Fortune, January 21, 2015
After President Obama’s State of the Union Address Tuesday night, today’s discussion has largely focused on his tax proposals. While these are important measures, two other areas he addressed raise issues that will have at least as many consequences.
Starting with the positive, Obama called on Congress to pass legislation for paid sick days, guaranteeing that all workers have the option to take at least seven days a year off from work due to illness or the need to care for an ill family member. This one should be pretty straightforward.
As two-income households are now the norm for couples, and single parents raise close to 40% of U.S. kids, many workers will need time off from their jobs to take care of sick family members, in addition to the occasions where their own illness keeps them from working. In these situations, workers shouldn’t have to worry about missing a day of pay or possibly losing their job.
Paid sick days is hardly an alien concept. Every other wealthy country has required employers to provide paid sick days for decades. Several state and local governments now do the same. In fact, more than half of the work force (largely the better-paid half) already has paid sick days.
Employers have learned to live with allowing their workers paid sick days. Invariably, they report that the cases of abuse are rare. Most people don’t take half the days to which they are entitled. And, as a practical matter, what employer wants someone running around the office sneezing on their co-workers? Or better yet, on their customers’ food? This one is just common sense.
There is another aspect to paid sick days or any paid time off that is generally overlooked. With unemployment still holding back the economy (or “secular stagnation” to use the now fashionable term), reducing the average hours of those with jobs can increase the number of jobs.
To take some simple arithmetic, if paid sick days or other forms of leave reduced average hours by 2%, this should open the door for 2%, or 2.8 million, more workers to be hired. In reality, the relationship will never be this simple, but the basic point holds. Germany has full employment not because its economy grew more than America’s, but partly because its workers put in 20% fewer hours.
If paid sick days are the good part of the State of the Union, President Obama’s renewed calls for fast-track trade authority is the bad part. The trade deals that are on the table now are not about reducing trade barriers and expanding trade. With few exceptions, tariffs have already been reduced to near zero and most other formal trade barriers have already been eliminated.
Rather than being about trade, these “trade” deals are a mechanism through which our largest corporations can get business-friendly regulations that would never have a chance in Congress. For example, three years ago the Stop On-line Piracy Act (SOPA) got beaten back due to massive grassroots opposition. Since the entertainment industry knows they may never get SOPA through Congress, they will try to get key parts of it in these trade deals.
The same is true of Pharma’s push for higher drug prices here and elsewhere; the financial industry’s efforts to evade Dodd-Frank and similar regulation, and the oil industry’s efforts to stop fracking bans and other environmental regulation.
Studies have shown that trade deals like the Trans-Pacific Partnership and the Trans-Atlantic Trade and Investment Pact would have a minuscule impact on growth or jobs and are simply backdoor tools for allowing business to get special interest rules that they could not get approved otherwise.
Trade deals like the Trans-Pacific Partnership and the Trans-Atlantic Trade and Investment Pact are simply backdoor tools for allowing business to get special interest rules that they could not get approved otherwise.
It is unfortunate that President Obama had to ruin his State of the Union Address with his appeal for these pacts.