Current issues related to economy, (responsible) investment, pension and income: every week an APG expert gives a clear answer to the question of the week. This time: Thijs Knaap, chief economist at APG, on the costs and benefits of a national holiday.
Spring is the time of the holidays. We have just had Easter and King’s Day is already upon us. Not long after that will come Liberation Day, Ascension Day and Pentecost. There is no law in the Netherlands that stipulates that employees have the day off on a holiday. However, many collective bargaining agreements do stipulate that employees have a day off on a public holiday. How much does a holiday actually cost the economy? And does it also contribute something?
The nine holidays on which we are don’t work in the Netherlands - four of which may fall on the weekend - seem to do justice to our Calvinist disposition. In fact, many other countries have more days off. Yet we are also at the bottom of the international rankings in terms of the number of hours worked. This is because part-time work is common here and employees get a fair number of vacation days.
There are some pretty accurate figures available around how much a holiday costs the economy, an analysis by the European Central Bank (ECB) proves. Knaap: “If you assume an entire lost business day for a public holiday, or 1 divided by 250 working days per year, then it amounts to a 0.4 percent shrinkage of the gross domestic product (GDP) a year. Because regular work gets shifted to other days and sectors such as hospitality and tourism have more turnover on a holiday, the actual loss on an average holiday is more like between 0.05 and 0.1 percent. If you have a lot of extra public holidays, the effect will become greater, because it will become increasingly difficult to make up the work later.”
The celebration of the 70th Jubilee of Queen Elizabeth II of the United Kingdom last May also proves that regular work on a public holiday gets shifted to the future. The extra day off cost British GDP 0.5 percent over the second quarter. “If you divide that by four, you get the annualized effect, which is slightly above the ECB’s estimate,” he said. The loss in production was expected to be largely made up in the third quarter, helping the British economy avoid a recession.