[My forthcoming article, in Investgazeta]
In August, when most Ukrainians are on vacation, one can’t help to wonder (being an economist, that is) what the optimal number of vacation days and holidays is. According to one website, there are in Ukraine 10 official holidays, and employees are entitled to an annual paid vacation of 24 (or more) calendar days, including weekends during the vacation period but not including official holidays. But are these the optimal numbers?
The answer is less straight forward than one would imagine. Indeed, according to a recent study by the US based Center for Economic Policy Research, there is quite a lot of variation in the minimum number of paid vacation days across countries – with zero work days in the States, 10 work days in Japan but 25 work days in Finland and Denmark and even 30 work days in France. Ukraine’s minimum vacation of 18 workdays is low compared to most developed countries but if one also adds the 10 official holidays (not all countries have these as official days off), Ukraine ends up somewhere in the middle of the days-off league table.
But what’s the ideal number? Having little or no vacation is unlikely to be optimal – the Chinese population had little or no holidays until in 1999 the Chinese government introduced the ‘holiday economics’ scheme giving everybody a one week holiday to celebrate the 50th anniversary of Communist rule in China, followed later by a week to celebrate the Chinese lunar year and a week to celebrate May 1. The idea behind this scheme was that by giving people a week off, people would spend money, thus boosting the economy, at least that’s what the Chinese government hoped for. According to one internet source, the success was complete – during the first holiday week, Chinese tourists took 28 million person trips spending over a billion dollars.
But it seems that it’s also possible to have too many days – an article in the Sunday Times of Sri Lanka, complains: ‘Sri Lanka is the country with the most number of holidays in the world. If we were to forget for a moment how so many holidays in the calendar affects the economy of the country, then this would be a lotus-eating paradise indeed’. The article then continues to explain that Sri Lanka has 14 Buddhist, 3 Hindu, 3 Muslim and 2 Christian, and 4 cultural and customary holidays; 21days of annual leave and 7 days casual leave. Moreover, while in many countries, there are employers who give their employees more vacation days than the legal minimum, these employees typically don’t use all the vacation days they are allowed to – for example, in the UK, a study found that the mean vacation entitlement was 23 days, while the mean days taken was only 20 days.
From the above examples, we clearly see that the main trade off is between the loss of production that is caused by vacation and holidays from one side and the value-creating effect from tourism and vacation related consumption. Hence, from an economic point of view, it’s possible to have too few or too many days off.
In addition to these two main effects, vacation and holidays have several other more subtle effects, at least if we can believe the many survey results one can find on the internet.
First, vacation and holidays do not only mean an employee doesn’t produce anything for the employer during the days off, also the productivity on non-days off can be affected – one survey found that over 40% of US managers think their employees are less productive the week before they leave on vacation though another survey reported that more than half of the employees claim they work more in the run up to their annual leave. At the same time, 70% of Canadian employers think employees are more productive after they return from vacation. Similarly, 50% of UK survey respondents ‘blamed a lack of public holidays between September and December for feeling unproductive at work’.
Second, vacation and holidays do not only affect the productivity of those taking the days off, it also affects the productivity of those who remain in the office. One study found that more than two thirds of interviewed employees thought that vacation causes stress for those who stay in the office – the stress coming for example from documents that couldn’t be found, projects that had to be finished by people who weren’t involved in the project before or confusion generated by the absence of a co-worker. And one website provides tips on ‘How to Stay Productive During Holiday Work Weeks’ recommending those employees who remain in the office to use the reduced work pace productively by cleaning up their desks, cleaning their email inboxes or making back ups. Finally, 70% of UK entrepreneurs think that an increase in paid days off for their employees, would increase the work they will have to do.
Third, vacations and holidays are claimed to have lots of other effects that are not directly related to work – one survey indicated that 60% of UK employers think that vacations will benefit the health of their employees. And indeed, a study by the US Travel Industry Association concluded that an annual vacation can decrease by 50% a person’s risk of heart attack. An academic study further found that the end of the year holiday season doesn’t affect body weight but does increase the percentage body fat. The abovementioned study of the US Travel Industry Association also found that even the anticipation of vacation makes people more positive about their life and that women who take more vacations are also happier with their marriage.
While, as the above illustrates, there are many surveys, mostly done by tourism organizations or management consultancies, that focus on specific effects of vacations and holidays, so far I have not been able to find academic studies that estimate the number of days off that is optimal from an economy’s point of view. Maybe, when back from my vacation, I’ll give it a try.
