Thursday, October 22, 2009

The Economics of Holidays

The Economist asks, "Are Holidays good for the economy?"

The Economist continues,

``STRIKING the right balance between life and work can be tricky. Employees in European countries tend to have a better deal than most, enjoying more days off work than their counterparts in Asia or America. Workers in Finland, France and Brazil have the most generous statutory allowance, getting 30 days of holiday every year. Americans work longer hours: theirs is the only rich country that does not give any statutory paid holiday. (In practice, most workers get around 15 days off.) This work ethic may in turn help to explain Americans' material wealth. Even adjusting for purchasing-power parity, America generates more wealth per person than all but a handful of mainly oil-rich economies such as Norway." (bold highlights mine)

In short, Americans have NO statutory mandates but earn more than their counterparts. The reason is obvious, capital accumulation through worker productivity gains offset losses from mandated "paid holidays".

This reminds me of the Philippine incumbent government's thrust to promote "holiday economics", where most of the holidays have been rescheduled to "extend the weekends" (even if they fall on Saturday or Sundays) allegedly to promote local tourism.

This we had earlier excoriated in Broken Window Fallacy: The Vicious Hidden Costs of "Holiday Economics".

The above commentary from the Economist exposes how local policies are counterproductive, privileges one sector (4% direct 10% indirect) over the entire economy, raises cost of doing business, reduces output, promotes idleness, hedonism and wrong virtues (spending instead of saving) and importantly the "elitist" tendencies of the powers that be.

While the adverse effects can't directly be seen, this contributes to why the Philippines has lagged its neighbors in terms of economic performances.

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