Bon Voyage!: Why Europe's Vacation-Loving Ways May Make Economic Sense

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Jacques Demarthon / AFP / Getty Images

A tourist boat on the Seine river during a sunny day in Paris on March 14, 2012

On March 11 in Switzerland, voters did something rather unusual for Europeans: they turned down two extra weeks of vacation per year. The union-backed proposal — which would have brought the country in line with Germany's six-week paid break — was defeated with two-thirds of the population voting no in a national referendum.

Why turn down more time off? The Swiss, it seems, feared that extending their vacations might cost jobs and hold back their economy. As people across the continent cope with painful austerity measures brought on by the debt crisis, holidays are increasingly coming under increasing scrutiny. "We can't have a common currency where some get lots of vacation time and others very little," said German Chancellor Angela Merkel in a barb aimed at sunbathing southern Europeans last spring.

Outside the continent, many have long believed that lengthy European holidays are part of an overindulgent cornucopia of social benefits that's bound to collapse. Last fall, the chairman of the China's sovereign wealth fund, Jin Liqun, tied Europe's economic troubles to its "the sloth-inducing, indolence-inducing labor laws." Earlier this year, Mitt Romney warned that European-style benefits would "poison the very spirit of America." And British-born Harvard historian Niall Ferguson has written that in contrast to Americans' Protestant work ethic, Europeans have an "atheist sloth ethic."

But even if Europe is guilty as charged, what's the real cost of this "sloth ethic"? Is the European insistence on an extended beach holiday — the European Union actually requires that workers receive at least 20 days of paid leave per year — dragging the continent into the sea? The short answer, economists say, is no. When it comes to paid time off — whether it be vacation, family leave or sick days — the macroeconomic effect is "actually pretty small," according to John Schmitt, a senior economist with the Center for Economic and Policy Research in Washington, D.C. "It's very hard to say that those policies are connected to any kind of a reduction in economic performance."

Case in point: Greece vs. Germany. Greeks toil for an average of 2,017 hours per year — more than any other European country — and take two weeks of vacation per year, according to the Organisation for Economic Co-operation and Development (OECD). Germans, by contrast, work only 1,408 hours per year — ranking them 24th out of 25 European countries. Yet Greece is an economic basket case with unemployment at over 20%, while Germany is the miracle powerhouse of Europe, humming along with only 6.8% unemployment — the lowest since reunification.

Part of the reason for this is productivity: Germany is the eighth most productive country in the OECD (as defined by gross domestic product divided by the number of workers), while Greece is the 24th. But taking time off also doesn't make that much of difference in the overall picture. Employees usually end up paying for their time off because employers factor the cost of that lost productivity into a pay package. (That's one reason why Europeans earn less than Americans on average per year, even if the pay per hour is the same.) Then there's the growing body of research showing that time off can actually help workers get more done. A 2009 study in Harvard Business Review, for example, showed that requiring business consultants to take time off every week actually boosted their productivity.

In the Netherlands, they've got the work-hard-play-hard balance down to a T. "We don't have long lunches," says Ton Wilthagen, professor of social law and policy at Tilburg University, noting that the Dutch are neck and neck with their famously productive American counterparts. "We get two rolls with cheese and a glass of milk and that's it." In return for their dairy-fueled focus, the Dutch work shorter hours each day, get six-week paid vacation and are even given an 8% holiday bonus, called a vakantiebijslag, by their employers in the spring.

In the U.S., however, it's a different story. The average American worker earns 14 days off per year, but only takes 12 of them, according to a 2011 survey by Expedia. About a quarter of Americans don't have any vacation time at all. "The U.S. is the only [industrialized] country in the world that does not have statutory requirements on employers to provide paid holiday, paid parental leave or paid sick days," says Schmitt. "We are enormous outliers."

So why can't Americans take a break? Tom Geoghegan, an American labor lawyer and author of the book Were You Born on the Wrong Continent?, says it's not that Americans are work-obsessed or that Europeans are lazy. It's simply that Europeans have "laws that require them to take [holidays]," thanks to their strong trade unions. Geoghegan says American unions aren't as concerned about the issue as their European counterparts are. "I've been pushing for years this idea of a mandatory vacation, for years with the AFL-CIO," he says. "It goes nowhere. They say, Look, we've got to get sick days before we get vacations."