Saturday, January 11, 2014

The economic impact of paid parental leave

How many ways is this economic impact study flawed?

new study on Connecticut’s paid sick-leave law concluded that the measure had little economic impact on employers in the state.
The preliminary report, released Monday by the  Center for Economic and Policy Research in Washington, D.C.,  surveyed 251 employers since Connecticut’s law — passed in 2011 as the first of its kind in the U.S. — went in to effect in 2012.
I think this was the hope of the organization, as little economic impact means they can say: "it doesn't hurt firms, but helps families, so we should pass this law."

Why do I put no faith in this paper? let me count the ways ...

1. A quck google search shows this is a left-leaning think tank that would advocate for this policy without any numbers.  They support higher minimum wages, and have a picture with the name "sprawlmart" on their webpage.  They aren't objective.

2. A survey?  So many problems ...
-- They may or may not have talked to the person in charge
-- The person they spoke with may have tried to guess at what the caller wanted to hear and then responded accordingly.  There are hundreds of articles on how responses to surveys are biased.
-- Given we know this institutes biases, were the data collected by an independent organization?  Or, at least double-keyed?  (Or the phone calls recorded?)  How do we know this isn't just made up?

3. You can't accept a null hypothesis.  Statistically, you start out with the assumption of no difference and look for enough evidence to reject that assumption.  This isn't a statistical analysis, but an exercise in hand-waving analysis.

The biggest economic effect isn't discussed.   It will be that firms will be more hesitant to hire somebody if there's a reasonable probability they'll be forced to pay them sick leave.  That will push the demand, and wages, down for these workers.  Further, I don't think many firms will admit this.

You can ignore the laws of demand and supply, but it doesn't mean they go away.

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