The Impact of Extending Mandatory Paid Time Off

Paid time off is among the most common and valued workplace amenities. The paper presented in this ZEW Research Seminar studies the labor market consequences of mandating paid time off. The authors exploit a German court ruling that required firms in select industries to grant additional paid vacation days to workers under age 30. The mandate led to a clear increase in paid leave but had no adverse effects on wages or employment. Instead, they find evidence suggesting that paid time off can facilitate continued labor market attachment during early parenthood. They show that young mothers return to full-time work sooner when additional paid vacation days are available.