If allowed, they usually do. Here are photos of some of my dogs having a grand time in the space we have designated as their "sandbox". These photos were taken over the period of a couple of years since we created this space for them to dig.
At the top is Ginna in the process of shooting dirt out at a mad pace to get to some unknown target.
Middle photo is of Pesca in the giant hole they all dug. She is able to go in and turn around. She hides from the others when the frisbee is coming her way.
Bottom photo is of Vando. Ginna has the frisbee.
Occasionally John fills in the holes so they get to start all over again. Having this space keeps them from digging all over the yard.