Europe works better with more holidays

Countries in the region have short workweeks and the highest rates of productivity in the world

One of the world’s great annual migrations is underway as Europeans begin their annual August break. Across the continent, millions are getting ready for their holiday or are already in transit, flooding into beach towns, alpine aeries or scenic spots in search of their own version of la dolce vita — the sweet life.

It carries different names and might have varied cultural roots, but the extended August holiday is a long tradition most Europeans hold dear, as much a required yearly holiday as Christmas or New Year. As they make their annual pilgrimage to the sun and sea, shops are shuttered and phones sometimes go unanswered. Those left behind take a careful note of what grocery stores and restaurants will remain operational.

Great for those on holiday, but envious non-Europeans can be heard grumbling about lost productivity and business. Surely one of the world’s great economic regions can’t just lay down its tools for the month and head to the beach without a significant impact on the global economy.

But surprising to many, the epic August break actually fuels productivity — in the crucial services sector.

Enrico Giovannini, professor of Economic Statistics at the University of Rome Tor Vergata and former Italian Minister of Labour and Social Policies, confirms that “the index of industrial production in August collapses”, but notes “the manufacturing industry represents 18 to 20 per cent of GDP and services weigh much more”.

“All hotels belong to this sector and they ‘produce’ a lot in August,” says Giovannini. “So the real issue is not the month-long August holiday that allegedly affects productivity. The true issue is the factors of production during the entire year.

“It is also necessary to distinguish among discontinuous industries such as car producers and clothing producers, and companies that produce in a continuous loop such as steel and electric energy,” he notes.

And though European countries can make the headlines for their short workweeks — below 30 hours in several nations — they have the highest rates of productivity in the world. Of the top-10 productive countries, all are in Europe except the US, which ranks number 5, according to the Organisation for Economic Cooperation and Development.

Easier just to lock the door, save on electricity and wages, and join the throngs headed to the seaside. Of course, the summer heat has many yearning for cool waters or alpine air

Japan ranks 20th and Russia 34th. At the bottom of the OECD productivity list is Mexico, which also works the longest workweek of the 35 countries studied.

Daniel Kashmir, economist at The Global Growth Institute in London, says the reason Europe is productive is actually due to its holidays.

“Research shows that people benefit from proper rest from work and that it takes a while for that to happen,” says Kashmir. “I’m both from Sweden and The Netherlands, where there is a custom of taking extended (over threeweek) summer vacations and productivity in these countries is very high.”

The August vacation “contributes and supports GDP — people then work harder and smarter”, he says.

But would it be better to scatter shorter vacation times throughout the year? “If the point of vacation is a total switch off and ability to recharge then I personally think it healthy to encourage more nations to enjoy substantial vacation periods,” Kashmir says.

Not everyone agrees. Moorad Choudhry, former Head of Business Treasury, Global Banking and Markets at Royal Bank of Scotland and a professor at Brunel University in London, writes that August is the time when financial markets seem to get shaky, conventionally thought to be the result of thin trading and low bank activity in Europe.

“The monthly ALCO meeting (the bank asset-liability committee, the key risk management forum in every bank) is often postponed and nothing happens,” he said in an analysis for business news channel CNBC.

A bigger impact could be that plans and strategies are postponed until everyone returns in September. “Postponing key decisions for a month because everyone is on holiday does not set the right tone in any firm and in any industry,” says Choudhry.

Some wonder how the tradition got started in the first place. It can be traced all the way back to when the Roman Emperor Octavian was proclaimed “Augustus” by the Senate in the 27 BC, meaning venerable and sacred. In 18 BC he ruled that the month of August, named for both for him and veneration, would be entirely devoted to rest. The month came at the end of the tedious harvest and before the next sowing. It was also full of festivities that celebrated a feast called the Augustali.

In modern times the tradition is reinforced by school holidays. And it feeds on itself. Mom-and-pop shops find scant demand for their products with many local residents gone.

Easier just to lock the door, save on electricity and wages, and join the throngs headed to the seaside. Of course, the summer heat has many yearning for cool waters or alpine air.

If you too want to join the migration in Europe, be warned the beaches and resort towns are packed with holidaymakers, so head the opposite way, into the cities. This could be time to enjoy the museums, art and architecture of this storied land.

And yes, they should be open for your visit.

Jon Van Housen and Mariella Radaelli are editors at the Luminosity

Italia news agency in Milan.