THE MCKELL INSTITUTE
The case for Victoria’s new public holidays
Background
This report has been funded directly by The McKell Institute and has not been commissioned by any of our sponsors or supporters. The authors of this paper have utilised a range of publicly available information and our own analysis in compiling this paper.
About the McKell Institute
The McKell Institute is an independent, not-for-profit, public policy institute dedicated to developing practical policy ideas and contributing to public debate. The McKell Institute takes its name from New South Wales’ wartime Premier and Governor–General of Australia, William McKell.
William McKell made a powerful contribution to both New South Wales and Australian society through significant social, economic and environmental reforms
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THE MCKELL INSTITUTE
The case for Victoria’s new public holidays
August 2015
Contents
Executive Summary 3
Introduction 4
Economic Benefits 6
Productivity 8
Social Benefits 13
The Proposed Holidays 17
Conclusion 20
Footnotes 21
Executive Summary
The Andrews state government plans to deliver on an election promise to introduce two new public holidays for Victorians: Easter Sunday and the Friday before the AFL Grand Final.
This paper makes the case for the introduction of both, putting to rest arguments in opposition of the new holidays.
Easter Sunday is a holiday that is already celebrated throughout the world and in other states in Australia. It is an anomaly of the system that it was never made a public holiday in the first place: it is believed that when penalty rates were first introduced, Sundays were treated the same as public holidays. That is no longer the case, and the Andrews government correctly aims to rectify the situation so that employees are paid fairly for their time on this special religious holiday.
The current designation of Easter Sunday as a normal Sunday for wage purposes means for example that the average retail worker will be earning $10 less per hour for working on that day than they would if it was deemed a public holiday.
The proposed AFL Grand Final holiday is no less required: in a state that has more than six months of the year without a public holiday, this day off in September will allow many Victorians to take a well-deserved break. It will give an added boost to the economy of up to $100 million, in both regional tourism and sporting tourism generated by the Grand Final weekend.
This paper demonstrates that the economic argument for introducing the new public holidays is much stronger than opponents would have us believe. The value of leisure time to Victorians is estimated to be $780 million for the two holidays; and the lost revenue and productivity is estimated to be much lower than originally thought. This is because most of the lost revenue that occurs from closing a business for a day is more likely to be delayed revenue; and the supposed drop in productivity is made up for in days either side of the holiday. In addition, those businesses that remain open on a public holiday do so because of the expectation of a higher turnover than normal weekdays, allowing for an offset in penalty rates.
Public holidays also provide an essential service to society, in that they force coordinated time off. Research into work-life balance shows that regular breaks reinvigorate workers, leading to better health and productivity outcomes, and lower rates of absenteeism.
Public holidays also contribute to social cohesion, allowing citizens to engage with one another in social events such as sporting events and festivals.
This paper finds that the two public holidays discussed present an excellent opportunity for the Andrews government to contribute positively towards Victoria’s economy and society.
Introduction
In their 2014 Platform, the Labor Party identified that public holidays ‘provide the opportunity for families and friends to take a break from normal work or studies and join together as a community with common ideals.’[1]
When implemented, the two new public holidays promised by the Premier will take Victoria’s state- wide public holidays to a total of thirteen, which is in line with the global average for number of public holidays per year.[2]
The current debate around the issue is contested; opponents of the proposal argue the costs to the state outweigh the benefits, although this report will show that this argument is based on superficial evidence.
For example, the Regulatory Impact Statement (RIS) produced by Price Waterhouse Coopers (PwC) has calculated the benefits of additional leisure time at $312 million to Victorians.[3] However, when taking into account that public holidays are paid at an average rate of 250 per cent of a worker’s normal wage, new calculations conclude that the economic benefits of leisure time are in fact worth $780 million to Victorians in total.
The total value of public holidays cannot be quantified as easily as that however. Society benefits from public holidays by an overall increase to the productivity and health of individuals, increased social cohesion and the added boost to the tourism and hospitality industries that are brought about by coordinated time off.
Public holidays are more important to today’s modern society than they were a generation ago. Today Australians are spending more time working. While Monday to Friday is still seen as the normal working week, many people are also expected to work outside these ‘social’ hours. As such, the benefits of coordinated leisure time are more critical than ever.
There are significant improvements to productivity when a person has regular time off. Regular short holidays such as long weekends and public holidays assist in workers maintaining a healthy work-life balance that contributes to better overall health and higher levels of productivity. As Victoria does not have a state-wide public holiday between the Queen’s birthday weekend in June and Christmas Day in December, the proposed AFL long weekend provides a much-needed break in September.
Public holidays use significant events such as Easter Sunday and the AFL Grand Final to enhance social cohesion. Easter Sunday, in conjunction with the three other days off in the Easter Holiday season, is a significant religious event for Christians. For others it provides the only four-day weekend of coordinated leisure for the year.
While the AFL Grand Final holiday presents itself as an additional holiday for Victorians to enjoy, the Easter Sunday proposal redresses the issue of fair pay on an already-celebrated national holiday. Labor therefore aims to ensure that all hours worked on Easter Sunday are compensated fairly through Public Holiday rates.
In Victoria the AFL Grand Final takes over the city.
There is already a week of festivities leading up to the event including free events at Federation Square and the ‘Footy on Parade’ march that winds through city on the Friday before the game. More than one hundred thousand people attend this parade every year.
In addition, the AFL Grand Final coincides with the Royal Melbourne Show. Between 1885 and 1994, Melbourne celebrated this event with a public holiday on the last Thursday in September. In recent years there have been calls to reinstate this public holiday, allowing the tens of thousands of people who already take an annual leave day to attend, a public holiday to enjoy the event.
In addition, the implementation of the Grand Final weekend as a long weekend will give those Victorians who are non-football fans one more opportunity to take a short holiday throughout the year, giving an added boost to the tourism industries of many regional towns in Victoria. It will also allow many Victorians in regional towns to travel to the capital to experience the Footy on Parade march and to see their teams and players up close.
PwC estimates that the new long weekend in September will give a boost of $51 million to regional tourism industries in Victoria, and up to $49 million in sports tourism from the AFL Grand Final.
Although certainly some businesses will choose to close on the new public holidays, representing lost revenue for those days, this paper argues that many of the estimated losses are made up before and after the public holidays in the form of increased productivity by workers anticipating the holiday, and delayed spending by customers.
The costs of these two new holidays are very clearly outweighed by the overall benefits to society.
Economic Benefits
The true value of public holidays
The PwC RIS has valued the benefits of additional leisure time at between $156 million and $312 million annually. However, these figures are based on the assumption that leisure time or public holidays are worth 50 percent to 100 percent of an individual’s normal wage. Yet penalty rates are currently worth 250 per cent of an individual’s wage, demonstrating that in order to make it worthwhile for an individual to give up their day off, when all of their family and friends are also enjoying a day off, the compensation must be much more than their normal wage.
Penalty rates represent compensation for the losses accrued to an individual who works during unsociable hours. The flipside to this, is that they can also articulate society’s definition of leisure represented in dollar value. While parts of the economy now operate outside of the traditional 9-5 paradigm, this does not translate into a 24/7 workforce. In Australia ‘social’ working hours are still defined as 9am-5pm, Monday to Friday. Hours that must be worked outside of social hours result in the penalty rates system.
The new award objective under the Fair Work Amendment Act 2013 articulates the value Australia places on working during normal hours. The amendment requires the Fair Work Commission to consider the need for extra remuneration for people employed during overtime, unsocial, irregular or unpredictable hours, as well as on weekends, public holidays or night shifts.[4]
The expected value of the two new Public Holidays should therefore be recalculated using the rate society has deemed as acceptable – double time and a half.
If the PwC RIS figures were to use this justification for equating the value of leisure time to the public, the figure would be equal to $780 million, rather than the original $312 million.
$780 million is the figure that more closely relates the value of time off for Victorians, as demonstrated through many years of the market solution of penalty rates.
The true cost of public holidays
From a superficial perspective, public holidays are argued to cost employers and the economy greatly in lost revenue, however it is widely acknowledged that this argument is flawed.
Australia is not the only nation to debate the economic impact of public holidays. When the UK celebrated an extra bank holiday to mark the Diamond Jubilee of Queen Elizabeth II’s reign in 2012, the British Department for Culture, Media and Sport reported that their figures for the impact of the extra holiday ranged anywhere between a net gain of £1.1 billion to a net loss of £3.6 billion.[5]
There are challenges in quantifying the impact of public holidays to the economy – both before and after the event. This is because while some parts of economy may face higher labour costs if they remain open, others benefit from additional capacity for spending on leisure activities – particularly those in the leisure, hospitality and retail sectors.
It is also important to discern between genuine losses and mere timing effects. For example, someone who might have originally planned to buy a car on the Friday before the AFL Grand Final may delay their purchase to the Saturday instead.
Similarly, many full-time salaried workers avoid a drop in their individual productivity by anticipating the extra time off and working longer hours (or being more productive during their normal hours) in the week(s) either side of the public holiday.
During the UK debate on the Jubilee holiday, the Confederation of British Industry stated that businesses recognised that it was “entirely appropriate” to have the extra holiday, and had been “factoring it into their planning for some time.”[6]
But some societal benefits are simply unquantifiable on a balance sheet. “Lifting the national mood, for instance,” cannot be quantified with an economic value, but few would argue against the benefit of doing so.[7]
Bringing tourism to the regions
Long weekends always offer the opportunities and benefits of tourism for regional towns. When Brisbane hosted the G20 Leaders’ Summit in November 2014, the city council established a one-off public holiday. As a result, the Gold and Sunshine Coasts experienced a boost of activity brought about by Brisbane residents taking the opportunity to get away for the long weekend before the Christmas rush. Many accommodation providers reported occupancy rates in the high 90 per cent range – a large boost from the same weekend in previous years.[8]
The PwC report estimated the Easter and AFL Grand Final long weekends would achieve economic benefits of approximately $51 million. Regional towns have the opportunity to capitalize on the festivities surrounding both the Easter holiday and especially the AFL Grand Final weekend.
Tourism Victoria has proposed a targeted campaign to encourage Melbournians to travel to the Victorian regions over the long weekends.
Melbourne is within a three-hour driving distance to multiple wine regions, mountains, lake districts, seaside towns, and national and state forests.
Many of these regions already take advantage of the close proximity to Melbourne by providing quality restaurants, cafes, accommodation and tourist activities, but many do not. The extra public holidays will allow many of the less-established regional towns to take advantage of this new opportunity, and to develop their own break-off events and festivals.
In addition to regional tourism, it is estimated that an added boost of up to $49 million will be achieved through the sporting tourism that the AFL Grand Final holiday will bring. The Grand Final eve holiday will allow many families living in regional towns to travel to Melbourne to experience the festivities associated with the sporting event, in particular, the ‘Footy on Parade’ march that takes place on the Friday before the Grand Final, and attracts over one hundred thousand people.[9]