October 2, a day that comes ahead of the three-day Chuseok holiday, was designated as a temporary public holiday to allow office workers in Korea to take 10 days off straight from September 30 to October 9. The unprecedentedly long Chuseok holiday raises hopes for boosting domestic demand and also concerns over a decline in production. Here is critic Chung Cheol-jin to analyze the economic effects of the so-called “golden holiday” period, which has both positive and negative aspects. First, Mr. Chung explains the background for the longest 10-day break.
This year’s Chuseok holiday period came under the spotlight when the 2017 calendars were issued at the end of last year. Many citizens hoped that the working day of October 2 would become a temporary holiday. During his election campaign, President Moon Jae-in pledged to designate the day as a one-off holiday if elected president. As you may expect, the purpose of the designation is to help spur domestic consumption. Previously, August 14 in 2015 and May 6 in 2016 were designated as temporary holidays, and the moves turned out to be a great success economically. According to the Hyundai Research Institute, the designation of August 14 2015 as a temporary holiday produced an estimated economic surplus of nearly 2 trillion won, or 1.8 billion US dollars, on that day alone. Against this backdrop, October 2 this year was set as a one-off holiday.
October 2 was confirmed as a temporary holiday by the Cabinet last month. The long chain of holidays includes the three-day Chuseok holiday from October 3 to 5, the October 6 holiday for National Foundation Day and the October 9 holiday commemorating the invention of the Korean alphabet of Hangeul. Thanks to the back-to-back placement of three national holidays, two weekends and a temporary holiday, workers can enjoy a 10-day break. The extended Chuseok holiday is expected to have a considerable effect in boosting the economy.
According to the Korea Culture and Tourism Institute, one temporary holiday is estimated to encourage a person to spend an additional 920 won for domestic tours and 340 won for overseas trips on average. One may think the amount is insignificant, but the figures are for the average spending per person. Overall, it is estimated that 40 billion won is additionally spent in Korea on the temporary holiday alone and 15 billion won overseas. Moreover, people are excited about the unexpected holiday and tend to spend more money. The positive effect of a one-off holiday on promoting spending has been confirmed in various ways.
The Korea Culture and Tourism Institute estimates that the designation of the temporary holiday will result in 43.2 billion won in domestic spending and generate 71.4 billion won in production inducement effects on goods and services in each industry. The government is expecting the long holiday to jumpstart a recovery in domestic consumption. On a positive note, the Korean economy has been in good shape in terms of industrial output, on the back of increased exports in the first half of this year. Consumption, on the other hand, has not made a solid rebound. According to Statistics Korea, retail sales in July inched up 0.2 percent on-month, while the Consumer Composite Sentiment Index for August fell 1.3 points from the previous month. The North Korean nuclear issue and housing market regulations are standing in the way of a recovery in consumer spending. But the 10-day long holiday is expected to provide fresh momentum to overcome the sluggish domestic consumption.
It is the retail industry that benefits directly from increasing consumption. The Chuseok holiday in early October coincides with the nation’s biggest annual shopping festival known as the Korea Sale Festa. The massive shopping event is expected to encourage consumers to open their wallets during the period. The industry has high expectations for shopping mall complexes, in particular. One of the buzzwords in the industry is “mallcance,” a combination of the words “mall” and “vacance.” Shoppers can enjoy their vacation in all-in-one shopping complexes, such as Shinsegae Group’s Starfield mall and the Lotte World Tower Mall in Jamsil. These facilities are expected to be the biggest beneficiary of the extended holiday. During the summer break season in July, a local shopping complex attracted a daily average of nearly 70-thousand visitors. Duty-free shops are also hoping that the holiday will help make up for losses incurred by a radical decline in Chinese tourists in the wake of China’s economic retaliation against South Korea’s deployment of the THAAD system.
There are growing expectations among those in the retail industry and the tourism sector about the upcoming Chuseok break. Department stores are hoping for a synergy effect from their regular sales that coincide with the Korea Sale Festa. Duty-free shops are also expecting a sharp increase in the number of travelers going abroad during the long holiday period. The tourism industry anticipates that more than 1.1 million people will travel abroad during this period. But the growing number of outbound travelers might have a reverse effect.
While the long break has the purpose of stimulating the local economy, a lot of people travel abroad during the period. So, those in the retail industry, including small merchants, prefer holidays interspersed with workdays to consecutive holidays. They expect people to stay in Korea and spend money here if they work for a day, take two days off and then work again. A local tour agency says that the number of those who made reservations for overseas tours in early October jumped by 40 percent, compared to same period of last year. It may sound ironic, but smaller sellers and traditional markets are concerned about the long holiday. Small-and mid-sized firms feel the same way. They extended the deadline of delivery to October 16 or later, as the holiday ends on October 9. That means their factories will resume operation in mid-October, and this will place a great economic burden on them.
The tourism sector, large department stores, and shopping malls benefit from the long Chuseok holiday, but small merchants and the self-employed may see their sales decline due to the increasing number of travelers going abroad. Also, there are worries about the potentially negative effect on production and exports. It is difficult to predict exactly how a long break may influence the local economy, and some propose changing the current public holiday system.
There are pros and cons about temporary holidays. One-off holidays have positive aspects in terms of giving workers a rest and boosting domestic spending. Given this, we may consider adopting the holiday system of the U.K., Japan and the U.S. For example, the current May 5 Children’s Day could be fixed as the first Monday of May. Then people can enjoy a three-day holiday, regardless of the calendar. Some lawmakers of the ruling Democratic Party have proposed a bill related to public holidays. I think it’s time to change the holiday system overall.
Since the 1970s, the U.S. has implemented a holiday system where a certain day of the week is designated as a holiday in order to boost domestic demand and increase work efficiency. Japan had initially set holidays according to the calendar. But amid a prolonged recession in the early 1990s, the nation introduced the “Happy Monday” system to revitalize the domestic market. South Korea needs to manage the holiday system in an effective way, not resorting to makeshift measures, to allow people to take a much-needed break and reinvigorate domestic consumption as well.