David Henderson has an excellent new post at EconLog on paid leave. But not all EconLog readers share my positive assessment of David’s post. Commenter Peter Gerdes is one who takes issue with David’s case against government-mandated paid leave.
I left this reply at EconLog to Mr. Gerdes’s comment:
Peter Gerdes: Although the U.S. government doesn’t require that employers provide paid family leave, the portion of workers in America who have some form of paid leave is almost two-thirds. This fact is evidence – although admittedly not proof – against your claim that workers are too likely to irrationally choose not to purchase (by accepting lower money wages) paid leave. Is your claim that every rational worker would choose to purchase paid leave? If not, do you have in mind a percentage – 70, 80, 95? – of workers for whom purchasing paid leave is rational?
Also, this comment of yours reveals an implicit yet mistaken assumption:
[R]emember that this policy [presumably of mandating paid leave for all workers] isn’t wholly neutral. It also effects a transfer from workers who have less need for medical/family leave to those who have more need. A transfer which wouldn’t happen in the free market. One could reasonably believe, in fact I think I may believe, that such a transfer is desirable.
The mistaken assumption is that all workers get the same bundle of fringe benefits. Yet precisely because some workers can choose to purchase paid leave by taking lower money wages while other workers can choose not to make this purchase, there is no need for government to force any transfer of the sort that you mention. Smith can have paid leave while Jones doesn’t. It’s a beautiful, peaceful, and mutually agreeable outcome.
Finally, why do you assume that the welfare losses imposed by mandated paid leave on workers who prefer higher money wages in lieu of paid leave would be less than are any resulting welfare gains enjoyed by workers who are willing to be forced to purchase paid leave at the price of lower money wages? Not only (again) can and do many workers already choose to so purchase paid leave, how can you possibly know that the harms that a paid-leave mandate would impose on, say, young childless couples working to save money to have families in the future would be less than the gains to other workers?
More generally, how can you be so sure – so sure as to endorse government coercively imposing paid leave – that the losses that such a policy would impose on workers desperate to earn as much money today as they possibly can would be more than offset by the gains so enjoyed by workers who could, but for some mysterious reason choose not to, purchase paid leave on their own?
