Income Inequality Could Be Causing Americans To Take Fewer Vacation Days

Americans are taking fewer vacation days than any time in the past 40 years, and the reason might be the widening gap between the country’s rich and its poor.

The forecasting advisory firm Oxford Economics and a travel industry group put out a troubling report last month found the average American took just 16 days of vacation in 2013.

That’s four fewer than the 20 vacation days people in the Netherlands are guaranteed by law and 14 fewer than the minimum 30 days of paid time off German workers enjoy.

This hasn’t always been the case, though.

According to the Oxford Economics report, Americans were taking upwards of 20 vacation days as recently as the mid 90s. You can see the chart included in the report here:

US Travel Association chart right size

At the same time American vacation days were on the decline, US income inequality was very much on the rise, according to the Gini coefficient, a measurement used to gauge the disparity in household incomes in a given country.

By this metric, the US today has the second greatest after-tax income inequality among the 31 member nations of the Organisation for Economic Cooperation and Development.

Here’s the US Gini coefficient over the past 50 years:

Fred Gini

One 2001 paper from the National Bureau of Economic Research argues that these two trends, increased income inequality and workers taking less time off, are linked.
The authors of the paper looked at the difference in hours worked between US and German workers from 1970 to 1997.

While people in the two countries worked about the same number of hours in 1970, the average German employee was putting in 409 fewer hours a year by 1997. The average American actually worked a few hours more.

What the report found was that in America, working longer hours led to a bigger increase in the wages employees made than in Germany.

That is, an American who decided to work an additional five hours every week earned a larger raise for doing so than a German who did the same, thereby giving the American more to gain by climbing the corporate ladder.

If a company pays all of its employees between $US50,000 and $US100,000 a year, there is a limit to how much a person can gain by working extra hours and refusing to take vacations. A company that pays between $US30,000 and $US200,000? Well, that’s a different story.

So long as working harder allows people to earn significantly more than they would have otherwise, putting in extra hours at the office is always going to be a choice made by some segment of the population.

It remains to be seen, though, whether this exchange of more hours for more money will make Americans happier in the long run.

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