Last Thursday, a lot of children woke up really early to sell their old toys and clothes on the street, while others ate orange tompouces, and everyone was dressed in the national Dutch colour. Admittedly, it may seem a bit strange to foreigners. On the 27th of April, the Dutch celebrate the birthday of King Willem-Alexander. This national tradition is comparable to the French Quatorze juillet (14th of July), the American Independence Day (4th of July), the Norwegian Grunnlovsdag (17th of May), and the Chinese New Year. What these days have in common is the fact that everyone has a day off and celebrates the same thing, which is something that is mostly derived from the national history. On these public holidays, almost everyone is having a good time, while most companies are closed. Although in some sectors revenues are really peaking on these kind of days (hospitality and leisure business), bank holidays do have some downsides in other sectors. What are these downsides, and do the economic benefits outweigh the costs?
The economic benefits of public holidays seem pretty obvious. Besides the peak revenues in for example the catering industry, the events that take place on these days also generate a lot of money. But not only do these events generate a lot of money; they also generate social cohesion and unity, which are of great importance to a country. Ask any Dutch citizen about typical Dutch traditions, and they will most probably name King’s Day alongside Sinterklaas. These public holidays serve the purpose of reminding people of the country they live in and the values that are respected within it. For example, Independence Day in the United States is a day to remind people of the freedom they have, which is respected in the States. So public holidays provide the people with a sort of nationalistic feeling that is needed for the unity of the nation.
Next to the social cohesion and unity, bank holidays are also beneficial to interpersonal relations. A study by Joachim Merz and Lars Osberg (2006) proves that one benefit of national holidays is that people all have a day off and are thus able to meet with family and friends. They found that people in countries with more public holidays turn out to value and rate their social relationships higher than people in countries with fewer national celebrations. These holidays solve the coordination problem of social gatherings, since nobody has to work – unless one works in one of the sectors that benefits from these kind of days. However, one of their most remarkable findings was that an extra day off also strengthens social ties during normal weekdays and weekends. This effect will in turn lead to an overall happier feeling and therefore to higher motivation and productivity on the workfloor. Yes, Merz and Osberg are indeed arguing that an indirect effect of public holidays is a generally higher level of satisfaction, motivation, and productivity!
Although it is stated that public holidays improve productivity and motivation among workers, these results are ambiguous. It may be the case that people are happier due to the prospect of a pleasant day off, but they do not work harder on the days just before and after the public holiday. When the public holiday takes place on a Thursday, people are also more likely to extend the holiday into a long weekend. Last Friday, for example, the department where I work was as good as empty the day after King’s Day – we were with two people, while usually we are with around 35. The most obvious disadvantage of this type of holidays is thus the enormous decrease in productivity in many areas of society. While the catering business flourishes on the holiday itself, as stated earlier, this is not the case on the days right after. Look at the clubs and cafes after a public holiday, and one can see that the peak revenues from the holiday are directly being compensated for by the day after. Moreover, The Telegraph reported that 45 percent of businesses suffer from bank holidays, and estimate a loss of productivity of 2.3 billion pounds per bank holiday in the UK.
All in all, we could say that public holidays are beneficial to some industries, although the peaks in revenues in these particular industries are compensated for by a dip during the days after. Whether these days result in a higher productivity and higher motivation is unclear, but they certainly result in a greater feeling of unity and nationalism. Social ties become stronger because of the national days off, and this is of course invaluable. However, the amount of public holidays per year differs from country to country, so it would be interesting to study the influence of the quantity of public holidays on the people. For policymakers it could be interesting to know what the optimal amount of national holidays could be, in order to increase the productivity so that it will actually outweigh the costs of having a nationwide day off. Although companies are currently making a loss on these bank holidays, I think that every employee will agree on the fact that this loss is compensated for by social benefits of that day. Or at least, this holds for me.