OpEdNews - Page 2 of Article: Pay for Play? Tax Credits for Paid Time Off

There have been examples in other countries that suggest that this sort of tax credit could lead to effective experimentation in work relations with lasting benefits. For example, the Netherlands reduced the standard workweek in the health care sector by 10 percent and found that it helped alleviate shortages of nurses. With a shorter standard workweek, nursing became a more desirable profession, attracting more workers. In this case, the increase in the number of workers more than offset the reduction in hours per worker. There could be similar experiences in many sectors in the United States.

Government policy in this area is especially appropriate since government policy has played an important role in pushing in the opposite direction. The vast majority of workers receive their health care insurance through their employer. Because health care insurance is typically paid as a per worker benefit (rather than a per hour benefit), employers have an incentive to try to get the most work out of each worker, rather than hiring more workers.

This pattern of health insurance provision is a direct outgrowth of a series of government policies beginning with wage controls in World War II and including the tax deductibility of employer provided health insurance. A paid time off tax credit would at least temporarily provide an offsetting incentive to push hours per worker in the opposite direction.

Conclusion

At this point, few people in Congress are actively discussing further stimulus. Of course, Congress has underestimated the severity of this downturn all along, passing a stimulus package in 2008 that everyone now concedes was inadequate. This will soon be the case with the more recent package. When Congress again realizes its mistake, there may be interest in a paid time off tax credit as the quickest and best way to get the economy back to full employment.

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[1] See Baker, Dean. 2009. "The Housing Crash Recession and the Case for a Third Stimulus," Center for Economic and Policy Research Briefing Paper. Available at click here />
[2] The wage of the median worker in 2007 was $15.11 (Mishel, L., J. Bernstein, and H. Shierholz, The State of Working America, 2007-2008, Ithaca, NY: Cornell University Press, Table 3-5). If non-wage compensation is equal to 30 percent of the wage, then the hourly compensation of the median worker would be approximately $20.

[3] This applies the same rule of thumb as President Obama's economic team used in calculating the impact of their stimulus plan. They assumed that a 1.0 percent increase in GDP lead to 1 million addition jobs. A $65 billion increase in GDP would be a bit less than 0.5 percent of GDP (Romer, C. and J. Bernstein, 2009 "The Job Impact of the American Recovery and Reinvestment Plan," President's Council of Economic Advisors, available at click here Therefore, it should be expected to create approximately 500,000 additional jobs.

This Issue Brief can be found online at CEPR's website.

Dean Baker is the Co-director of the Center for Economic and Policy Research. CEPR's Jobs Byte is published each month upon release of the Bureau of Labor Statistics' employment report.

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