Arguing for more generous mandatory vacation laws, Ezra Klein writes:
Which goes to the reality of the situation, which is not that workers and employers “flexibly choose an arrangement that works for them.” Employer-employee relations are rarely so idyllic. Broadly speaking, employees with the power to demand more paid vacation do so, and employees without the power to demand more paid vacation get less — or in some cases, no — paid vacation. A law guaranteeing paid vacation would primarily tilt the playing field toward low-income workers, rather than against them, as is the case now.
The problem with this is defining the employer/employee “power” in terms of vacation setting only. If an employer has the bargaining power negotiate a deal where the employees total compensation is less than their marginal product of labor , then they will have the power to negotiate lower wages when laws mandate less days of work. Or they can just take those hours back by negotiating longer work weeks, shorter breaks, working harder, or something like that. Unfortunately you can’t write a law mandates wages be equal to marginal product of labor, and there will be unintended consequences of any law that attempts to restrict hours whereby employers cash in their bargaining power in some other form.
UPDATE: And if you think only zany libertarians believe that labor markets work, here is Yglesias arguing basically the same thing several years ago.