Work Hours, Wages, and Vacation Leave

Using the Panel Study of Income Dynamics, the authors provide a set of facts about vacation leave. They show that on average, vacation time taken rises one-to-one with paid vacation; annual hours worked fall by about one full-time week with every week of paid vacation; the amount by which vacation time taken exceeds time paid is highest for women, union members, and government workers; paid vacation weeks are positively associated with hourly wage rates and, to a lesser extent, with nonwage compensation; and vacation time taken is weakly countercyclical. Vacation leave seems to be determined by broad employer policy rather than by negotiation between the worker and the firm. In particular, it is strongly related to seniority but depends very little on labor market experience, and for job changers it is only weakly related to vacation on the previous job.