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The impact of mandatory entitlement to paid leave on employment in the UK

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  • Lembcke, Alexander

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

  • Lembcke, Alexander, 2014. "The impact of mandatory entitlement to paid leave on employment in the UK," LSE Research Online Documents on Economics 60270, London School of Economics and Political Science, LSE Library.
    • Handle: RePEc:ehl:lserod:60270
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    More about this item

    Keywords

    UK Working Time Regulation; Employment and labour regulation; UK LFS;
    All these keywords.

    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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