Hear no politics, see no politics, speak no politics

Apparently, Swiss voters have just rejected a referendum that would have raised the minimum vacation time from 4 to 6 weeks. Which lead Scott Sumner to say this:

I see two possible interpretations for this vote.  First, it may be the case that all Europeans prefer 4 weeks vacations, but other governments don’t give them the chance to vote on the issue.  (By analogy, many Europeans supported the death penalty when their governments abolished the practice.)  But my hunch is that a referendum on moving back from 6 to 4 weeks would fail in many Western European countries.  In my view a more plausible argument is that the Swiss vote reflects the lower income tax rates in Switzerland, as compared to other Western European countries.  Thus is a tax sense, Switzerland resembles the US more than France.  A third explanation might be cultural, but my gut instinct tells me that a 2 to 1 vote against 6 weeks of vacation represents more than cultural differences.  That’s a pretty overwhelming vote.

[As an aside, I anticipate many commenters putting way more weight on cultural factors than they actually deserve.  When US MTRs on the rich were very high in the 1950s, wives of well-paid men rarely worked.  When MTRs fell sharply between the 1960s and 1980s, wives of well-paid men became much more likely to work.  Just the opposite happened to the labor force participation rate of poorer women, as their implicit MTRs rose a lot between the 1950s and 1980s.  But the effect of MTRs seems "invisible" to most people, hence both liberals and conservatives are likely to see these changes in cultural terms.  Liberals see more well-educated women working as being the result of feminism, and conservatives see less poor women working as representing cultural regress away from Victorian values.  Also note that when French tax rates were similar to US rates in the 1960s, they worked similar hours.]

It is an odd conceit of discussion of things like labor regulation among mainstream economists that they must be phrased in terms of individual preferences. Thus, someone like Krugman will point out that lower per capita production in say, France, is in large part the result of the French working less, and that this is at least plausibly rational as the result of a trade-off between work and leisure. I think this is what Sumner is referring to when he rejects a "cultural" explanation in favor of an emphasis on the individual return-to-work, i.e. marginal tax rates.

What is so odd about this is that it insists on looking at the issue entirely in terms of individual preferences for work, whether resulting from "cultural" preferences or marginal incentives. This, out of no reason except for pure ignorance, pretty much rejects the entire literature on comparative political economy, which sees the main explanatory factor as the legacy of institution formation as the result of the political balance among organized social groups. From this perspective, the most important fact in the news story that Sumner is quoting from is one that he omits: ". . . but business groups warned about the cost to the economy." Business groups say this about all labor market interventions, and whether or not they such interventions are put in place is largely a product of the organization of the labor movements and the strength of left or labor parties (which has secondary effects via the adaptive response of center-right parties).

The problem facing the individual is not merely the collective action issues of the trade-off between work and leisure (i.e., that employers expect a certain minimum of time spent at work, and it's often impossible to negotiate even a proportional reduction of both work and pay), which is the only issue the economists admit, but also the problem of judging the claims are the business class. The "cost to the economy" is a real concern for even the poorest members of society. If increased vacation reduces productivity and thus profits enough to restrict economic growth, than everyone really does suffer in the form of lower employment and constrained wage growth. Thus, they have good reason to take the warnings of business groups seriously, and overcoming these concerns requires political organization on the other side. This is more or less what politics has been about under capitalism, and economists are willfully ignoring it when they talk exclusively in terms of individual incentives and preferences.

About the parenthetical: even from a narrow economist's perspective, this is exceptionally daft, because it assumes out of existence the gender-wage gap--to put it in language that Sumner could understand, it's kind of like a high marginal tax rate (30% even today!) on being female. I don't know whether the correlations he's identifying hold, but at the very least he's describing trends that operated roughly simultaneously (I also couldn't find evidence that the labor participation rate of poor women decreased . . .). Notice again that he's thinking in terms of personal rather than social factors, thus feminism => increased desire among well-educated women to work => increased labor participation rate, as opposed to feminism => reduced barriers to entering high-status professions/reduced wage gap => increased labor participation.

Note of course that other than in the U.S., the highest female labor participation rates are in the northern european social democracies (another standard stylized fact of comparative political economy). Oh, and what about when there was not even an income tax that would have cut into wages received by "the wives of well-paid men"? It's like he's hardly even trying.