Why Mandating Paid Vacations and Sick Days Won't Hurt Workers' Pay

 

I've been a big advocate of mandating paid vacation and sick days for a long time now.  The reasons are obvious: people need time off, sometimes because we get sick, and sometimes just because we need a respite from the wear and tear of working.  This is especially true for the low-wage workers that are least likely to have any paid vacation time or sick days.

I'd bet that a law mandating two weeks' paid vacation, and five sick days per year, would be overwhelmingly supported by actual living, breathing human beings, though it would surely be massively opposed by the corporate world.  Still, that's the sort of battle line that we'd like to draw, isn't it?

Not that I think that would be the ideal amount of paid leave, just that job one would be to get any minimal amount of paid leave enshrined in the law.

But this issue was brought to mind by a back-and-forth on this issue between Ezra Klein, Matt Yglesias, and others over the past day or so.  Matt says:

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.

And:

over the long run the total share of GDP going to labor force compensation is roughly constant at around 56 percent of GDP...If you make employers give people more time off, that will be made-up somewhere else in the system. Simply mandating a certain mix of vacation time (or any other kind of benefit) doesn’t change bargaining power available to low-productivity workers.

That last sentence is just plain wrong.  Mandating benefits to the lowest-paid workers the only way to increase their bargaining power, since they have essentially none of their own.  And it's pretty damned effective, too.  When we increased the minimum wage from $5.15 to $7.25 per hour, how many workers earning less than $7 per hour had any meaningful paid benefits?  Very few, I'd bet.  What countervailing cost did they incur when their wages increased?  None. 

Matt is right that the costs of mandated vacation and sick leave will be made up somewhere else in the system.  The question is, where?  In the case of the minimum wage hike, it's hard to say, but it surely came from people who can better afford it, whether it came out of corporate dividends, or out of the benefit packages of higher-paid workers, or wherever.  The same would surely be true of mandated vacation and sick days - and it would be more easily absorbed than the minimum wage hike.

After all, the jump from $5.15 to $7.25 per hour is a 41% increase in wages and FICA payments for those at the bottom rung of our economy.  Ten days of paid vacation and five paid sick days would effectively increase the pay of those who had neither by a multiple of 52/49 - the weeks they'd be paid for, divided by those they'd actually work.  52/49 = 1.061, a 6.1% increase in compensation.

That's pretty modest, but it would make a real difference in the lives of those that have few or no paid days off.  And it would probably have a bit of a ripple effect: two weeks' vacation is no longer a selling point to a potential employee when the law requires that you offer at least that much.  There's also the matter of status: people who aren't as easily replaceable as the folks stocking shelves at WallyWorld will expect a better benefits package than those folks, including the amount of paid time off.

Matt's right that paid vacation is a bit of an accounting fiction, but sometimes those fictions have real-world implications.  Most people aren't in a position to individually negotiate a tradeoff between vacation and base pay; they've got to take what their employer is offering everyone else with a similar job type.  There's really no way to get people some more vacation (or, for those at the bottom, any vacation at all) without either mandating it by law, or having unions that can negotiate it (a rarity these days, unfortunately), or having the market mandate it (even rarer, in the absence of the first two).

Finally, I'd bet my bottom dollar that Matt's wrong about his boldfaced sentence that "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."  First of all, there just isn't that much room for most of them to become less lucrative.  Second, unlike pay hikes, a paid leave requirement has the side effect of reducing the annual productivity of each worker by the amount of leave taken.

Now, we normally regard a drop in productivity as a bad thing, but think it through: if the demand for a company's products remains unchanged, but its workforce just became 6% less productive because they now had 15 days of leave each year, what are they going to do about it?  If they're profitable, or expect to be in the near future, they're going to hire more workers so that they can meet the demand, and sell as much of their product as they possibly can.

And (Econ 101 time!) if the demand for X increases, what happens to the price of X?  Right, it goes up.  And that's true even if X is the workers of a certain class.  It may go up only infinitesimally, if the supply of those workers is very large, but it damned sure won't go down.

So mandating a modest amount of paid vacation and sick days won't cause the wages of our lowest-paid workers to decrease over time.  Quite the opposite, actually.

Comments

[T.R. Donoghue]

I just stopped reading Chunky Megan McArdle. I really can't take his smug know-nothing bullshit anymore. The guy has never done a real days work in his entire life. He comes from an enormously privileged background. He has a massive platform from which he could do tremendous good.

And at every turn he takes swings at workers and adopts a psuedo-intellectual libertarian posture on issue after issue.

To me he encapsaltes exactly what is wrong with so many American liberals. They have liberal positions on environmental and social issues. But when the rubber hits the road and it comes to discussing American workers and what it's like for 50%+ of this country day in and day out they run and hide. Economic issues make them uncomfortable, they don't want to talk about class.

It pisses me off to no end. I see this shit every day where I work (I'm in labor). There are politicians and pundits who will talk all day long about climate change, stem cell research and a a host of other pet issues but they refuse to even engage on matters of class and workers issues.

[Crissa]

In every job I've had, I had to fight just to get unpaid vacation. Most minimum wage jobs would rather fire someone than let them choose their schedule.

[low-tech cyclist]

Crissa - I believe it. What scares me is the extent to which professional Democrats seem to have lost sight of the fact that a good deal of their constituency is made up of people in that predicament - mostly because they've largely forgotten that people in your situation even exist.

BTW, having been at a number of different income levels over the years, it's not just minimum or near-minimum wage jobs that would rather fire someone than let them choose their schedule. I bet that's true for most people earning four or five times the minimum. There's room to negotiate pay, once you get to a certain level. But employers have a standard benefit package with only limited options, and that's that, as far as they're concerned.

[low-tech cyclist]

T.R. - I wouldn't single out Yglesias, or the circle of bloggers that he's associated with, or even the more affluent class of liberals. (And let's face it, most affluent people are conservative.) You think Max Baucus or Blanche Lincoln thinks about the lives of working people other than briefly, in passing?

Unfortunately, very few people in this country want to talk about workers' issues. John Edwards did, and the mainstream media did their level best to render his candidacy invisible, back in 2007 when he was still running a fairly strong third.

And one can't help but get the feeling that his concern for workers' issues was behind the way they turned him into a pariah over his extramarital affair, while ignoring the affairs of Ensign, Vitter, Gingrich, and the like. Especially because Edwards had been out of the news for months, and wasn't likely to be newsworthy anytime in the near future, when his affair became front-page news.

[Sir Charles]

I agree with T.R. Yglesias doesn't know what the fuck he is talking about on this topic.

I would go further and mandate three weeks of vacation and two weeks of sick leave and eight weeks of paid maternity and paternity leave. Give workers something real to support.

The cost will either be passed on to customers or eaten by the owners. As the part-owner of a small business as a law partner, I can tell you that we either get fee increases to cover the cost of our employees health insurance increases (We give our staff from two to five weeks paid vacation, and twelve days of sick, and three days of personal leave a year, so I'm not just advocating an abstraction here.) If we can't get the increases, we as partners eat it. Too bad for us.

and p.s.

I want my dentist to be licensed and regulated. Jesus.

[low-tech cyclist]

SC - I agree that Yglesias has no idea what he's talking about here, hence my dissection of his argument. I just think he's hardly notable in this respect. Who does want to talk about workers' issues these days, in a way that comes down firmly on the side of the workers?

And while I'd be for a mandated level of leave closer to what you prescribe than what I propose, I don't think something that big would have a prayer, even back in the more optimistic days of the spring of 2009. I think you've really got to harness a "I can't believe everybody doesn't get two weeks' vacation!" attitude.

[Crissa]

Sir Charles, does your dental hygienist /have/ to be in the employ of a dentist? Or should they be able to set up shop and refer people to a dentist if necessary? There's some gatekeeping that could be examined. The equipment a hygienist needs will always be in the way of startups, but it could be argued if we could increase the number of them it would help dentists, as well.

As it is, it's actually quite hard to get an appointment with a dentist in some areas but in cities it's tougher to get an appointment with a hygienist. My dentist has three, and they're always scheduled months in advance.

Anyhow, he was saying maybe the system had some built-in restrictions which were not necessary, or restricted care instead of expanded or made it better.

[Crissa]

I don't know how small businesses could hand extended paid leave, though. Insurance or something, but we'd have to make it so businesses wouldn't be pressured to not hire parents or fire potential parents.

[Eric Wilde]

For our salaried employees we don't have an explicit vacation policy. The approach is that each manager handles it for their own team; but, with general guidelines of about 3-4 paid weeks off per year (plus holidays and shutdowns totaling to about 5.5-6 weeks altogether.) Some abuse it in either direction.

Most teams here are enlightened enough to know that working much over 40 hours/week is counterproductive. I strictly limit my hours every week and reinforce at least once per month to my team that they are paid for 40 hours/week, no more. Any time someone claims overtime to me I tell them to take extra vacation to make up for it.

[Sir Charles]

Eric,

Of course I logged about 140 hours over the last two weeks -- but I get paid handsomely to do so. And I'm completely useless right now.

kathy,

I think the idea in most jurisdictions is that a hygenist needs to work under the supervision of a dentist, just as a paralegal has to work under the superivision of a lawyer. I think this is a good practice. I think people tend to underestimate how medically serious dental problems can be.

[kathy a.]

you meant crissa.

[Crissa]

I dunno. I don't need a lawyer to fill out documents. A paralegal might be all I need. Or a clerk. Same for the hygienist: What if freeing them from dentists meant that more people got their teeth cleaned? Yes, dental problems can be serious... But hygienists don't generally deal with those.

[Sir Charles]

kathy,

Oops.

Crissa,

Paralegals and hygenists both have their places in helping to provide cost effective services. But one of the reasons the dentist pops in to see you for five minutes when you visit is that he has actual medical training and presumably can spot problems that might elude the hygenists.

Similarly, there are very competent paralegals -- I have one who is extraordinarily good -- but I generally think there is wisdom in having them operate under the supervision of lawyers.

I don't like to oversell my expertise, but what I do is not easy. At all. It's very complicated crap as is a lot of law. And even the stuff that seems routine -- real estate settlements for instance -- have serious implications if they get screwed up.

[big bad wolf]

when i graduated law school, i took the massachusetts bar. to take the massachusetts bar, at least in those long ago days, you had to have a massachusetts lawyer sign your bar application. i thought, and think, that a silly requirement and one not exactly favorable to opening up the bar.

now, it turns out there are always those bar members who agree, which was a lucky thing for me as i didn't know any lawyers and the only time my folks had seen one was at closing and a few years later to write a will, mostly so they could direct us to the appropriate godparents if something happened to them. but a friend of the family knew a woman who worked as a secretary to a judge and she called her and the secretary asked the judge if he would sign for me, and he said he would. i went down to the courthouse, went to chambers, and the judge graciously signed my form. pretty damn lucky for me to have a second-degree clerical connection. i never saw the judge before and i never saw him again, but i appreciate his generosity.

that bar groups may set the admissions requirements too socially high, isn't the same thing as you don't need a lawyer. one of the things one learns in law school is that the lawyer's job is primarily about thinking hard about what could go wrong. you want a form to fill out and i sympathize with that desire, but the form doesn't think. nor does the form ask questions, including the hard ones that people don't want to answer and many times don't answer the first or third time. a good lawyer is not there to collect a fee just so things that would otherwise happen, happen. the lawyer, if s/he is doing it right is there to make sure that the things you don't want to have happen, that you don't consciously admit might happen, won't happen.

it's frustrating to pay for that. if the lawyer does the job correctly, it's easy to think you paid for nothing, because everything went smoothly. the sad fact of the human condition is that nothing is routine. if the lawyer asks the right questions, she can make it seem as if things were routine because the problem is headed off, often without you ever really seeing that there is a problem. people think of laywers as after-the-fact fixers, but lawyers are actually more valuable as preventives. forms don't prevent.

i'm not going to tell you that there aren't lawyers who overcharge, or that there aren't lawyers that do a poor job. i am telling you that a lawyer who does a good job is often a lawyer you think you didn't need.

[kathy a.]

BBW is spot on about it all. i'm legally qualified to deal with any old legal problem, but law school taught me enough to identify issues outside my area, and find someone else who knows about them.

my own family has struggled with an estate situation for the better part of a year -- and it should have been easy, since everything was laid out in legal documents, but one relative has been a major pain in the ass, wanting to grab more for himself. the estate lawyer has earned every dime. i've thought more than once [and i'm just a beneficiary, not someone dealing directly with the legal stuff] that she was about ready to fire us, and she'd be justified, but i think this mess is about to be over, finally, thanks to her knowledge and skilled work.

crissa, i once had a dental hygenist tell me i had skin cancer because of a discoloration on my face. and that freaked me the hell out, because my dad had just died of metastatic skin cancer. she was wrong. i was glad that she did not last at the dental practice.

[Crissa]

Ya know, none of those anecdotes really deal with whether it might be better to allow PAs, Dental Hygienists, or paralegals to serve in a different structure. And the one about the estate lawyer is completely ridiculous.

It's nice you're able to afford the current structure, and it certainly is effective. But there are states with even more restrictions on what a trained person is allowed to do as a service, and those restrictions show no better results in care.

So what if we've slowly gotten more restrictive in our rules regarding trained personnel operating? Well, maybe it has gotten too restrictive. And none of your anecdotes face how to tell if the system has gotten too restrictive. Which was Matt's point!

[kathy a.]

well, i'm sorry you feel that way about the estate lawyer story, but i'm awfully glad the trustees did not just decide to wing it themselves and save the fees. or hire a paralegal for the paperwork.

and i know that's an entitled kind of problem [i never expected to inherit anything, and this won't make me rich], but all areas of law contain landmines. i've seen some really devastating problems caused by paralegals -- not things i can describe publicly, but "devastating" is not overstating the situations. one ended up in prison, and that did not exactly resolve the problems for the clients.

as a matter of fact, our primary care "physician" for at least the last decade is a well-trained family nurse practitioner. and i cannot say enough about how great she is. but she operates under the supervision of an MD, and that means she and we all have the assurance that she has backup for things that maybe are more complicated. and she is good enough to know when backup will be useful.

[Rashad]

Sir Charles, I just wanted to comment on your economic analysis. You are right that the way to think about mandatory vacation packages is like a raise in the minimum wage. However, you get the implications for the economy slightly wrong. The short answer is that the lower productivity will result in higher prices, which takes money away from other sectors. So the total impact on the economy is actually slightly reduced employment and/or higher prices for goods depending on the slopes of the demand and supply curves and the decisions the companies make.

The easy way to think about it is that if a company gets less efficient, it costs them more to make the same amount of stuff. Consumers then end up paying more for the same amount of stuff, which leaves them with less money to spend on other things, which hurts those other companies. In this case, since it affects all firms, companies that are more labor intensive will suffer at the expense of companies whose costs are not.

However, I still support mandating vacation, but we have to be realistic about the costs. It's not a free lunch. Just like the minimum wage. However, clearly I think those costs are worth it. I as a consumer am happy to pay more for things and be a little less-well off in order for people to have slightly better wages and vacation. But I'm under no illusions that this leads to higher prices, and slightly (but probably VERY slightly) less total employment.