1 “Keeping in Touch” - A Benefit of Public Holidays Joachim Merz Department of Economics and Social Sciences University of Lüneburg Lars Osberg Economics Department, Dalhousie University CEA 2006

2 The paper in one slide  Public Holidays co-ordinate leisure time  Leisure time is often social Greater utility if social match can be arranged But social contacts atrophy if not used  Public Holidays enable people to “keep in touch” More holidays mean more contacts - makes it easier to arrange social life on normal workdays & weekends  Benefits of holidays include increase in utility of leisure time on normal workdays & weekends  German Länder have 13 to 17 public holidays This paper:  Presents model of time use with endogenous contacts  Predicts greater social life on normal workdays & weekends in Länder with more public holidays  Tests hypothesis with time use data

BerlinBrandenburgNordrhein – Westfahlen Baden- Württemberg Bayern BremenHessenRheinland- Pfalz Saarland HamburgMecklenburg- Vorpommern Sachsen- Anhalt Sachsen NiedersachsenThüringen Schleswig- Holstein Public holidays in the Länder

5 Context: The Debate over the Growing Trans-Atlantic Lifestyle Divide  25 years ago - not much difference in annual work hours per working age adult  Divergent trends : Increased work hours in USA (+ 234) Decrease in Germany (-170), France (-210)  per adult per week: Germany - USA = hours  3 components Common entitlement to Public Holidays & Vacations Labour Force Participation (women & older men) Normal weekly hours of employed  influence of unemployment rate differential is small  Contentious literature Bell and Freeman (2001), Alesina,Glaeser and Sacerdote (2005), Prescott (2004)  What are the welfare implications?

6 “Social Leisure” literature  Osberg (2003), Jenkins & Osberg (2005) “Nobody to Play With” – labour supply externalities  Corneo (2005) re private (TV) & social leisure Hamermesh (2006) time zones & work, TV, sleep Weiss (1996) re work hour coordination Spousal synchronisation of work schedules (Hallberg, 2003, Hamermesh (2002)-USA; Sullivan, 1996, GB; van Velzen, 2001, NL)  This paper: public holidays as a co-ordination device present contacts - endogenous to past social life  social time use on normal workdays and weekends is affected by the number of public holidays

7 Public Holidays as a Leisure Co-ordination Device  Public holidays imply individuals have leisure time at the same time,  But public holidays are not a binding constraint on annual leisure consumption Bavaria has most public holidays (17) in Germany  Bavarians have 348 other days each year to compensate any unwanted “excess” leisure Both workers and firms have multiple possible margins of adjustment shorter private vacations weekend working longer hours of work on normal workdays new jobs with different hours second jobs.

8 The core hypothesis: “Have a life” = “have a social life”  What people do in their non-work time … often involves other people often distinctly more pleasurable if done with others  Heterogeneity of leisure tastes implies individuals have to locate “Suitable Leisure Companions” – a.k.a. ‘somebody to play with’ – and schedule simultaneous free time  when paid work absorbs more of other people’s time, each person finds own leisure time scheduling problem more difficult to solve,  i.e. own leisure hours are of less utility  externality to individual labour supply choices,  possibility of multiple, sometimes Pareto- inferior, labour market equilibria  social payoff to leisure co-ordination devices

9 Our model: work (H), or spend non-work time alone (A) or in social leisure (S).  To enjoy social leisure, each individual must arrange a leisure match from among the list of possible contacts that they have at the start of each period Contacts expire if unused in D periods  Each period, individuals first must commit to specific duration & timing of work hours H, after that they arrange their social life H  money income  utility from material consumption  Ex ante, utility from social life is uncertain: search for Suitable Leisure Companions involves uncertainty, since some desired matches may not be feasible. contacts not revisited within D periods expire  Time spent alone not working, A, is the residual after work and social commitments are honoured. U = u(C, A, S 1, …, S n,) where i indexes possible Suitable Leisure Companions; 1,…,n where n is the number of realized social leisure matches

10 Solving the time use problem  Arranging a social life - cannot be done unilaterally discrete matching process involved: => uncertainty constrained by: social contacts, availability of other people  Expected utility of specific social leisure match = p i u(S i ) i indexes each potential SLC p i is Prob(social match with i) u(S i ) is utility associated with that match.  maximise expected utility: max (U)=u(C) +  ik p i u(S i ) + u A [T – H –  ik p i (S i )] subject to: k t = θ + f( t i,t-D (S it )) and p i, T, w, D

11 Model equilibrium illustrated Equilibrium implies work hours H* such that u* = MU H*, and A*, S* such that MU A* = MU S* = MU H*. MU S*, MU H* are ‘expected’ marginal utilities: uncertainty ex ante via p i = Prob(social match with i) p i is negatively associated with own work hours and with non- overlapping work hours of potential SLC i.

The implications of keeping in touch (or not) Fewer past social matches  k t   p i (S i )   MU S  Given equilibrium condition, H*  to H**, and S*  to S**. Effect on A* ambiguous.

13 The German Time Use Study 2001/02  time use diaries from persons in 5400 households.  diary kept by all household members over age 10 respondents recorded the course of 3 days in own words Survey days randomly selected & evenly distributed over 12 months. duration of individual activities recorded in 10 minute intervals.  primary + secondary activity  respondents were asked with whom primary activities were performed (children under 10 years, spouse/partner, other household members, other acquainted persons)  + location of activities and any travel time in connection with the primary activity recorded. population = all private households shown in the micro- census at their place of main residence  i.e. the German speaking foreign population was included.

14 Dependent Variables  Daily Individual Diary records: Entertainment outside home Meetings Social Time  time spent in leisure activities with person outside household of residence  Household interview: weekly time on main job + job2 + commute unpaid time spent helping others outside household in last 4 weeks

15 Average time usage: non-holiday weekdays by Lander type mean minutes lhs >=0 weekdays Lander type 01234all Länder entertain meetings Social time

16 Regression Analysis: – do more public holidays enable more social contacts & a better social life?  Sample – Germans aged 25 to 54  Post school & pre-retirement  Germany – relatively high total leisure  Controls for:  Age, gender, education, health  Employment status, work timing & fragmentation, total daily work hours  Equivalent individual income (= Y h /N h.5 )  Number of co-habitants, presence kids <6  Temperature, sunhours, rain on survey day  OLS + Heckman sample selection bias  Non-linear specification tests diminishing returns to additional holidays  Range = 1..4

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18 Other Benefits of Public Holidays  Common enjoyment of festivals Adds to utility of participants on the day Builds social cohesion & social capital  Direct utility value  Faster growth, better health, lower social costs Putnam (2000); Knack & Keefer (1997); Osberg (2004).  Increases mutual assistance between families  Plus gain in utility of leisure time on non- holiday weekdays & weekends

19 Total Number of National Public Holidays by Country  Canada 12*  Italy 13*  Luxembourg 14*  Mexico 15  New Zealand 11  Norway 14  Singapore 8  Russia 11  Spain 14*  Sweden 15.5*  Taiwan 14  Thailand 8*  Ukraine 13  Switzerland 10*  United Kingdom 9*  USA 10*  Hungary 11  France 13*  Australia 10*  Belgium 12  Denmark 12.5  Egypt 7  Germany 13*  Portugal 15*  Poland 11 * = + local holidays

20 No Necessary Effect on Labour Demand !! Public Holidays only change the composition of the actual hourly wage  Paid Vacations & Holidays are “fringe benefit” of jobs – but Holidays not decided at workplace level w N = nominal hourly wage rate per hour paid  V = hours of paid vacation  P = hours of paid public holiday  L U = unpaid leisure time  Total leisure = V + P + L U w = labour cost per hour actually worked (in year)  H = hours actually worked  w = [(H+V+P)* w N ] / H Change in P changes composition of actual wage  Workers – labour supply – desired H for given w  Firms – labour demand – desired H for given w  No reason for equilibrium (w, H) to change Vacations, unpaid leisure, nominal wage (L U, V, w N ) can offset P

21 conclusion  German data shows benefits for social life of more public holidays over the range Canada & USA now below Germany in public holidays  Why not have more public holidays?

22 Costs of an additional holiday ?  Congestion in use of leisure facilities on holidays ? - would fall as number of holidays rises - “stay-home” option is always available on holidays  holiday users must perceive net benefit from usage at peak periods  Firms now using capital stock 24/7 would pay extra holiday premium on a new holiday Firm/Worker transfer – not a social cost  Social cost = loss of consumer surplus on any investment discouraged by 1/380 th higher annual wage bill  BUT most firms now leave their capital stock idle when not “open for business” i.e. any readjustment of work timing would readjust the timing of capital usage