The Tortured History of Paid Leave in the United States

Posted by Alan E. on May 7, 2014 7:00:00 AM

How did we get here?
The United States is one of the few industrialized countries without statutory national mandates for paid leave. The EU  requires a minimum of twenty leave days, not counting national holidays. Australia has similar laws.

Paid annual leave and paid public holidays OECD countries

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On average, U.S. companies provide ten to twenty days per year depending upon seniority. But many companies provide only ten days (two weeks) off per year. Then there the 25 percent of American workers and 31 percent of low wage earners have no paid vacation time at all, according to a 2011 study by the Center for Economics and Research

william_taftWhere Did Paid Leave Start?

Amazingly, while the U.S. currently lags behind, the push for paid leave actually started here. Paid leave mandates have been attempted and got stopped each time. More than 100 years ago, in 1910 President William Taft proposed that every American worker needed 2 to 3 months of vacation. He said it was “in order to continue his work next year with the energy and effectiveness which it ought to have.” Taft hammered away at Congress, but his law never passed. However, But around this time, Sweden and Germany took the American president's lead, and both passed legislation mandating seven weeks of paid vacation per year.

Other Countries Started Mandating Paid Leave

By 1930, the United States Department of Labor looked at the issue again. By then, over 30 countries had laws requiring paid time off. More countries kept adding mandates so by the mid and late twentieth century, many had paid leave time that averaged seven weeks. Finally, the U.S. responded, not with minimum leave mandates, but the Family Medical Leave Act. FMLA, passed in 1993, guarantees a minimum of 12 weeks unpaid time off so workers can deal with extended medical issues of immediate family members. Beyond this unpaid time off mandate, Congress has gone no further. Its one last failed attempt was in 2009, a refused vote on “The Paid Vacation Act," with opponents saying it would kill jobs. Without mandates, the extended recession and lower employment levels after 2008, paid employee leave declined through 2011 and beyond. By 2013, states mandating Sick Time is the major change in paid leave rules. Paid sick time rules begin in San Francisco, Washington D.C., Milwaukee and the State of Connecticut require a minimum number of sick days per year.

hard_workU.S. Has A Culture of Work Not Leave

So why is the U.S. so different?

Apparently, we prefer to work than take time time off.

Harris Interactive reported in 2011 that 57% of American workers had at least two weeks of accrued vacation that they did not use by year end. Why?
Call the U.S. one of the most competitive labor markets in the world. Our workers work longer hours than anyone except the Japanese and Koreans. Not surprisingly, both of those countries average ten days of paid leave per year as well. There is no definitive proof, but perhaps it's the relatively high level of "frictional unemployment," that part of the U.S. workforce that's always in transition from job to job, and the relatively shorter average tenure with an employer that makes the U.S. job market so different. Workers are easier to layoff and fire than in Europe. They also are held less by the golden handcuffs of superior employee benefits. In the end, these factors add up to employees moving around more and being able to demand less paid leave than their European counterparts. In this mix, it makes sense that U.S. workers have less bargaining power to demand more paid leave.

The Future of Paid Leave

So what does the future hold for paid leave?

Where most organizations have provided paid Vacation and Sick days during the second have of the twentieth century, these are now fast becoming obsolete. Employers are switching to an all-inclusive system called “paid time off” usually called PTO. Under this system, all of an employee’s time off, paid vacation time, paid sick time, paid personal time, sometimes even holidays, are becoming merged into a single class – paid time off.

The advantages of PTO are many. It's a much easier system for employers to administer. However, some employers when consolidating vacation, sick and personal time, will cut the number of days they will pay. As with all time off management issues, any time off policy needs careful thought. For example, some employees prone work while sick to keep their vacation days can have a negative impact on productivity as other employees can also become ill and an entire team's productivity can suffer. On the other hand, in other cases with a Sick Time policy, employees might come in sick anyway because they can bank or cash out Sick Time later. Every policy and situation needs to be evaluated accordingly. 

While PTO is not perfect, the consensus among HR and payroll professionals is that, on net, it's a better option and likely to grow in popularity. 

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Topics: Time Off Management, vacation time, paid time off, sick time

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