An economic case for more public holidays

I have a short oped in the AFR today, arguing that Australia needs more public holidays. The piece was inspired by a conversation with my friend Chris Fry. Full text over the fold.

An Economic Argument for More Public Holidays
Australian Financial Review, 8 July 2006
Andrew Leigh

To the flexible Australian labour market of today, the rigid working hours of the 1970s are but a distant memory. Yet the flipside of flexible work is irregular socialising. When few people worked evenings or weekends, social life was easier to organise than it is today. Over recent decades, it has become easier to buy milk at 11pm, simpler to find a part-time job, and harder to arrange leisure activities with friends and neighbours.

As working hours become more unpredictable, public holidays play an increasingly important role. In economic jargon, public holidays solve a coordination problem: both you and I would like to get our families together to socialise sometime. But if we have to sort out work schedules, we may never get around to it. A public holiday solves the coordination problem, since both of us know that the other will be available.

Despite major changes in the nature of work, state and territory governments do not appear to have rethought the question of whether we have the “right” number of public holidays. Most Australians enjoy 10 public holidays a year, the same as the typical American, but fewer than Canadians (12), Spanish (13), Japanese (14), or Israelis (34). And Australia’s public holidays are clustered towards the first half of the year. With half the year still ahead of us, most of us have already had 7 of our 10 public holidays.

Not only do public holidays have a direct impact on socialising, recent economic analysis suggests that there may also be an indirect benefit. Using variation in the number of public holidays across Germany, Joachim Merz and Lars Osberg have shown that in Länder (German provinces) with more public holidays, social ties are stronger during normal weekdays and weekends. In other words, an extra holiday in September helps strengthen interpersonal ties in October.

Policymakers who care about social capital – the bonds of trust and reciprocity that knit us together as a society – should consider increasing the number of public holidays. In the Australian case, the best time for a new holiday would be in the second half of the year. For example, we might consider making Melbourne Cup Day or Remembrance Day a national holiday, commemorating Sir Henry Parkes’ Tenterfield Oration (24 October) or marking the anniversary of the Eureka Stockade (3 December)

The cost of a new public holiday is likely to be minimal. For businesses and government departments, the creation of a new public holiday would be taken into account in wage negotiations. In the event that a firm wished to continue operating on the new public holiday, it would simply need to pay a penalty loading. Given that there are about 250 working days per year, the impact on the annual wage bill would be trivial. Public holidays are an effective way of coordinating social life: are ten a year really enough?

Dr Andrew Leigh is an economist at the Australian National University. His weblog is andrewleigh.com.

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5 Responses to An economic case for more public holidays

  1. Pingback: CoreEcon » Blog Archive » The use and uselessness of Public Holidays

  2. derrida derider says:

    J… in Länder … with more public holidays, social ties are stronger
    Isn’t there an obvious endogeneity problem here? More sociable places will push their pollies for more holidays.

  3. Andrew Leigh says:

    DD, I agree. Panel data would be better, but countries/regions rarely change their number of public holidays.

  4. The Israelis must feel strange if they have a week go by without a public holiday.

    In addition on public holidays alcohol consumption would go up and so would entertainment expenditure including meals out. More public holidays would boost the economy and make us all more strongly bonded, and relaxed.

    win, win bloody win all round.

  5. Mark G says:

    But what is the social cost of this extra social capital? Is the time I spend bonding with the people I like, offset at all by my increased crankiness at the people I don’t like while I’m contending with them and their ill-behaved children for access to roads, leisure venues and supermarkets?

    And what about those hard-working overachievers supporting our economy — if their social networks are largely work-based, aren’t we consigning our neediest sector to more lonely long weekends of pizza and DVDs?

    More seriously, when was the last time you took a long weekend fishing trip with a neighbour, or wanted to? Will the creation of more opportunities to do this, really stimulate more desire to do so?

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