| Why do you think the real wage of low-end workers would decrease by 10% if paid vacation were mandatory? If I try to reconstruct your reasoning, I guess it goes like this - correct me if I'm wrong: 1) Employers of these workers are paying the workers according to their marginal product, and will continue to do so. 2) The worker's marginal productivity is exactly proportional to days worked. 3) Therefore, if they work 90% as many days, they will be paid 90% as much as before. The first problem here is premise 2 - better-rested, happier workers tend to be more productive, so increased vacation partly pays for itself. But the more serious problem with this logic is that, even if premise 2 were true, most of these workers are probably in wage-goods industries. A reduction in productivity within the wage-goods industries as a whole will be offset in two ways - less production of wage goods, and increased real price of wage goods, i.e. decreased real wage in non-wage industries. So even in the idealized classical world you seem to be living in, most of the effect will be on the wages of people who already enjoy vacation time. You also have to consider the macroeconomic demand effect. The economy is still running below capacity, so employing more people will have a multiplier effect. |