“Keeping in Touch” - A Benefit of Public Holidays

1. “Keeping in Touch”- A Benefit of Public Holidays Joachim Merz Department of Economics and Social Sciences University of Lüneburg merz@uni-lueneburg.de Lars Osberg Economics Department, Dalhousie University osberg@dal.ca CEA 2006

2. Thepaperin 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 Länderhave 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

3. 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 1980-2000: • Increased work hours in USA (+ 234) • Decrease in Germany (-170), France (-210) • per adult per week: Germany - USA = - 9.7 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 corehypothesis:“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 tastesimplies 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, S1, …, Sn,) 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 = pi u(Si) • i indexes each potential SLC • pi is Prob(social match with i) • u(Si) is utility associated with that match. • maximise expected utility: max (U)=u(C) + ikpiu(Si) + uA[T – H – ikpi(Si)] subject to: kt = θ + f(ti,t-D (Sit)) andpi , T , w , D

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

12. The implications of keeping in touch (or not) Fewer past social matches  kt  pi(Si)  MUS  Given equilibrium condition, H*  to H**, and S*  to S**. Effect on A* ambiguous.

13. The German Time Use Study 2001/02 • 37700 time use diaries from 12600 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

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 (= Yh/Nh.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

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. 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 Total Number of National Public Holidays by Country

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 • wN= nominal hourly wage rate per hour paid • V = hours of paid vacation • P = hours of paid public holiday • LU = unpaid leisure time • Total leisure = V + P + LU • w= labour cost per hour actually worked (in year) • H = hours actually worked • w= [(H+V+P)* wN] / 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 (LU ,V, wN) can offset P

21. conclusion • German data shows benefits for social life of more public holidays over the range 13-17 • 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 1/380th 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