Two of the main problems being dealt with today are the lack of jobs and growth and the budget deficit. These two problems on the surface seem to be diametrically opposed. However, there are ways to radically increase the number of jobs and economic purchasing power of the American consumer without increasing revenue and without increasing the deficit. Further, these are changes will improve society.
Paid vacation is one way to accomplish these outcomes.
As I've written about before, raising the minimum wage to roughly $10.00 per hour in 2013 would increase GDP by over $60 billion and add well over 100,000 jobs per year according to the Economic Policy Institute. I have written a post recently concerning this and will therefore not belabor the point here, but I think it is clear that having so many people earning such pitiful amounts of money and so many living in or near poverty is detrimental to our economy and devastating for our society. The post can be found here:
http://www.dailykos.com/...
In addition to raising the minimum wage, mandating paid vacation time for employees would not only give an overworked and overstressed society some much needed relaxation time to enjoy life but also millions more jobs. Here is an overly simplistic yet illustrative demonstration of how this might work. Let's say that, for instance, the Federal government mandated that for every 104 hours of labor an individual completes they must receive 1 full day of paid vacation. An individual who works full-time(we'll use 52 40 hour weeks=2080 hours per year) would receive 20 days of paid vacation. This is 4 full workweeks, which is 1/13 of the year. So, for every 13 full-time equivalent employees employed at a company, another full-time equivalent employee would need to be hired in order to make up for the other 13 employees' paid vacation time and to keep the workforce complete.
Let's do an analysis and assume that this requirement is only applied to the private sector. According to the BLS, there are more than 110 million workers in the private sector and the average workweek as of May was 34.4 hours. This equates to 94.6 million private sector full-time equivalent employees. Since 1 full-time equivalent employee would need to be hired to make up for the vacation time of every 13 full-time equivalent employees, 7.3 million new full-time equivalent workers would need to be hired to make up for the paid vacation time. While I know this analysis is not the most precise, and that the true number might be lower than this, it is worth noting that corporations have been squeezing hard to get every last bit with less employees and would be hard-pressed to squeeze much more out of them at this point. It is also worth noting that these are FTE jobs. As most jobs are not FTE, the number of actual jobs created would likely be higher. 7.3 million new full-time equivalent employees would be equal to 8.5 million new jobs at the current average workweek. It is also worth noting that hiring these new employees would be cheaper than making up for vacation time by increasing hours of current employees to the point where additional benefits and overtime are received.
This also does not take into account the increase to purchasing power and GDP by this increase in overall personal worker income. For that economic analysis, lets assume employers find a way to squeeze more out of employees and only hire or increase hours by 5 million full-time equivalent jobs, instead of the 7.3 million full-time equivalent jobs, to make up for paid vacation time. 5 million full-time equivalent workers at 2080 hours per year earning the US private sector average of $23.41 per hour would lead to an increase of $245.8 billion in total US income. While these were previously unemployed individuals, it is safe to assume that the multiplier effects of this income is closer to that of unemployment benefits(1.64) or food stamps(1.73). Let's say that the multiplier effect of these new jobs is 1.45. The total increase in GDP would then be $356.4 billion. This would increase in GDP by 2.5% over what it would have normally been which would cause the indirect creation of millions of additional jobs. So, assuming this is only applied to the private sector, the overall creation of 5 million new jobs per year is a very conservative estimate.
Product prices might be a concern. However, hiring 1 new worker for every 13th indicates a labor cost increase of roughly 1/13. As labor costs usually constitute only a fraction(15%-20%) of the price of a product or service, the rise in prices would only be slight and would be more than offset by the increase in personal income. Any concerns about the price of our exports could easily be alleviated(and relatively cheaply) by refunding to the manufacturer the 1/13 of labor costs associated with any exported product.
How would this affect the budget deficit? Well, if $250 billion more dollars is spent on wages in the United States, and with the average individual income tax rate currently around 10%, it stands to reason that around $25 billion in additional revenue would be taken in. The US safety net/welfare spending would be less, as individuals would have less need for food stamps, EITC, unemployment benefits, Medicaid, etc... Corporate taxes are harder to read, as revenue and quite possibly profits would be higher. Even if they were not higher, they would almost certainly decline by less than individual income, in which case the income tax base would increase more than the corporate tax base would decline. And since the effective individual income tax rate is higher than the effective corporate income tax rate, a general increase in revenue would be experienced. Therefore, allowing paid vacation time would have a significantly positive impact on the Federal budget deficit by increasing revenues and decreasing safety net expenditures. Lastly, because states rely very little on corporate taxes and higher on sales and income taxes, and because Medicaid is such a large portion of state budgets, state budgets would certainly be improved as well.
Is this out of line with our major competitors? In short, no. The OECD average for vacation time is 26.75 days per worker. Outside of Japan, which has 18 days, all other OECD countries workers get at least 20 or more. Americans, on average, receive 10 days of vacation and it is quite likely that a good deal of this goes to public sector workers. The average number of paid vacation days for private sector employees is almost certain to be lower. From what I see, hardworking Americans deserve some time to relax and enjoy life while they are raising children and before they retire. Further, it should be noted that this is only a benefit to workers. This is not welfare, this is an incentive to work. This is a worthwhile, deserving reward for those who work, an improvement to our society, and a great job creator and stimulus to our economy.
While this analysis certainly contains some "back of the envelope" figuring, it illustrates that requiring paid vacation days for workers would be beneficial to our economy, budget deficits, and society. While the true effect might be slightly more beneficial or less beneficial than this analysis concluded, it will certainly be significantly beneficial.
UPDATE:
I did not take into account that the average worker gets 10 days of paid vacation. The impact would be reduced by half, but still, very sizable if you look at the numbers.
There are 26% of workers that get no paid vacation time.