $24.3 million every year for businesses in the City of Spokane. How does he come to this estimate? Well, he multiplies the amount of total employees by the amount of employees without earned sick leave, then takes the number of employees without paid sick leave and multiplies that by average hours worked per year and total worker cost of providing earned sick and safe leave and…. tada!…. We have a magic number. The only problem is, it’s not the slightest bit accurate.
The first problem arises from Cargill’s employee counts. He estimates that there are 146,000 people (he doesn’t say whether this is total civilian or only private) who work in the city. Yet, the last available data from the Census Bureau LEHD Origin-Destination Employment Statistics in 2011 showed just over 122,000 civilian jobs, with 106,133 of those being private jobs. Assuming the amount of jobs has stayed relatively stable since 2011 (which is true for Spokane County) and depending on which source you use (the Washington State Employee Benefits Survey or the National Compensation Survey), the number of employees in the City of Spokane without access to earned sick or safe leave ranges from 41,391 to 52,960.
The second problem arises from his cost estimate for providing earned sick and safe leave. The National Compensation survey does indeed show that the cost for providing earned sick and safe leave for *all* workers is an average of $0.25 per hour worked. However, the cost varies significantly depending on industry and firm size. In Leisure and Hospitality for instance, the cost is $0.05 per hour worked. In Construction the cost is $0.13 per hour worked. For firms with 1-49 employees, the average cost is $0.16 per hour worked. While firms with 100 or more workers, the average cost is $0.36 per hour worked.
Finally, Cargill neglects to include any potential benefits, whether direct or indirect, that come with an earned sick and safe leave policy. These potential benefits include reduced turnover/job separation, increased employee productivity, reduced flu contagion, reduced nursing stays and reduced emergency room visits.
Lets do a short calculation for a single busisness. Say you are a hotel owner who has 49 employees. According to the Bureau of Labor Statistics, average hours worked per week in May 2015 was 25 hours for employees in leisure and hospitality. That is 1,300 hours per employee per year. With a cost of $0.05 per hour worked, the total direct cost to the business would be $3,185. Now lets consider a benefit: reduced turnover. The job turnover rate in this industry is 66.3 percent. Estimates for reduced turnover as a result of access to earned sick and safe leave range from 5.3 percent (Cooper and Monheit, 1993 – Tables 5 & 6) to 25% (Heather Hill, 2013). Using the more conservative estimate of the two, the job turnover rate drops to 62.95 percent. The cost of replacing one front office staff member at a hotel has been estimated to be $5,688 to $5,965 (Hinkin and Tracey, 2000), and the cost of replacing a single housekeeper has been estimated to range from $3,000 to $10,000. Even if we use the higher 16 cents per hour per employee cost estimate for earned sick and safe leave, the direct cost of providing the benefit is made up in reduced employee turnover costs alone. Suffice to say, Cargill’s simplistic estimate reflects anything but reality.
Beyond the odd data and simplistic analysis, Cargill further approvingly cites statistics from the (second) University of Washington survey in an effort to prove the “harm mandates cause to workers.” What he neglects is that the neither the surveyors or most employers, attempted to control for other variables: so when a business owner says they had to increase costs or decrease other benefits, it could have been due to inflation, increases in employee wages, increased inventory or transportation costs, etc. This is not just me dreaming up scenarios: The survey found that only 8.3 percent of businesses surveyed had identified *any* specific costs to comply with the ordinance. For the very few who provided surveyors with data on costs, the average cost was a whopping 0.125 percent of total annual revenue. In the other “survey” he cites, the question was whether employers *thought* it would lead to an increase in costs.
The moral of the story is simple: do your homework before you post.
Thank you for setting the record straight. Facts matter.