Externalizing costs and illness

By Dave Anderson:

The Pittsburgh Tribune Review reports that most food service workers will show up for work when they are ill:

Two-thirds of restaurant employees � including cooks, waiters and waitresses � admitted to working while ill, according to a recent survey by the Restaurant Opportunities Center United, a New York-based restaurant workers advocacy group...

There might be a connection between the willingness of low-wage employees to come in while they are sick and their economic bargaining position:

Almost 90 percent of food service workers do not receive health insurance through their employer, and about 88 percent don't receive paid sick days, according to the survey. That could contribute to employees showing up to work while ill.

But offering paid time off is nothing to sneeze at, said Patrick Conway, president and CEO of the Pennsylvania Restaurant Association.

"From a business standpoint, a mandatory sick-leave program where someone has to be paid when they can't be at work working could really hurt restaurants," Conway said. "You've got to have someone else there doing the job to serve the customer. You're basically double-paying for one shift of work

The employees are faced with a situation of show-up, and potentially inflict significant costs on both their employer (reputation, legal liability, ambiance) and their customers or go without pay for a day or more. Food service does not pay well.  The BLS has the details:

In May 2008, median hourly wages (including tips) of waiters and waitresses were $8.01....
Bartenders had median hourly wages (including tips) of $8.54...
Median hourly wages (including tips) of dining room and cafeteria attendants and bartender helpers were $8.05.

Using this wage data (the data for cooks and food prep workers is similar), we can make the assumption that most food service workers are cash constrained and have a fairly high marginal value on their last dollar of earning. Missing a shift or two for a borderline illness is the difference between making or not making rent for the month. So food service workers take the risk and seek to externalize their risks to their employers and customers.

Employers who are ultimately liable for any sick customers, as well as reputation costs due to customers being grossed out, want to shift all the costs of illness to their poorly paid workers.  Most servers cost their employers less than $5.00 per hour (reduced minimum wage for tipped workers.)  Employers want to externalize the cost of having a visibly healthy workforce while internalizing the benefits.   The few employers who do provide good benefits and sick-days have a more expensive cost structure (even if they make the money up on the back-end in reduced turn-over and a happier/more productive work-force) that is hard to justify in an intensely competitive business sector.  

So we are in a situation where it is show-up or not get paid which increases societal risk of illness and with those attendant costs because the incentives are aligned to try and get everyone else to pay for the problem.  Social solutions that level a playing field by either guaranteeing healthcare for all or requiring all restaurants to provide 3% to 5% of work hour compensation in the form of sick days for their food service workers would be a solution.  Unfortunately, that is big government stepping in to solve an externality problem, and our political discourse does not recognize that as a possibility much less a solution.