Benefit Guarantees - Island of Sanity

Island of Sanity

Policy Issues

Benefit Guarantees

I was chatting with some folks about work hours and vacation time. The consensus of the group was that there should be laws requiring minimum amounts of vacation time and the like. I said that I was against such laws, that conditions of employment should be determined by negotiation between employee and employer.

One person, who was from Denmark, said that he was glad that the law there requires a minimum of 25 days vacation per year. Sure, he said, he could negotiate for better salary and benefit, but he appreciated that there was a minimum so that a company could never offer him less.

At that point the conversation turned to other subjects and I never got around to responding. But as an opinionated person I can't let it go, so I'll give my response here:

Suppose there was no such law. And suppose someone called you and offered you a job paying twice your current salary, doing something that you absolutely loved, with all sorts of other great benefits ... but they could only give you one week vacation a year. How would you react to this offer?

  1. Seriously consider it. The other advantages make up for the low vacation time.
  2. Dismiss it instantly. No matter what other advantages the job has, the short vacation time makes it unacceptable.
  3. If you consider the job unacceptable today, could you imagine any change in your life circumstances that would make it desirable?
  4. Maybe you believe a law is necessary to protect others. If you wouldn't want such a job, no one else should be allowed to accept such a job either. If someone else would be foolish enough to take a job that you don't think is good enough, the law should stop them.
  5. Or perhaps you are glad that there is a law against it for your own sake. Otherwise you might be tempted to accept such an offer. You need the government to protect you from taking an offer that sounds good to you, but fortunately the bureaucrats know how to run your life so much better than you do.

The people in favor of the government setting minimum benefits kept talking as if the choice was between a job with poor vacation, insurance and other benefits; and a job with the same pay but with good benefits. Of course if that's the choice, anyone would choose the good benefits. But in real life, this isn't the choice. The money to provide these benefits doesn't come out of nowhere. If the company is going to spend more on benefits, that money has to come from somewhere else. Some of it could come from profits, but realistically, that can only be a tiny percentage: Labor costs for most companies are way higher than profits. Most likely the money would have to come from salaries. So the real choice is, Do you want to make $X per year with 2 weeks vacation, or would you take 5% less pay to get 4 weeks vacation? I'm sure some people would prefer the extra vacation time while others would prefer the extra money. It is not at all clear to me why the government should make one of those choices a crime.

A recurring theme in the conversation was that the participants -- mostly computer programmers -- had the skills that we could negotiate decent jobs, but that there are other people who could not. Someone brought up a hypothetical single mother working at a fast food place that the others quickly latched onto.

But again, they kept talking as if this hypothetical poor woman had a choice between a job with very poor benefits and a job with the same pay but with good benefits. For people with few good marketable skills, the real choice is even starker than a pay cut: Minimum wage laws make that illegal. If an employee does work that brings in, say, $10 an hour, the company cannot afford to give that employee pay and benefits that have a total cost of more than $10 per hour. If the government mandates minimum pay and benefits that total $12 or $13 or $15 an hour, companies will simply not be able to afford people to work these jobs at all. For that employee, the choice is between a job with poor benefits, and no job at all.

(By the way, it's no use condemning the company for being greedy and tight-fisted. If their employees all cost more than they produce, before long the company will go broke all they'll all be unemployed anyway.)

© 2010 by Jay Johansen


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