Will cutting public holidays boost Germany’s economy?

Researchers at the Institute for Macroeconomics and Business Cycle Research (IMK) doubt the growth-increasing effect that other experts hope the abolition of public holidays will have. “There is no empirical evidence that the abolition of public holidays increases economic output,” explained the institute of the Hans Böckler Foundation, which is close to the trade unions, on Friday. In a short study, the researchers analyzed specific cases in which public holidays were abolished or newly introduced in Germany or in individual federal states.

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Over the past 30 years, there have been a number of examples, such as the abolition of the Day of Prayer and Repentance in all federal states except Saxony from 1995 or the introduction of International Women's Day as a public holiday in Berlin in 2019. The IMK researchers then compared the economic performance of the respective states with that of the Federal Republic as a whole and other federal states in the year of introduction or abolition.

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“In a good half of the cases, the economy even developed better afterwards in those federal states in which work-free public holidays were retained or newly added,” they explained. This was the case in Saxony, for example, which was the only federal state to retain the Day of Prayer and Repentance and still grew more strongly economically than the national average and also more strongly than its neighbors Thuringia and Saxony-Anhalt.

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Economists from the Institute of German Business, which is close to employers, calculate in their studies that each public holiday increases economic output by around 0.2 percentage points. In their overall report, the economic experts also recommended that the federal government abolish public holidays in order to boost the economy. They argue that more would then be produced.

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The IMK counters this with the fact that there are indications that the demand situation of companies is the determining and limiting factor for production. More companies cite a lack of orders as an obstacle to production than a lack of staff. Factors such as productivity and innovation should also be taken into account - and less recovery time could reduce productivity.

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According to the IMK researchers, long-term negative effects on hours worked due to the loss of public holidays are also conceivable, for example if this contributes to the decision to work part-time. In any case, the equation "If public holidays are removed, growth increases" obviously does not work, explained Sebastian Dullien, Scientific Director of the IMK. "Because it is too simplistic and does not do justice to a modern working society."