The Effects of Expanding the Generosity of the Statutory Sickness Insurance SystemISER Internal Seminars

Statutory sick pay for sickness episodes up to six weeks was increased from 80 to 100 percent of
forgone gross wages as of January 1, 1999 in Germany. We show that the generosity expansion
has increased average absence days by about ten percent or one day per employee, per year. We
find a substantial degree of effect heterogeneity. Employees in a bad health shape have reacted
strongest. By contrast, employees’ average health has not improved as a consequence of the
reform. Our calculations suggest that the generosity expansion represents an annual increase
in labor costs of about e1.8 billion. Finally, we provide evidence suggesting that employers
have tried to compensate this shock in labor costs by increasing overtime and decreasing wages.

Presented by:

Nicolas Ziebarth (DIW)

Date & time:

10 Mar 2010 13:00 pm - 10 Mar 2010 14:00 pm

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