Regulation

There's No Such Thing As a Free Vacation

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Who's in favor of mandatory viewing of Chevy Chase movies?

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.

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  1. Does Klein really think that businesses print their own money or have no motivation or ability to cut cash wages to make up for the vacation cost? Jesus tap dancing Christ how is someone that stupid allowed to work for a newspaper.

    1. Um, because most newspapers are run by fucktards with no business sense?

      1. I hope they wait until Republicans are ascendant to give out, so we can possibly avoid a bailout.

    2. How many newspaper editorial boards have the following three things in common?

      1. Believe newspapers are covered under the right to freedom of the press in the 1st Amendment?

      2. Believe corporations have no constitutionall protected rights?

      3. Work for newspapers owned by corporations?

      For certain major newspapers (New York Times) that level of stupidity in their reporting staff appears to be mandatory.

  2. there may not be anything wrong with legislators choosing to make the trade-off between hours worked and cash earned

    Because legislators obviously know what’s best for Every. Single. Person. in the country. And what’s best is one-size-fits-all.

    Of course this will level out in a few years, with cash comp coming down (or not going up) to make up the difference.

    Of course, these are probably the same idiots who don’t think that raising the minimum wage causes any reduction in the number of minimum wage jobs on offer, either.

    1. And they are also the same people who think not taxing insurance benefits has anything to do with the rise in health insurance costs.

  3. Backphefengezrasich.

    1. Great usage!

  4. I think the other BIG issue here is that the vacation law would almost certainly only apply to full-time workers, so this would create a big incentive to only offer low-wage workers part-time work.

    Low-wage workers tend to be pretty basic inputs. If you tell me I have to give my 10 full-time workers paid vacation, I might turn around and decide I want 11 36-hour workers instead.

    Some liberals might cry, “Yay! You hired another worker!” but that will probably throw people off of their health insurance plans, cut their overall wages even more, etc.

    1. Bingo, Fluffy.

    2. If you tell me I have to give my 10 full-time workers paid vacation, I might turn around and decide I want 11 36-hour workers instead.

      Or you might even look for a way to make due with 10 36-hour workers, since you probably have some higher paid workers whose new mandatory benefit has to be paid for somehow.

      1. plus the part timers will not have 401k’s to match or health insurance to pay for, its cheaper all around. I lost my well paid well benifeted full time job due to the economy and my former employer hired 2 non benifit reciving 20 hour a week part timers to work instead, saving them a fuckton of money since they are paid half of what i was, have no paid vacation 401 k matches or health insurance.

    3. fluffy lives in the real world, unfortunately

  5. Unless something has drastically changed in the last 15 years, low wage hourly jobs are by far the most flexible. Perhaps poor people don’t take vacations because they don’t have any money. Just a thought.

    1. It is also possible that low wage labor may choose to work as many hours as possible without a vacation to accumulate the most money they can to finance improvement of their skills.

      1. No way, dude. That sounds insane. Work more, like weekends and shit, to get ahead both financially and improve one’s skill. That’s too radical. Besides, there are people that know much better about how “you” should spend your time. Like Ezra Klein. Between Ezra and Obama, I am really starting to get some direction as to how to navigate the dangerous waters of deciding how to live my own fucking life. This Hope and Change stuff has surpassed all of my expectations.

  6. How fucking stupid does a lefty have to get before they aren’t even worth answering?

    1. If they’re a lefty, they are stupid.

      It’s self regulating, but they’ll never believe it because it’s not top down.

  7. I love that guys like Klein and Yglesias like to make these proposals about how a business should be run when they have next to zero experience in, you know, RUNNING A FARKING BUSINESS.

  8. 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.

    Then raise the minimum wage… DUHHHH.

    Gosh you libertaridiots are so stoopid.

    1. So right. And what’s a paid vacation without a pony?

      Let’s legislate ponies for everyone!

      And mandatory paid pony paternity leave!

      Legislation is like the genie in the bottle that doesn’t turn your wishes into some horrific inronic punishment.

      1. But I don’t want a pony… I want a unicorn… legislate me my free rainbow crapping unicorn!

        1. I rise in support of the proposal by Senator Nephilium, but would add that my constituents want their unicorns to crap DOUBLE rainbows.

          Thank you, I yield the rest of my time.

  9. Joining the chorus: dumb, dumb, dumb.

    I get 5 weeks paid vacay per year. A competing firm gets less, but their salaries tend to be higher. If someone had a strong preference of one vs. the other, they could always apply at the company that fit their needs. This is not difficult to figure out.

    1. 5 weeks?

      Where do you work, Lazy Ass University?

      🙂 Just kidding, but that does seem high.

      1. I clearly need a career change. In almost 20 years, I’ve never taken more than two weeks off in a single year.

        And only once were they consecutive.

      2. It’s one way to keep the natives less restless when raises and bonuses have been pretty nonexistent the last couple of years.

    2. I get five weeks of unpaid vacation a year. And if I actually take it, I’m fired when I return.

  10. In the real world, wages tend to be sticky, so a government mandate of more vacation probably wouldn’t lead to immediate pay cuts

    It won’t lead to pay cuts. It will most likely lead to less employment.

    Or would it be fewer employment? Someone call Cavanaugh to get a ruling on this.

    1. It is less.

      I agree with fluffy upthread in that the initial reaction by employers would be to put in more part-time workers, ultimately creating a situation where fewer people have insurance and other benefits.

      Another point not brought up is production work. If you mandate 3 weeks vacation for every person in a poultry processing plant, those three weeks need to be covered by someone else, ultimately increasing the price of the good being produced while decreasing the wage of each employee (to compensate for the extra staff, training time, etc), creating a double-whammy of badness for society.

      That in mind, a novel approach would be for the free market to decide what it wants to do. Employers offering better compensation packages on the whole will attract better workers. Those that lose good workers will be forced to offer more attractive packages to get the better workers back and eventually an equilibrium will be met where most workers and employers are happy, productive and profitable. Of course, that would make too much sense for these pundits and legislators because then they wouldn’t be able to tell us how much smarter they are than us.

    2. “It won’t lead to pay cuts. It will most likely lead to less employment.

      Or would it be fewer employment? Someone call Cavanaugh to get a ruling on this.”

      actually, I think it is “lower unemployment,” but we may need a Cavanaugh ruling.

    3. I know. I can’t believe this ??? is suggesting this during a recession with 10%-ish unemployment. I guess this is the perfect time to ramp up that minimum wage to $80k per year or so.

  11. Would it actually tilt the playing field?

    Yes, and it would level the windmill.

  12. This has the same smell to it as the salary freezes during WWII, which lead to employers offering Health insurance in lieu of compensation to attract and hold workers during the manpower short war years and the post war economic boom years. All of which lead, 60+ years later, to the Elephants thinking that Health Insurance is a “natural right”.

    So in 25 – 50 years the gooberners and legisticalators will demand a Public Paid Vacation option, becasue “Vacation is a Right!” – there will be Vacation Exchanges (or a Single Payer Vacation System)

    1. Since the juicebox mafia are experts in everything, upon creation of the vacation exchange I volunteer all their members to fill your job as you exercise your option in the exchange.

  13. My wife doesn’t get paid vacation, but we still take vacations. She just saves up money from working, so she can “pay herself” during weeks she’s not working. It would probably work almost anywhere, except that people often place higher value on the money than their own time – and some people will never take a break unless it’s free (even if they turn into a low performing grump – which is practically a protected class).

    1. Someone call Cavanaugh to get a ruling on this.

  14. I’m self employed. What am I supposed to do?

  15. low-wage workers are currently among the least likely to have paid vacation

    I make a pretty good wage and I can’t afford to go anywhere or do much of anything as part of a vacation. What are low-wage workers supposed to do?

    I see a lot of “staycations” happening in the future if regulations like these come about.

  16. I have not reached one year tenure in my company and I cannot have paid vacations yet. But my girlfriend and I have already went to 3 vacations this year and the experience was awesome even if we had to pay for it ourselves.

  17. My employer (thousands of employees) eliminated paid vacation for salaried employees last year, as one of many cost-reduction moves. They paid out all accrued vacation time, and from that day forward, employees just work out their vacations with their manager. The CEO explained that salaried employees are paid to get their job done, not to work a specific number of hours or days. So, no punchclocks, and now, no vacation accrual either.

    It makes sense in theory, but in practice, it means that getting vacation time becomes a political exercise, just like getting raises and good assignments.

    But now the company doesn’t have a big liability on the books. But it also means that I can’t bank up a big vacation balance to get paid out if I quit (like at all my previous jobs). In the past, vacation time had been like an exit bonus, but now I’ve got to actually use it. That’s not so bad, since I’ve got kids now, but I would have hated it when I was a young workaholic with a much lower salary.

    1. When you say “salaried” do you mean “salaried-exempt” or “salaried-non-exempt” i.e straight salary or hourly but not eligible for time-and-a-half? If it’s straight salary, you still get your full pay when take time off, if not, you lose whatever money you would have made if you had not taken the vacation.

  18. Couldn’t agree more…Had a post already written about this too, (good job i checked around first)never mind.It is a really good tune though.
    Here’s hoping more labels wise up and do this.

  19. !Megan McArdle reviewed this question a while back.

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