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The Daily Signal
What the Media
Missed About Obama’s New Proposal: It’s a Wage Cut for Workers
James Sherk, Alex Belica
January 15, 2015
President Obama just urged Congress to cut workers’ wages. Of course,
the news headlines did not report it as such. However, make no mistake:
The president’s call for mandatory paid sick leave would simultaneously
cut workers’ pay.
The president proposes requiring businesses to offer seven days paid
sick leave to their workers. That sounds great. But the president never
explained where businesses will get the money for it. In fact, the cost
almost certainly will come out of workers’ paychecks.
Businesses care about the total compensation they pay workers. They
care much less about how that compensation splits between wages and
benefits. Economists have repeatedly found that when the government
requires businesses to offer a benefit, they do so – and take the cost
out of workers’ pay.
Ironically, some of the best research on this comes from Jonathan
Gruber, the Obamacare architect who boasted that the healthcare law
takes advantage of Americans’ “stupidity.” Gruber’s research finds that
mandated increases in medical benefits and mandatory workers
compensation insurance lead to offsetting reductions in cash wages.
Currently 91 percent of businesses already provide some form of sick
leave.
The popularity of Obama’s paid sick leave proposal depends on workers
not realizing it ultimately comes out of their paychecks. If the
president’s proposal becomes law, many workers will lose the equivalent
of seven days of pay a year.
The government should let employees and businesses decide for
themselves how to divide compensation between wages and paid leave. Of
course, most workers do want paid sick leave. Currently 91 percent of
businesses already provide some form of it.
Workers should be the ones who decide whether to work at a firm that
offers lower wages and more fringe benefits, or vice versa. The
government should not make that decision for them. Some workers value
paid sick leave. Some have tight budgets and would prefer higher wages
instead. Individuals understand their own needs much better than the
government does.
Milton Friedman observed that there is no such thing as a free lunch.
Someone pays for it. The president should remember that there is also
no such thing as a free day off.
Read this and other articles with links at The Daily Signal
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