How can Denmark earn money by abolishing a public holiday?

The government last week announced it wanted to abolish one of Denmark’s annual public holidays in a measure that it says will allow it to increase spending on defence.

The policy, confirmed in the agreement between the three parties in the coalition government, means that a public holiday – most likely to be the springtime Great Prayer Day – is likely to be scrapped.

If the proposal is adopted, the change would likely take effect from 2024.

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In its policy agreement, the government states that it wants to raise 4.5 billion kroner for additional spending on defence. To this end, it wants an extra working day to be added to the year, and therefore suggests that Great Prayer Day be abolished.

The agreement does not outline how the money will be raised or what the contribution of working people would be.

Leaders from the three coalition parties told broadcaster DR in a joint interview on Sunday that people who work on Great Prayer Day will be paid in full for working that day.

Some confusion had emerged after employment minister, Ane Halsboe Jørgensen, had referred to future pay for working on Great Prayer Day as “compensation”.

Scrapping a public holiday could in fact cost the government money in the long term, according to an analyst who spoke to broadcaster DR.

“Danes adjust according to how much they have in their wage packets after tax, and Danes have sought more leisure time in recent decades as we have become richer,” senior economist Mads Lundby Hansen of free-market conservative thinktank Cepos told DR.

“And my expectation is that this won’t have a major effect on the overall time spent working in the long term,” he said.

This is because people who work in Denmark will eventually demand more paid holiday to replace the lost public holiday, he speculated.

“In the short term, it could be a financial contribution if trade unions don’t demand corresponding increased holiday at the next round of collective bargaining talks,” he said.

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Because of the many uncertainties that remain around the policy, it is difficult to say how much the government could save by increasing annual labour by one working day, as well as the costs that might be involved, DR writes.

Several factors could affect the outcome, including the number of people who simply take a different day off, the number who accept the extra working day, and how wages for the extra labour in the public sector will be financed.

There is also no precedent for the policy and therefore no basis for comparison.

However, if all public sector workers were paid for one extra day’s work per year, the cost to the state would be around 900 million kroner in additional wages after tax, DR writes based on Cepos’ calculations.

This would be offset by additional tax revenues from the private sector for the extra day of work.

These revenues would therefore need to cover the cost of the extra pay for public employees and the additional revenue that the government wants to generate for the military.

Another option could be to reduce the number of public sector staff, DR reports based on discussions with economists. This would be possible because the additional day provides more working hours, so fewer employees could put in the same amount of work across a year. Restructuring and adapting existing jobs would, theoretically, help the government achieve this.

Employment Minister Jørgensen told DR that removing a public holiday would be a “simple and efficient way to bring a very large amount of money to our military by getting everybody to work for one more day, and is something that can be done instead of making cuts and savings to our welfare”.

The Ministry of Finance did not provide DR with its calculations on the proposal, and the Employment Ministry does not yet have the finalised bill, the broadcaster writes.