large majority of the employees in American business firms are covered by plans providing maximum vacations of 3 weeks or more should not be interpreted as evidence that a majority-or even a very large minority-of American workers actually receive 3- or 4-week vacations in any year. Eligibility for such vacations is usually attained only by years of service with one employer. In most firms, therefore, a notable gap exists between the average length of vacation taken by employees and the maximum allowable to long-service employees. Correspondingly, an increase from 2 to 3 weeks (or from 3 to 4 weeks) in the maximum vacation period will not produce an increase of a full week in the average vacation taken, since at any one point in time only a small proportion of workers will be eligible for the maximum vacation.

Thus, if attention is concentrated upon the maximum periods of vacation specified, a misleading impression may be created of the extent to which annual vacation benefits have been liberalized. For most vacation plans existing today, a substantially greater increase in realized paid vacation time would probably be brought about by a drastic reduction of eligibility requirements for receipt of the maximum vacation than by a further increase in the maximum, unaccompanied by change in eligibility conditions.

Vacation plans, of course, vary greatly in their qualifying terms. Some of the most common patterns of eligibility requirements, however, are described in the surveys that have been previously cited. These surveys demonstrate the still-dominant tendency to restrict the 3-week or more vacation to the long-service worker.

The Bureau of Labor Statistics 1961 study of graduated vacation plans in major collective bargaining agreements found that a large majority of these plans required 10 to 15 years of service in order to qualify for a 3-week vacation. Of those plans which provided a maximum of 3 or more weeks, less than 10 percent allowed the worker to become eligible for a 3-week vacation before he had accumulated 10 years of seniority. Thirty-six percent required 10 years of service, 40 percent required 15 years, and virtually all the remainder required some period between 10 and 15 years.27

In those graduated plans which provided a 4-week maximum, the most common qualifying period in the 1961 BLS survey was 25 years, followed at some distance by 20 years. Fifty-two percent of these plans required 25 years of service, and 32 percent required 20 years. Less than 3 percent allowed the worker to qualify for a 4-week vacation in 10 years or less.28 Clearly, the 4-week vacation is still seen as a benefit to be deferred until very late in the worker's career.

The BLS survey of vacation benefits for workers in 18 major metropolitan areas in 1961-62 also shows the long period of employment usually required for 3 weeks of annual vacation-and the much longer period required for 4 weeks. Of the plantworkers covered by vacation plans providing a 3-week or greater maximum, less than 15 percent could qualify for the 3-week vacation after 5 years of service. An additional 33 percent, approximately, were eligible after 10 years of service.29 The remainder, slightly more than one-half of the total, qualified only after 15 years of service.30

#U.S. BLS Bulletin 1342, p. 6. (Same reference as for footnotes 19, 22.)

29 Idem.

This includes a small proportion of workers under plans which entitled them to a 3-week vacation after less than 10, but more than 5 years of service.

Again, a relatively small part of this remainder was composed of workers qualifying after more than 10 but less than 15 years.

With respect to the 3-week vacation, this BLS survey found that eligibility requirements for officeworkers, by 1961-62, were not markedly more liberal than those for the blue-collar plantworkers. About 15 percent of the officeworkers under plans with 3 weeks or more maximum qualified with 5 years or less of service, an additional 40 percent qualified after 10 years, and the rest-about 45 percentafter 15 years. For officeworkers, as well as for plantworkers, an annual vacation of 3 weeks or more was generally attainable only after long service to one employer.

Likewise, no great difference in treatment of officeworkers, compared to blue-collar plantworkers, appears upon analysis of the BLS findings concerning eligibility for 4-week vacations in its 1961-62 study of the 18 major metropolitan areas. As previously noted, a substantially higher proportion of officeworkers-47 percent-than of plantworkers-32 percent were under vacation plans with a 4-week maximum. For both categories of workers, however, many years of service were required normally to qualify for the maximum. Of those covered by such plans, slightly less than 10 percent of both plantworkers and officeworkers were eligible for the 4-week vacation with 15 or fewer years of service. Cumulatively, half the plantworkers and about 40 percent of the officeworkers qualified with 20 years or less. The remainder approximately 50 percent of plantworkers and 60 percent of officeworkers-were eligible for the 4-week vacation after 25 years of service.31

To conclude this presentation, information developed by the 1965 National Industrial Conference Board study can be cited as portraying the vacation eligibility requirements currently prevalent among a good-sized sample of the largest American corporations. More than nine out of ten of these surveyed corporations, as has already been stated, provided maximum vacations of 3 weeks or more in 1965. Of those that did, however, only about 8 percent allowed their employees to qualify for the 3-week vacation with 5 years of service. Almost 60 percent required 10 years of service-this being by far the most common eligibility condition. Almost all of the remainder gave the 3-week vacation after 15 years of service.

To qualify for a 4-week vacation, employees of the corporations surveyed by the NICB had to accumulate many years of seniority. Less than 5 percent of the corporations which provided a 4-week maximum gave it to workers of 15 years' service. Approximately 45 percent required 20 years of service, and the remaining 50 percent required 25 years. Thus, eligibility requirements for the 4-week vacation, in this 1965 sample of large corporations, proved to be very similar to those found in the Bureau of Labor Statistics' earlier and larger-scale survey of vacation benefits for workers in major metropolitan areas.32

31 The fact that 20 years, rather than 25 years, was the qualifying period for a somewhat higher proportion of plant workers than officeworkers-of those under 4-week maximum vacation plans-has an implication for future developments. The large majority of plantworkers under such plans have had their vacation terms established through collective bargaining, while most officeworkers have vacation benents granted them unilaterally by employers. Unions have not as yet extended the 4-week maximum to as large a proportion of blue-collar workers as of officeworkers. But, this BLS survey indicates that when unions have negotiated a 4-week maximum, they have tended to institute a more liberal length of service requirement than have employers, in providing this benefit to their nonunion office employees. Collective bargaining then, may well set the pace for reductions of years of service typically required for a 4-week vacation, for nonunion as well as unionized workers.

32 National Industrial Conference Board, op. cit.

Summary

This examination of the current status of paid vacations in the United States has shown that there has been a very widespread movement, in the years since the end of World War II, toward adoption of the 3- and 4-week vacation, for both white- and blue-collar workers. American employers have generally abandoned the vacation pattern that had been most typical of the immediate prewar years: 2 weeks for office employees, and 1 week for plant employees. The labor movement has not officially, so far, pronounced the extended vacation to be one of its major goals, and other fringe benefits have attracted much more attention than have paid vacations from analysis of postwar trends in collective bargaining. Yet unions have, in fact, been working persistently to liberalize the provisions of collectively bargained vacation plans and make 3-week or longer annual vacations available to an increasing proportion of union members. In so doing, they have certainly helped to speed up the rate of adoption, by nonunion employers, of such longer vacation periods in their unilaterally established vacation plans. Although the proclaimed target of the American labor movement has, for some years now, been the shorter workweek, the effective thrust of collective bargaining in the postwar period has thus far been more in the direction of cutting annual working hours through liberalized vacations than achieving a widespread breaking down of the standard 40-hour week.

The great wave of conversions of vacation plans to 3-week and 4week maximum vacation periods has not, however, actually brought these longer vacations to a very large proportion of workers. At any given time, long-service eligibility requirements bar most employees in American industry from receipt of an annual vacation of more than 2 weeks. Indeed, the present situation has an anomalous quality. On the one hand, the incorporation of the 3-week or longer vacation in a large majority of vacation plans offers strong evidence of a broad consensus that such a vacation period is an important, desirable employee benefit. But on the other hand, there is still an entrenched reluctance to extend this important and desirable benefit beyond the limited circle of those workers who have put in many years of service with one employer.

BROADENING THE COVERAGE OF THE 3-WEEK-OR-MORE VACATION: THE ISSUES INVOLVED

What would be the impact of Federal legislation which required all American employers in interstate commerce to give each of their employees a paid annual vacation of, say, 3 weeks? In any one year, how many workers who would otherwise have received vacations of less than 3 weeks would gain an additional week or two of vacation? How many who would have received no vacation at all would now enjoy a paid vacation? What would be the increase in total vacation time paid for by employers, and to what extent would this increase push up the aggregate labor costs incurred by American private industry?

Precise answers cannot be given to these questions, and estimates of the probable increase in paid vacation time will vary according to the assumptions that are made about such matters as: the qualifying

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Finally, if the employee is one of that small minority in American industry not yet covered by an annual vacation plan, a requirement that he receive a 3-week vacation would reduce his hours worked from 2,016 to 1,896. His employer, therefore, would incur an increase of approximately 6.3 percent in the cost of each hour actually worked by the employee.3

34

In view of these calculations, what is the average percentage increase, in cost per employee hour worked, that a typical American employer would seem likely to incur as the result of a legally established minimum 3-week annual paid vacation? A plausible estimate would yield a figure in the neighborhood of 3 percent. The most common length of vacation now received by employees is 2 weeks. On opposite sides of this large model group, the number of employees currently receiving less than 2 weeks of vacation is offset, to at least a large degree, by those receiving 3 weeks or more. It is very unlikely, accordingly, that the average increase in cost per employee hour worked could greatly exceed the approximately 2-percent increase that would result if every employee had been entitled to exactly 2 weeks' vacation, before the enactment of a 3-week-minimum standard. Therefore, an estimate of 3 percent, as the upper limit of the probable cost increase to American employers in the aggregate, can be strongly supported.35

The estimate just developed, though it is admittedly rough, indicates that the added cost to American employers from the introduction of a 3-week annual vacation standard would be about the equivalent of 1 year's round of wage increases. The President's Council of Economic Advisers is currently advocating a noninflationary wage "guidepost" which prescribes a rate of increase in wages, averaged over the American work force, of approximately 3.2 percent per year. And, in actuality, the average annual rate of increase has been somewhat less than this, in recent years. If, then, a minimum 3-week paid annual vacation were to be legislated, the aggregate cost to American employers would be about the same as that of 1 year's wage increase at a pace conforming to the Council's 3.2 percent "guidepost." The price, therefore, of establishing such a minimum vacation standard is relatively modest-one that could be met out of the increase in the

34 For simplicity and comparability, each of these calculations has assumed eight paid holidays a year in addition to whatever annual paid vacation an employee may receive. (Currently, the number of paid holidays most commonly provided by American employers is from six to eight.) 35 A recent study by the Bureau of Labor Statistics of costs of vacations and other fringe benefits provided to nonproduction employees, i.c., employees classified into such categories as clerical, technical, professional, and administrative, showed that a higher proportion of these employees were actually receiving 3 weeks or more vacation, in the large sample of firms studied, than receiving no vacation or less than 2 weeks' vacation. It is true that nonproduction employees, as a group, receive longer average vacations than production workers. Even when allowance is made for this difference, however, the study adds weight to the argument that a 3-week-minimum vacation requirement almost certainly would not push up labor cost per hour worked by more than 3 percent.

Analyses furnished by the BLS, at the request of the select subcommittee, also indicate the reasonableness of a figure of approximately 3 percent. The Bureau prepared two alternative estimates of the impact of a mandatory 3-week vacation on the amount of vacation time actually taken by production workers in manuacturing.

These estimates in turn can be translated into a range of about 2.5 percent to about 3.2 percent for the probable increase in labor cost per employee hour worked. Since the percentage cost increase for production workers in manufacturing would not be expected to be lower than for the aggregate of employees in American private industry, the overall estimate of approximately 3 percent can derive additional support from this analysis. (U.S. Bureau of Labor Statistics, "Supplementary Compensation for Nonproduction Workers, 1963," Bulletin 1470, Government Printing Office, 1965, p. 53; special tabulation furnished by BLS to select subcommittee, 1965.)

wage bill that rising productivity would normally justify in a relatively short period.36

This analysis has thus led to two conclusions. First: The employer's desire to keep down labor costs is by far the most plausible explanation for the current practice of withholding the 3-week or longer vacation from workers who have not accumulated many years of continuous employment with one employer. Second: the cost to employers of Federal legislation making almost all regular full-time employees eligible for 3 weeks annual vacation, would not actually be very burdensome. It would just approximate the increase in cost, per employee hour worked, that most employers would incur in 1 year from the wage increases they regularly negotiate with unions or grant unilaterally.

Vacation Practices and Legislation Abroad

In developing public policy recommendations, it can be instructive to examine the approaches taken by foreign countries to the problems or issues under consideration. The question of instituting a legally required minimum paid annual vacation in the United States calls for a look at vacation practices and laws abroad. These will be described and analyzed, therefore, for a sample of Western nations whose levels of industrialization, education, and per capita income are comparable enough to those of the United States to make their experience particularly relevant for American policymakers.

The nations surveyed are drawn from Western Europe and the British Commonwealth. They are: Austria, Belgium, Denmark, Finland, France, Western Germany, Ireland, Italy, the Netherlands, Norway, Sweden, Switzerland, Great Britain, Australia, New Zealand, and Canada.

Historical Development

As in the United States, paid vacations in the Western nations included in this survey were first extended, by unilateral grant of employers, to select groups of salaried employees. By the middle of the 19th century, vacations were often provided for the executive staffs of business firms, commonly during the Christmas or Easter seasons or during slack periods of business in the summer months.

At the beginning of the 20th century vacations were still confined almost entirely to government officials and civil servants, and to some of the salaried personnel in private industry. Vacations for bluecollar workers were virtually unknown, outside of a relatively few "family" business concerns in Britain, Germany, and Austria, which had now begun to give their older workmen, with many years of service, a few days off each year with pay. Such vacations for a few manual workers were seen as a kind employer's beneficent way of

A simple example can illustrate the analysis used here. Assume that an employer's present vacation practices and seniority composition of his work force are such that a legally required 3-week minimum vacation would increase his labor cost per employee hour actually worked by 3 percent. Consider two alternatives over a period of, say, 5 years: (1) No wage increase in the initial year, but the establishment of a minimum 3-week vacation, followed by a wage increase of 3 percent in each of the following 4 years, (2) a Wage increase of 3 percent in each of the 5 years, with no change in paid vacation practices over the period. Either of these alternatives will produce for this employer, at the end of the 5-year period, an essentially identical labor cost per employee hour actually worked.

If labor productivity (output per man-hour) rises at an annual average rate of 3 percent over this 5-year period, either alternative will also leave the employer's unit labor cost virtually unchanged. That is, such arise in productivity would allow either alternative to be chosen, without upward pressure on labor cost per unit of output.