France's plan to cull public holidays may not help the economy

Reuters

2 days ago

FRANKFURT, July 16 (Reuters) - The French government thinks the country has too many days off for its own good, but its proposal to cull some public holidays may not produce much of an economic benefit.
Prime Minister Francois Bayrou has proposed scrapping two of the country's 11 public holidays as part of a deeply unpopular emergency plan to plug a budget hole. In his sights is Easter Monday and one of four bank holidays in May, a month Bayrou compared to Gruyère cheese for its many holes.
Bayrou's idea is that working two extra days will generate more economic output and therefore revenues for the government. Recent experience from elsewhere and various economic studies suggest it won't be as simple as that.
In 2023 Denmark abolished Great Prayer Day, a Christian holiday that fell on the fourth Friday after Easter and dated back to 1686, to great popular discontent.
On the surface, the sacrifice paid off. The number of hours worked by the average Dane fell by less than in previous years, according to Danske Bank.
Yet when it comes to economic output, which is what matters for public finances, the impact of the extra day was tiny at between 0.01% and 0.06%, according to IMF estimates.
France's statistical agency INSEE put the boost to GDP of Bayrou's proposal at a similarly negligible 0.06%.
This is because time off is not all bad.
Of course it slows down production, particularly for manufacturing companies.
But it is also considered key for mental and physical health, and typically proves a boost to sectors like tourism.
In fact, economic studies find that output increases along with the number of national holidays - but only up to a point.
One study of 101 countries by the Centre for Future Labour Market Studies in Malaysia put that sweet spot at nine or 10 public closures in a year.
"As the number of public holidays increases, initially economic growth increases, but after some optimal point, when the number of public holidays increases further, economic growth starts to decline," the researchers said in the 2023 study.
The exact number may depend on the make-up of a country's economy.
A study of the Italian economy, which like the French is dominated by services and has on average 12 public holidays in a year, found that economic output did not vary or even slightly increased in years with more closures, indicating it was close to its own sweet spot.
"Companies have fixed production targets and work around holidays," said author Francesco Maria Esposito, an assistant professor at the Birmingham Business School.
The situation was similar in Germany, where the calendar is set by the 16 states and ranges from 10 to 13 holidays.
The Dusseldorf-based Macroeconomic Policy Institute (IMK) found that German states that introduced a public holiday more often than not experienced stronger economic growth than those that cut one.
"The equation 'fewer holidays equals more growth' simply does not hold up," said Sebastian Dullien, IMK's scientific director.
Portugal scrapped four public holidays at the height of its debt crisis in 2012 -- only to reinstate them four years later.