How incentives affect sick days

Casey B. Mulligan writes:

A study by the International Monetary Fund showed that American workers were less frequently absent from work for sickness than was the average European (during the years studied, 1995-2003). As shown in the chart below, workers in the Netherlands, Sweden and Norway stayed home sick about twice as much as American workers did.

Economists have been aware of these differences for a while now, and have understood them to be the result of incentives. Quite simply, the financial penalty for work absence in the Netherlands, Sweden and Norway was quite small (as compared with other European countries and the United States), and the labor market responded by keeping workers home “sick” more often.

In Norway, for example, the social insurance system may have to pay a sick worker’s entire salary for the duration of a worker’s sickness, and require the employer to provide still further benefits. Under such a system, sick people are less likely to go to work when sick — but healthy people are also more likely to stay home claiming they are sick.

Indeed, a 2004 paper by the Stockholm School of Economics professor Skogman Thoursie found that the Swedish incentives were so strong that a large number of Swedish men reported sick merely to watch sporting events on television.

Thus, none of the studies have concluded that the Dutch, Swedes or Norwegians are sicker than we are. Regardless of whether you think these countries’ sick leave systems are on balance desirable because they allow sick workers to stay home, or counterproductive because they induce healthy workers to feign sickness, the literature concludes that financial incentives are affecting the size of the work force.