Mandatory Sick Leave Benefits Kill People

Megan McArdle notes, on Bloomberg, that feel-good policies can have bad effects:

What happens when you suddenly offer parents generous family leave benefits, paid at the expense of the government? You can probably think of dozens of outcomes. But here’s one you might not have been expecting: people die.

That’s the finding of Benjamin Friedrich and Martin Hackmann, in a new working paper at the National Bureau of Economic Research. The culprit? Nurses, who skew female, provide a lot of vital health care, and made heavy use of Denmark’s new paid family leave benefit when it passed in 1994. Since the supply of nurses was limited, and their skills could not easily be replaced, hospital readmissions went up, and more troublingly, mortality spiked among elderly patients in nursing homes.

Unfortunately, McArdle falls off the horse with her analysis, in my view.  She goes on (rightly) to make this a discussion about the unforeseen consequences of policies, and not about the implications of this specific policy, but ultimately, she downplays the importance of that very point.

She imagines, for example, that it would be possible for legislators to figure out fixes to policies, like “training extra nurses beforehand” when planning to require sick leave benefits.  But that is post hoc backfilling.  By definition, one has to implement a policy in order to find its unintended consequences, and then each new fix will have its own unintended consequences.  Maybe training extra nurses creates incentive that draws candidates away from some other necessary occupation.  Or maybe the surplus of nurses drives down their value and their pay, forcing them to take second jobs and eating into their free time, or making them less effective at their primary jobs.

The government then must constantly be tweaking the policies to try to find some effect politicians can tolerate (or can’t see).  It’s like the scene in the classic Fat Boys B-movie The Disorderlies in which our heroes accidentally cure their rich client by messing up his medication, and it turns out that he was just over-medicated.

Customers and employers — the market — already make these calculations and adjustments in real time.  The nature of the work affects the leave policies which affects the level of pay necessary to attract candidates, and the level of pay draws a certain number of candidates into the field, and so on.

The lesson, in short, is that the government should just get out of the micromanagement business and let people figure out how to help each other.

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