Job Incentives

by Elaine Schwartz    •    Jul 19, 2012    •    742 Views

Assume that you just said good-bye to your co-workers for your annual 3-week vacation and then disaster strikes. You drop a glass on your foot, sever a tendon and head straight for the operating room. A lengthy convalescent period follows.

If you work in Spain, all is not lost. The Court of Justice of the European Union just salvaged your vacation.

As the Court stated in a June 21, 2012 decision, the purpose of paid annual leave is to “enable the worker to rest and to enjoy a period of relaxation and leisure. The purpose of entitlement to sick leave is different. It is given to the worker so that he can recover from an illness that has caused him to be unfit for work.”

The result? Your time out will be interpreted as sick leave for which you are paid. So, it is okay to schedule another (paid) vacation.

Mandated by law, Spanish workers get 14 public holidays and 22 paid vacation days annually, another 15 to get married and other days for a birth, death, hospitalization. A 16 week paid maternity leave, 2 days for paternity, 18 paid consecutive months for an illness.

Spain currently has 24.6% unemployment, 52% youth unemployment and a contracting GDP.

In Randall Bartlett’s economic toolbox from his “Thinking Like An Economist” Teaching Company course, he includes these 3 economic ideas that we can use to explain the impact of Spain’s labor regulations:

  1. “People respond to incentives.”
  2. “There is no such thing as a free lunch.”
  3. Legislation can lead to unintended consequences.


This WSJ editorial lists all of Spain’s restrictions on businesses and here is the Court decision. Perhaps realizing the destructive impact of its labor laws, Spain has sought to diminish their impact with little success as this article tells us.


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