Commentary

Vacation from Sanity

By Edward L. Hudgins
July 10, 2000
Since today’s crackpot ideas too often become tomorrow’s public policies, it might be worthwhile spending some time reviewing the latest European import: government-mandated vacations. “Good Morning America” and other TV tabloids are giving airtime to Joe Robinson, editor of the travel magazine Escape, who’s gathered some 20,000 signatures for a petition seeking a federally mandated national vacation policy. Those signing the petition are entered in a lottery for a free vacation. (Vote buying, anyone?)

Supporters say that on average American employers give their employees 16 paid vacation days a year. For employees with less time at a company, the average is two weeks or less. By contrast, European governments mandate between four and six weeks minimum paid vacation for all workers. Thus, some whine, the federal government should mandate at least three weeks of vacation for overworked, stressed-out, “vacation-starved” Americans.

Of course, this is another example of political pushers promising government-mandated benefits such as higher wages, free health care and paid retirement, hoping recipients will not notice that at some point they will pay for such faux free lunches.

So let’s compare the labor markets in leisurely Europe with those in workaholic America. The current American unemployment rate is 4.1 percent, down from 6.8 percent in mid-1991. Today the United States suffers labor shortages. In France, the jobless rate today is 9.8 percent, versus 10.2 percent in 1991. German unemployment has risen to 9.6 percent from 6.3 percent. Italy’s rate has grown to 11.7 percent from 10.1 percent, and in Spain unemployment is at 16.1 percent, up from 15.2 percent 9 years ago. On average, unemployment in the industrialized European countries is 10.1 percent, over two-and-a-half times higher than the American rate. European workers tend to be unemployed for almost a year, compared with three to four months for Americans.

Furthermore, in 1998 the American economy employed 133 million workers, up from 119 million in 1991. By contrast, there were 154 million workers employed in the 15 European Union countries in 1998, almost unchanged from 153.8 million in 1991.

What about wages? In 1996 the average per capita income for an American was $27,821, compared with $21,200 for a German, $20,533 for a Frenchman and $19,333 for the EU average. We win again.

But is the six-week vacation mandate the reason well-rested Europeans have such dreadful labor markets compared with the United States? In part, yes. When governments force businesses to pay workers to be idle beyond what is justified by the businesses’ productivity, less wealth is produced, more capital is consumed and the result will be lower job-creation rates, lower real pay, or both.

In addition, Europe heavily regulates labor markets. Wages for the most part are set by governments, in conjunction with labor and corporate elites, rather than by markets. Unemployment benefits are generous. Taxes and regulations make it costly to hire workers and difficult to dismiss them. Thus businesses create few jobs.

Consider the mindset of those who impose such destructive policies. To reduce unemployment the French government mandated a higher minimum wage, on the theory that out-of-work individuals collecting state benefits would be tempted to seek jobs if salaries were higher. The French government also cut the workweek to 35 hours with no cut in pay, on the theory that businesses would hire more workers to take up the slack. Government police now literally raid offices and fine workers for working too much. The result: high, chronic unemployment, with France experiencing a brain drain as entrepreneurial individuals seek opportunities elsewhere.

A logical consequence of illogical labor policies was seen recently when jobless Germans demanded that their government pay for vacation trips to resorts to break the monotony of sitting at home and collecting unemployment benefits. Maybe they’re right, since their government’s policies help keep them out of work.

American policymakers are also prone to such foolishness. The Clinton administration’s family leave policy mandated that employers allow workers to take unpaid leave for certain Washington-defined emergencies. Now the administration wants to authorize the use of state unemployment funds to pay for such leave, creating a new entitlement. Mandated vacations could be the next slip into the muck of European labor policies.

Are many Americans stressed out because they don’t balance work with other priorities? Unfortunately, yes. Would many find a few weeks hiking in the mountains to be physically and spiritually reviving? I certainly do! But vacations, along with salaries, 401(k)s and other compensation, are the business of employers and employees, not the federal government. The more Washington mandates employment practices, the more America will resemble Europe in the worst possible way.

Edward L. Hudgins is director of regulatory studies at the Cato Institute.