Think through the compromises of government-mandated paid vacation

The nonsensical coverage of the paid vacation debate continues. Apparently, turning down a federal paid vacation program is synonymous with being family-hostile or suffering-friendly, or so we are told. We seldom receive information about the full ramifications of such a policy.

What types of leave do employees use most often? Who does not currently have a paid vacation? Are there legitimate reasons for an employer not to provide these? Or would a government program only target workers who are currently not on paid vacation from the employer?

These are some of the questions rarely asked by those who insist that our government impose a major new program.

Let me try On average, 15% of employees take paid family or sick leave annually. As Rachel Greszler of the Heritage Foundation stated in a testimony before Congress, “Surveys show that virtually all workers who need leave take it, and nearly three in four who take leave receive full or partial pay.”

Given the general media coverage on the matter, I wouldn’t blame you for not knowing this fact.

The emitting fire:Veronique de Rugy: Pour fuel into the burning fire

Most vacations are based on medical needs

In recent years, most of the attention has been paid to parental leave. However, you may not realize that this is just one of four different types of vacation options available to workers. While parental leave is the easiest to plan, as Greszler notes, “more than half of all parental leave is taken by employees for their own medical needs, while the remaining quarter is used by employees to care for family members; these vacation days can be unpredictable and require vacation days of different lengths. “

Of course, not all workers are entitled to paid leave. But that’s not surprising. Paid vacation benefits are not free regardless of who formally provides them. When employers provide this service, employees receive less than usual wages. Some people may prefer to have paid vacation in their service, but many do not. In the meantime, a federal program would not be free either, since it would be paid for with a wage tax.

Studies show that statutory paid vacation falls as employees, including many lower-paid workers, find out what it costs them to take away.

While it is expensive, a federal program will not really help many workers who are not eligible for paid vacation. This is because most of them are self-employed, are employed by very small companies, or are in temporary and part-time jobs.

For example, state-level data shows that only a small proportion of lower-income workers tend to take advantage of state paid vacation programs. Even if an individual is eligible, the cost (both from wage tax and administration) for the benefits is too high, especially if the program provides less than 100% of wages and takes a few weeks to pay.

Different for the self-employed

The situation is different for the self-employed. There are approximately 25.7 million small businesses with no employees (sole proprietorships) and more than 9.4 million self-employed workers, most of whom are sole proprietorships. While these workers could purchase disability insurance to receive paid vacation benefits, many of them do not. Insurance is a prepayment for a service that you may never use.

If state paid vacation plans are an indication, a federal program isn’t going to change much. For example, in New York, independent contractors must opt ​​for the state program and start depositing within the first 26 weeks of starting their business. If this is not the case, they will have to pay in for two years before they can receive benefits. Other states have fewer requirements, but the cost is generally not worth the benefit.

The bottom line is that most workers already have paid leave, and their benefits are often much better and more flexible than those granted by the government. Unfortunately, a federal paid vacation program would not help most low-skilled workers. And for independent contractors, their cost for a limited benefit would increase significantly.

Veronique de Rugy is the George Gibbs Chair in Political Economy and Senior Research Fellow at the Mercatus Center at George Mason University.


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