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More on Paid Leave

Here’s a letter to a high-school senior who is writing a paper on mandated paid leave:

Mr. Morrison:

Thanks for your e-mail.

You write that it’s “hard to get [your] head around why government shouldn’t require employers to give all workers paid leave.”

Here are a few items that I and some other economists wrote on this topic. But let me try yet another version of the explanation.

Begin by noticing your language: You describe employers being required “to give all workers paid leave.” If offering paid leave were costless to employers, there’d be no reason any would fail to do so. Therefore, what you describe is employers being required to give something to workers that is costly. The danger is that, once compelled to include paid leave in the compensation package for each worker, employers will offset this higher cost by reducing the value of other parts of the compensation packages for workers – for example, by lowering workers’ take-home pay. Workers who’d prefer more take home pay to paid leave are thereby harmed.

Think of the matter this way: Suppose that government required auto producers to give annually to each of their workers a new car worth at least $20,000. I’m confident that such a requirement would result in each auto-worker’s take-home pay falling by about $20,000. The fact that, in and of itself, a new car is good to own clearly doesn’t mean that this government requirement would be good for auto workers. Effectively, such a requirement would compel anyone who chooses to work for an auto producer to buy from his or her employer $20,000 worth of product every year.

By the same logic, mandating paid leave would require all workers to buy from their employers a specific product – namely, paid leave. How are workers made better off by government telling workers what they must buy from their employers? Asked differently, how are workers made better off by government telling employers what they must force their workers to buy from them?

Good luck with your paper!

Donald J. Boudreaux
Professor of Economics
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA 22030