Enjoy your holiday — you are paying for it
There are no paid holidays any more than there are free lunches in the company canteen
The Easter holidays are upon us. Many will be enthusiastically taking time off believing they will be enjoying a “paid holiday”. A holiday paid for by their ever-obliging employers, that is. But they are wrong, especially if they work in the private sector. They will in fact be sacrificing salary or wages for the time they spend not working.
That is on the simple assumption that there is a consistent relationship between the value they add for their employers and the hours or days spent working. And that therefore they are paid according to the contribution they are expected to make to the output, and so the profitability, of the firm they work for. Wages are not typically charitable contributions.
It makes no sense for some employer, the owner of a business with a natural concern for the bottom line, to pay you for time spent on holiday — or weekends off, or when sleeping, or travelling to or from work. They are unlikely to survive the competition if they do not take into account the loss of production, revenue and profits incurred when their employees are not working. Those known costs must mean salaries, wages and employment benefits given up by the worker. There are no paid holidays any more than there are free lunches in the company canteen.
Those paid on an hourly basis and at the end of every day or week will be under no illusions about having to sacrifice income when not working. Many of them might well be willing to work on the Easter weekend if given the opportunity to do so in stores, hotels or restaurants. They may well prefer to consume more other goods and services than leisure.
It is those who are paid on a predetermined monthly or rather annual basis (divided into 12 or even 13 payments) who may be inclined to believe they are being paid to go on holiday. They should appreciate that the more time they take off, or the larger the contributions the employer may be making to medical insurance or pension contributions or training levies, the less they will inevitably be taking home in their monthly pay check. They are sacrificing salaries so that their employers can better stay in business and offer them employment.
The same bottom line, and hence a sense of sacrificing pay, may not apply with anything like the same force in the public sector, where the taxpayer picks up the salary, pension and medical aid bill regardless of its size. And where measuring the output of employees is not nearly as easy, and where performance measures are often strenuously resisted.
European workers typically take many more days off than their American or SA counterparts. It is a widening trend that has evolved only over the past 30 or so years. And we are often surprised by how little time the typical American worker takes off. Why is it that the average American worker consumes significantly less leisure, takes less time off and therefore sacrifices less pay for holidays? Is it because they consume proportionately more other stuff — goods and services they prefer to pay for?
Is it a cultural difference? Or are Americans naturally more hard working than their European or SA cousins? If so, why have these differences in working behaviour become so much more pronounced in recent decades? (Incidentally, the average number of hours worked per week or day in Europe and the US does not differ much. The striking difference is in the average number of days worked.)
It may be because American workers and their employers enjoy more freedom to choose pay over leisure. Perhaps the regulations that determine compulsory time off for holidays or festivals are less onerous for American than European employers (and on formal SA businesses). Were maximising output and money income and employment the primary objective of policy, SA would be wise to adopt the American rather than the European practice. That is, to allow the number of days off to evolve (mostly) out of competition for workers rather than be regulated for them and their employers. And have fewer “paid holidays”.
•Brian Kantor is chief economist and strategist at Investec Wealth & Investment. He writes in his personal capacity.