Compare the work-incentive effects of the two options

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Question: A firm wants to offer paid sick leave to its workers, but it wants to encourage them not to abuse it by being unnecessarily absent. The firm is considering two options:

a. Ten days of paid sick leave per year; any unused leave days at the end of the year are converted to cash at the worker's daily wage rate.

b. Ten days of paid sick leave per year; if no sick days are used for two consecutive years, the company agrees to buy the worker a $100,000 life insurance policy.

Compare the work-incentive effects of the two options, both immediately and in the long run.

Reference no: EM132117035

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