A Healthy Alternative to Federally Mandated Paid Sick Time

Should employers be required to give their workers seven days of paid sick leave per year? President Obama has proposed just such a mandate, but John C. Goodman offers an alternative that would truly help workers but without imposing costly, counterproductive burdens on their employers. His idea? Liberate health savings accounts so they can accommodate sick leave.

Here’s how it would work: Employers would be allowed to deposit seven days of untaxed wages in a worker’s health savings account (HSA), in addition to normal contributions. When the worker takes off work due to illness, she may lose her normal pay but may withdraw from her HSA an amount equal to her lost wages. Those deductions would be taxed as regular income. Any amount that she keeps in her HSA would grow tax-free. One feature of this proposal, which employers should like, is that it gives workers an incentive not to take sick leave when they’re not really sick. Another advantage, which workers should like, is that it solves the problem of their losing any unused sick time they have accrued over the course of the year. In addition, Goodman’s proposal would be completely voluntary.

“If workers bear the full cost of any mandated benefits,” Goodman writes, “is there any public policy reason for government to get involved? None that I can think of. Presumably workers and their employers are perfectly capable of arriving at mutually agreeable allocation of their compensation between taxable wages and other benefits. In fact, if the overall cost of labor is the same, employers have an incentive to give employees precisely the fringe benefits they prefer.”

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