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Economic rationale behind the day off: Do Ukrainians have too many holidays?

Author : Yuriy Hryhorenko

Source : 112 Ukraine

The average duration of work in the most developed countries is significantly lower than in Ukraine
09:23, 2 January 2018

Read the original text at 112.ua.

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The number of official holidays in Ukraine tends to grow. In 2017, a Catholic Christmas was announced a day off (Until 2018, May 2 was a public holiday – Labor Day, instead in 2017 Western Christianity's Christmas celebrated 25 December become a new Ukrainian public holiday –Ed.). In total, there will be 10 free days during the winter holidays in Ukraine.

At the same time, in 2018 the number of holidays and days off may decrease. The Institute of National Memory has drafted a bill proposing to reduce the number of holidays. March 8 and May 9 will be working days, and it is proposed to cancel May 2 as a holiday. It is also proposed to cancel the practice of postponing the weekend when the holiday falls on a Saturday or Sunday (the “transfer” will remain only for Easter, Christmas and Trinity Sunday).

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Did the authorities realize that the holidays are hitting the country's economy? But is it really so?

For example, against the background of people's deputies, the average Ukrainian looks like a workaholic, even taking into account the holidays. People's deputies have not only actually left (of course, officially they "work with voters") for a vacation a week before the New Year (they accepted the budget in advance), and in January they will have only one plenary week (from 16 to 19 January) instead of two.

The average duration of work in the most developed countries is significantly lower than in Ukraine. According to the Organization for Economic Cooperation and Development, in 2016, the Germans worked on average around 1 360 hours, the French - 1,470, the British - 1,680, the Americans - 1,780, the Poles - 1,928, the Russians - 1,974; the record holders were Mexicans - 2 255 hours. In 2016, the norm of working hours in Ukraine with a 40-hour workweek was 2 008 hours. That is, with all our day offs we are more working than people in the countries of Western Europe, but at the level with neighboring countries.

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As noted by the analyst of USC consulting company Ivan Nikitchenko, Western countries tend to reduce working their hours: in Sweden, the possibility of moving to a 6-hour day was discussed, and Finland plans to pay unconditional basic income (a person receives a minimum income regardless of her work).

In addition, our country in terms of work is more "progressive" than the countries of Western and Eastern Europe. We do not have a traditional siesta, like the Mediterranean countries do, on Christmas holidays, many shops and restaurants in the above-mentioned countries simply do not work, many shops do not work on weekends, but on weekdays they close earlier, whereas in Ukraine many work much longer and longer.

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How much can you estimate the "loss" from the holidays? A very conditional indicator is the level of GDP created in actual prices per day: it gives an idea of a financial value of the working day in the country. The average number of working days a year is about 250. So, this indicator in 2015 was 285 million USD, in 2016 - 339 million USD and for three quarters of 2017 - 396 million USD. That is, on average 0.4-0.5% of GDP is created in one working day.

Of course, business in Ukraine is also being carried out to a certain extent during the weekend: the production of a continuous cycle (for example, metallurgy, energy generation and services - trade, public catering, transport, etc.), and accurately calculations of the economic effect are quite problematic. Therefore, the above-mentioned "losses" are conditional and very approximate.

 

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However, there are also force majeure circumstances: due to Donbas blockade, Ukraine increased energy imports, which negatively affected the trade balance and led to the loss of 1% of GDP (according to the Cabinet of Ministers' estimates). And no one counts losses from unsuccessful managerial or corrupt decisions in Ukraine at all.

The key is the issue of labor productivity, and in this Ukraine lags far behind developed countries: this indicator in our country is about 4 times lower than the European level.

"The problem of Ukraine is not the quantity and duration of holidays and weekends, but its low labor productivity (not least because of the reluctance to invest in refurbishing and modernizing production.) This explains the fact that the number of working hours in Germany, Belgium, Switzerland, France is lower than in Ukraine, Russia, Mexico and a number of other countries," said Oleksiy Amfiteatrov, director of IBI-Rating agency.

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At the same time, the average Ukrainian's salary, due to the low specific weight of labor costs in the product produced, does not strongly depend on the results of the labor.

Also, there are no guarantees that by canceling a number of holidays and weekends, we will get a positive effect for the economy. It is important to take into account the factor of mentality (for example, the productivity of people on January 1 may be somewhat lower, and the production traumatism is higher, in addition, the format of holding May holidays is a Soviet tradition – working in the fields and gardens).

In addition, there are a number of professions, where the final result is more important, and the amount of hours plays a less important role (in many professions the factor of a fixed working day fades into the background - journalism, the IT sphere, etc.).

In such circumstances, reducing the number of holidays is useless, since the success of the country depends on other variables. "There are many factors that affect the state of the economy: labor is only one of them. But in order to improve labor productivity, it is necessary to administer the use of working time (to form a system of payment by the result.) In addition, it is necessary to pay attention to the modernization of capital funds and the qualification of personnel, and then a large number of holidays will not hinder economic growth," Amfiteatrov stated.

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The festive season makes people spend more, during this period, expenditures grow disproportionately to incomes, including the use of funds from "private savings" and officially unaccounted income.

It is possible to determine the approximate size of growth in retail trade turnover in connection with the New Year holidays. According to State Statistics Service, the growth of retail trade turnover in November and December 2016 amounted to 3,9 billion USD and 4,1 billion USD, respectively. A similar situation, when the December index is significantly higher than the November figure, took place in 2015. This indicator (on average - 10 billion USD) can be considered a "trade price" of New Year's holidays. However, this figure is relatively small, since it is about one-tenth of the monthly expenses in retail. In addition, it is necessary to take into account the pre-New Year rise in prices for many goods, as well as inflation, which makes Ukrainians spend more money, but do not buy more goods. For example, according to a poll by the Research & Branding Group, the total amount of New Year's spending by average Ukrainians in 2017amounts to 59 USD on average, while a year ago it was 43 USD. This means that prices have grown significantly, which could not be said about the real incomes of the Ukrainians.

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Funds from the shadow turnover during holidays fall into legal trade, from which they partially go back to the shadows - this is the traditional "cycle" of funds in the Ukrainian economy. In the first quarter of 2017, the level of the shadow economy amounted to 37% of the official GDP.

In general, the only rational way to overcome low labor productivity is to increase this indicator on the basis of attracting investments and introducing innovations in all spheres of the economy and society, that is, to improve investment attractiveness and radically combat corruption. According to EY, Ukraine ranks first in terms of corruption among 41 countries in Europe, the Middle East, India and Africa, and the index of Ukraine's investment attractiveness (survey of the European Business Association) in the second half of 2017 is 3.03 points out of five possible, which is 0.12 points less than in the first half of the year.

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