There's No Such Thing As a Free Vacation

In a debate between Ezra Klein and Reihan Salam about the desirability of regulations requiring employers to give workers paid vacation, Klein writes:

Broadly speaking, employees with the power to demand more paid vacation do so, and employees without the power to demand more paid vacation get less—or in some cases, no—paid vacation. A law guaranteeing paid vacation would primarily tilt the playing field toward low-income workers, rather than against them, as is the case now.

Would it actually tilt the playing field in their favor, allowing everyone to nab some time off and finally take that dream vacation to Walley World? Or would, as Salam argues, a policy mandating paid vacation days simply shift compensation from one form (cash) to another form (days off)? I think the following explanation offers a helpful way to think about mandatory paid vacation:

A paid vacation is a kind of accounting fiction—you continue to draw a paycheck (and health care benefits, etc.) even while you're on vacation. But nobody's going to pay you to go on vacation. You're paid for the work that you actually do. The money you get on your vacation days is part of your payment for the work you do on the other days. Over the long run, if the government mandates a certain number of paid vacation days, then positions that currently offer fewer vacation days then that will become less lucrative.

In the real world, wages tend to be sticky, so a government mandate of more vacation probably wouldn't lead to immediate pay cuts, but a government mandate of more vacation probably wouldn't involve immediate implementation anyway. The point, though, is that while we definitely could use public policy to shift the money/leisure mix the American workforce receives, we can't just conjure up free money through a regulatory mandate—if everyone is made to work less, then everyone will earn less money.

That explanation comes from former Atlantic staffer and current Center for American Progress Action Fund blogger Matt Yglesias (who makes sure to note that he thinks that there may not be anything wrong with legislators choosing to make the trade-off between hours worked and cash earned). I'm not quite as confident as Yglesias that we wouldn't see some wage reductions relatively soon after implementation, but the basic point is perfectly sound; in the long run, those forced days off would translate into less cash compensation. And who would that likely hurt the most? Given that, as Klein informs us, low-wage workers are currently among the least likely to have paid vacation, those eventual wage reductions would probably hit those low wage workers—who probably need actual cash in their pockets the most—the hardest.