It works OK, but there's two situations where it can go bad:

1. (Uncommon) People take off during crunch time

2. (Very common IME) People take off en masse during lulls, leaving a skeleton crew to handle blowups.

3. No vacation payout during layoffs

If you do 1 just to get out of work, you're a crappy coworker. People do 2, to be team players, but it can result in large waves of low staffing. 3 is a natural result, which is a major financial downside - the upside, of course, is that you can take much more vacation, and many do.

Even with the above, I like it. You can take mental health days and deal with family issues without that feeling of "begging for forgiveness"