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Again, There Is Simply No Good Argument for Mandated Paid Leave

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Here’s a letter to a long-time reader of Café Hayek who describes herself as “very skeptical but appreciative.”

Ms. T__:

Thanks for your e-mail and kind words.

While acknowledging that most workers in America already have paid leave, you think me [2] “wrong to oppose a government requirement of paid leave.” You base your conclusion on the fact that “it is hard for each worker to get a tailor-made job package…. Workers have to accept what most of their co-workers want.”

With respect, I’ve two related reasons for believing that you fail to make a compelling case for government-mandated paid leave.

First, no worker is destined to hold – and no worker is stuck in – any particular job. Workers who value paid leave highly enough can work for employers that offer such leave, while workers who don’t, don’t. Many employers, in both the private sector and public sector, offer paid leave [3]. And so while it’s true that transaction costs prevent each worker from having an employment package tailored exactly to his or her desires, it’s not true that each worker must accept the employment package that is desired by (and, hence, offered to) the majority of workers for any particular company.

Second, your argument cuts both ways. Precisely because transaction costs prevent each worker from having an employment package tailored exactly to his or her desires, any randomly chosen worker is just as likely to prefer to have less paid leave (and higher money wages) as to have more paid leave (with lower money wages). It’s therefore mistaken to conclude that the transaction costs that prevent each worker from getting an employment package tailored to his or her exact desires results in too little private provision of paid leave. It very well might be the case that these costs result in too much private provision of paid leave – a reality that only further weakens the already unsalvageable case for mandated paid leave.

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