Would an extra working day make an economy meaningfully stronger? A new German study suggests that public holidays do reduce economic output — but by considerably less than a simple calculation of lost working time might imply. The findings have relevance beyond Germany, particularly as European economies struggle with productivity and demographics while Middle Eastern markets confront a different mix of labour-market reform, diversification and round-the-clock service requirements. The larger economic question is therefore not simply how many days people work, but how productively labour and capital are used when they do.

The argument is seductively simple: remove a public holiday, gain an additional working day and produce more.

For an economy struggling to generate growth, it sounds like one of the easier policy levers available.

Economic activity, however, is not quite so mechanical.

A study published by ZEW Mannheim on 28 September finds that one additional public holiday reduces annual German GDP by an estimated 0.055 to 0.28 per cent. The wide range is important. The underlying effect can be measured relatively clearly in manufacturing; how far the same result can be extrapolated to the rest of the economy is much less certain.

The study therefore provides ammunition to both sides of the debate.

Public holidays have a measurable economic cost. But they are hardly a convincing explanation for Germany’s deeper growth problems.

One more working day is not one more day of output

The researchers exploit a useful feature of the German calendar.

When a public holiday falls on a Sunday, employees generally do not receive a replacement weekday off. This allows economists to compare periods in which a holiday removes a normal working day with periods in which the same holiday falls on a Sunday.

The difference is visible.

In manufacturing, revenue per employee is around 3 per cent higher in months in which a public holiday falls on a Sunday rather than a weekday. Hours worked are approximately 2.5 per cent higher.

At first glance, this supports the case for additional working days.

But the same results also show why the effect is smaller than a calendar-based calculation would suggest.

Companies adjust.

Production can be rescheduled. Employees may work additional hours at other times. Orders and workloads can be redistributed across days or shifts.

“The loss of a working day measurably reduces economic output, but firms compensate for part of the production loss through overtime and other adjustments,” ZEW researcher Eduard Brüll concludes.

The economic cost therefore exists, but part of it is absorbed by organisational flexibility.

The difference between 0.06 and 0.28 per cent matters

ZEW illustrates the uncertainty with two scenarios.

If the effect observed in German manufacturing were assumed to apply across the entire economy, an additional working day would correspond to roughly 0.28 per cent of annual GDP.

If the measurable effect were largely confined to manufacturing, the figure would be closer to 0.06 per cent.

The realistic economy-wide impact is likely to lie somewhere between these two values.

That gap is economically significant because industries do not respond to public holidays in the same way.

A factory operating according to defined production schedules faces a different situation from a hospital, airport, data centre or security control room that continues operating regardless of the calendar.

This is particularly relevant to the security industry.

Guarding services, monitoring centres, aviation security, emergency response and the protection of critical infrastructure cannot simply suspend operations because a day has been designated a public holiday.

For these sectors, the immediate economic effect may therefore appear less as lost output and more as a question of staffing, shift planning and labour costs.

The German manufacturing estimate should consequently not be treated as a universal formula for the service economy.

Europe’s larger challenge is productivity

That distinction matters particularly in Europe, where the debate about working time often sits alongside a much broader concern about competitiveness.

The latest OECD productivity indicators show how persistent that challenge has become.

Labour productivity growth across the European Union was only 0.2 per cent in 2024, following a decline in 2023. Preliminary estimates point to a stronger increase of around 1.4 per cent in 2025, but the longer-term picture remains weak: across OECD economies, the pace of productivity improvement has roughly halved compared with the early 2000s.

This puts the public-holiday debate into perspective.

Adding working hours can increase output. But sustainable growth ultimately depends on how effectively economies combine labour, capital, technology and organisational processes.

A country that works slightly more but invests too little, deploys technology slowly or allocates labour inefficiently has not solved its productivity problem.

This is particularly important as Europe also faces demographic pressure.

Germany provides an unusually clear example. The Institute for Employment Research, IAB, expects the number of employed people to fall by 210,000 in 2026 and by another 140,000 in 2027. Germany’s potential labour force is itself projected to decline by 70,000 this year and by another 140,000 next year.

The problem is therefore becoming structural.

Germany — and increasingly parts of Europe — must ask not only how many days each person works, but how many workers will be available in the first place and how much economic value each working hour can generate.

The Middle East poses a different question

The same ZEW percentages cannot simply be transferred to the Middle East.

Economic structures, working-time regimes, public-holiday systems and labour markets vary substantially between countries. The Gulf economies, for example, combine capital-intensive energy industries with construction, logistics, hospitality, aviation, security and other service sectors that may operate continuously or through shifts.

The economic meaning of a public holiday is therefore different from that of an additional lost production day in German manufacturing.

More broadly, the Middle East faces its own productivity and labour-market challenges.

The World Bank has pointed to low productivity growth, limited private-sector dynamism and persistent labour-market challenges across the wider Middle East and North Africa region. In 2026, those structural issues have been compounded by geopolitical disruption affecting trade, energy, investment and business confidence.

Gulf economies are simultaneously pursuing another transformation: reducing dependence on hydrocarbons and expanding the contribution of private-sector and non-oil activity.

Saudi Arabia illustrates this shift. The IMF notes that Vision 2030 reforms have strengthened the non-oil economy, increased the private sector’s role and improved labour-market outcomes. It continues to emphasise human capital, digitalisation and more selective capital allocation as important elements for raising productivity.

In that environment, the economically interesting question is not whether the German estimate for a lost working day also applies in Riyadh, Dubai or Doha.

It almost certainly cannot be transferred mechanically.

The more relevant question is whether labour, capital and infrastructure are being used efficiently across the days on which economic activity already takes place.

For security services, the calendar works differently

The distinction is especially pronounced in the security sector in both Europe and the Middle East.

Security operations frequently follow the asset rather than the working week.

An airport does not become less security-sensitive on a public holiday. Neither does a data centre, energy facility, logistics hub, shopping centre, hospital or critical-infrastructure site.

In such environments, staffing requirements continue while the cost structure may change.

A holiday can therefore create a different type of economic burden: premium payments, more complex rosters, replacement staff and tighter personnel availability rather than a simple loss of productive hours.

The issue becomes even more relevant where security companies already face labour shortages or localisation requirements.

This also strengthens the economic case for technology.

Remote monitoring, automated alarm processing, AI-supported video analytics and more efficient control-room operations can help organisations provide continuous services without increasing staffing requirements at the same rate.

They do not eliminate labour demand. But they can change the amount of output or security coverage generated per working hour.

That is fundamentally a productivity question.

Longer hours are not the same as higher competitiveness

The ZEW findings therefore expose the weakness of an overly simple policy argument.

Yes, one additional working day can raise economic output.

But the effect is finite, partly compensated by companies and highly dependent on the structure of the economy.

Removing a holiday is therefore very different from increasing an economy’s underlying productive capacity.

That requires investment, reliable infrastructure, access to capital, competitive energy costs, technological modernisation, skills and labour-market structures that move workers into productive employment.

For Europe, the urgency comes increasingly from ageing populations and weak long-term productivity growth.

For many Middle Eastern economies, the challenge is different: building more productive private sectors, diversifying economic activity, improving human capital and making large investment programmes translate into sustainable output and employment.

The starting points differ. The underlying economic logic does not.

Economic prosperity ultimately depends less on the number of squares marked as working days on a calendar than on how efficiently every available hour of labour, technology and capital is used.

The German study puts a useful number on the cost of a public holiday. It should not be mistaken for a universal figure — or for a growth strategy.

Public holidays have an economic price. Competitiveness, however, is determined by much more than the calendar.