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The Impact of Mandatory Entitlement to Paid Leave on Employment in the UK

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  • Alexander C. Lembcke

Abstract

I evaluate the impact of the UK Working Time Regulations 1998, which introduced mandatory paid holiday entitlement. The regulation gave (nearly) all workers the right to a minimum of 4 weeks of paid holiday per a year. With constant weekly pay this change amounts effectively to an increase in the real hourly wage of about 8.5% for someone going from 0 to 4 weeks paid holiday per year, which should lead to adjustments in employment. For employees I use complementary log-log regression to account for right-censoring of employment spells. I find no increase in the hazard to exit employment within a year after treatment. Adjustments in wages cannot explain this result as they are increasing for the treated groups relative to the control. I also evaluate the long run trend in aggregate employment, using the predicted treatment probabilities in a difference-in-difference framework. Here I find a small and statistically significant decrease in employment. This effect is driven by a trend reversal in employment, coinciding with the treatment.

Suggested Citation

  • Alexander C. Lembcke, 2014. "The Impact of Mandatory Entitlement to Paid Leave on Employment in the UK," CEP Discussion Papers dp1262, Centre for Economic Performance, LSE.
  • Handle: RePEc:cep:cepdps:dp1262
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    References listed on IDEAS

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    1. Richard K. Crump & V. Joseph Hotz & Guido W. Imbens & Oscar A. Mitnik, 2009. "Dealing with limited overlap in estimation of average treatment effects," Biometrika, Biometrika Trust, vol. 96(1), pages 187-199.
    2. Paul Smith & Gary Morton, 2001. "New Labour's Reform of Britain's Employment Law: The Devil is not only in the Detail but in the Values and Policy Too," British Journal of Industrial Relations, London School of Economics, vol. 39(1), pages 119-138, March.
    3. Sarah Oxenbridge & William Brown & Simon Deakin & Cliff Pratten, 2003. "Initial Responses to the Statutory Recognition Provisions of the Employment Relations Act 1999," British Journal of Industrial Relations, London School of Economics, vol. 41(2), pages 315-334, June.
    4. Jennifer Hunt, 1999. "Has Work-Sharing Worked in Germany?," The Quarterly Journal of Economics, Oxford University Press, vol. 114(1), pages 117-148.
    5. Mark B. Stewart, 2004. "The Impact of the Introduction of the U.K. Minimum Wage on the Employment Probabilities of Low-Wage Workers," Journal of the European Economic Association, MIT Press, vol. 2(1), pages 67-97, March.
    6. Joseph Altonji & Jennifer Oldham, 2003. "Vacation laws and annual work hours," Economic Perspectives, Federal Reserve Bank of Chicago, issue Q III, pages 19-29.
    7. Bruno Crepon & Francis Kramarz, 2002. "Employed 40 Hours or Not Employed 39: Lessons from the 1982 Mandatory Reduction of the Workweek," Journal of Political Economy, University of Chicago Press, vol. 110(6), pages 1355-1389, December.
    8. Ioana Marinescu, 2009. "Job Security Legislation and Job Duration: Evidence from the United Kingdom," Journal of Labor Economics, University of Chicago Press, vol. 27(3), pages 465-486, July.
    9. Giacomi De Giorgi, 2005. "Long-term effects of a mandatory multistage program: the New Deal for young people in the UK," IFS Working Papers W05/08, Institute for Fiscal Studies.
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    More about this item

    Keywords

    UK Working Time Regulation; Employment and labour regulation; UK LFS;

    JEL classification:

    • J08 - Labor and Demographic Economics - - General - - - Labor Economics Policies
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • J45 - Labor and Demographic Economics - - Particular Labor Markets - - - Public Sector Labor Markets

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