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July 19, 2007

What Is Leisure Worth?

Now, so much as I don't want to argue the vacation stuff in terms of economic growth, I'm happy to talk in terms of total utility. And if our system has, as I believe, been significantly undervaluing leisure, then LB may be exactly on target when she argues that:

More generally, the question of whether 'compensation' can be increased by mandating paid vacation depends on whether leisure time is worth, in terms of utility, the same amount to the employee as it costs the employer. If workers, on average, think that two weeks of leisure increases their utility by more than employers think it costs them, but transaction costs (cultural factors, whatever) keep them from bargaining for that outcome, then mandating that a part of every worker's compensation consist of paid vacation is going to make everyone better off -- it will literally increase compensation to workers in terms of utility, without injuring employers. A libertarian would probably think it was patronizing to believe that workers and employers are systematically arriving at deals other than the ones that would make them both happiest, but I'm not a libertarian, and in this case I think it's fairly likely that mandating paid vacation would make people better off.

I have, in the past, traded X amount of income for Y amount of vacation, where X was, in absolute terms, worth significantly more, but Y was worth significantly more to me. So this isn't impossible.

As a more general point on all this, the debate on vacation time and compensation basically tracks the debate on the minimum wage. If you believe lower-skilled workers are being systematically undervalued because they have so little bargaining power, you're for things like a raise in the minimum wage, which would create widespread displacement if all these folks were being paid what they were worth, but won't if, as appears likely from the data, they're being paid what companies can get away with paying them. Same too with vacation. If government mandates more vacation time, you may, as Matt thinks, see pay cuts, or it may turn out that most of the folks affected by the change are being compensated so poorly anyway that companies will basically absorb the cost. There's not enough to cut to make cuts worth it. To be clear, I don't think anyone knows if that'll happen, and I don't think it's the relevant issue when deciding whether to support a broad increase in vacation time. But like with a lot of policies, the economic effects here are substantially more uncertain than simple models may indicate.

Oh: And on a related note, could people stop confusing vacation time, which you get a lot of in France, with work rules, which you have a lot of in France? How much vacation someone gets has nothing to do with how easy it is to fire them. If this is really hard for you to wrap your head around, pretend I keep saying "Sweden" or "Norway" rather than France, as both countries have similarly lavish paid leave policies but actually exhibit less job lock than America.

July 19, 2007 | Permalink


see my comments at greater length in post below.

I don't argue with the utility measure that Ezra brings up here, but it is overall social utility rather than personal utility that makes a better argument. Something is a social good when society says it is so, and once identified and codified, it isn't a part of the employment bargain/contract, but becomes part of the corporation/business bargain with society for recognizing and supporting its existence.

Businesses really aren't 'persons', and therefore have no 'rights' (except the privileges granted under the law passed by legislators) - even though SCOTUS bestowed this dignity on them (incorrectly) in a number of contexts.

We have gotten off course on this, but a course-correction is completely up to the people through their representatives. I need not remind that corporations are not mentioned in the Constitution, and that 'commerce' is fully under the control of the Congress and the state legislatures.

Posted by: JimPortlandOR | Jul 19, 2007 1:56:54 PM

I think the biggest problem is that the entire conventional wisdom economic outlook on labor is severely broken and probably needs to be redone from the ground up.

The CW states that if you force employers to pay more, either in wages, or benefits (and at least for me, vacation time is accounted for in hiring decisions, and it's a part of my wages), employers are already paying what the employee is "worth", and thusly the employment ceases to be worth it, so the job will be lost. That's the conservative economic outlook.

The reality is that at least in my experience, employers have X units of work that need to be done to run a business, and they try to find the personal they need to cover that X units of work, at the lowest cost. So mandating increases of this cost, will not by definition result in these jobs being lost. They MIGHT, if the productivity of a position falls below the wages, however, anybody who suggests that this is the case should be laughed right out of any argument.

Posted by: Karmakin | Jul 19, 2007 2:34:29 PM

Last sentance should be:

Anybody who argues that this always is the case should be laughed out of any argument.

Posted by: Karmakin | Jul 19, 2007 2:35:23 PM

As a more general point on all this, the debate on vacation time and compensation basically tracks the debate on the minimum wage.

And both can also be viewed as governmental protection of workers against the willingness of their fellows to settle for less than some minimal standard. Collective bargaining and government protection are in a way competing means of protecting workers, with the effectiveness of the one lessening the need for the other. Employers who don't want to deal with unions ought to consider that when they consider minimum wage and other protections.

Posted by: Sanpete | Jul 19, 2007 4:08:04 PM

Rather than requiring employers give 3 weeks vaction, why not give them a choice between giving their workers 3 weeks vaction time or pay them 50% extra for three weeks? This might have a the effect of making people want to work instead of taking a vaction to get the extra money, but it's an improvement.

Posted by: Ronald Brak | Jul 20, 2007 1:20:07 PM

Match Love Horoscopes There is no doubt that most people would be somehow influenced by what the horoscope says. It is however found that the widest read in the horoscope is that of love, coming close behind are things like health and money. Therefore, one can safely say love shines high in the horoscope world.

Posted by: Unfobbymymn | May 21, 2009 12:59:48 AM

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