This week has marked the start of a six-month UK trial of a four-day working week. Employees at around 70 businesses will receive 100% of their usual pay in return for just 80% of their usual hours. This concept is (of course!) hugely popular with the general public, and has been lapped up in the media. But some healthy scepticism is needed.
To be clear, I think the four-day week trials are a ‘good thing’. Employers should always be open to different ways of working, and these trials may help to identify the types of business where this model is more realistic.
I am a little wary here, partly because the participating businesses are self-selecting. The study is also being run by two campaign groups set up to lobby for a four-day week, with support from a consultancy that promotes a four-day week, and an academic panel dominated by sociologists rather than economists. But hopefully the results will be published in full.
The fact that there are now widespread labour shortages across the UK economy is not necessarily a reason to hold off, either. Some people who have dropped out of employment since the pandemic, especially older workers, may be tempted back by a shorter week. This could therefore be positive for both recruitment and retention.
Nonetheless, it is still right to worry about the impacts on output and incomes. In order to do the same amount of work, and therefore justify the same pay, employees would have to be 25% more productive on average when working four days rather than five.
This is not completely unrealistic. It is plausible that some people are much less productive on the fifth day anyway, or that up to a day a week is wasted in activities that add little value. A shorter week could also reduce staff absences due to stress or other illnesses, and happier employees could up their game on the days when they are working.
But while a 25% gain might be possible in some businesses and types of job, these may well be the exceptions rather than the norm. This may be a particular problem in the public sector where, for example, it is hard to see how a doctor or firefighter can deal with as many emergencies in four days as they can in five.
If service levels are to be maintained, many more staff would therefore be needed. CapX’s parent organisation, the Centre for Policy Studies, has tried to put some numbers on the potential costs to the taxpayer, and they are scary – between £17bn and £45bn a year.
Nor are the results of trials in other countries as impressive as many seem to think. It has been suggested that some Icelandic civil servants have been able to complete all their work in a shorter week. But perhaps this just says a lot about the inefficiency of the Icelandic public sector. And if we are looking for lessons from elsewhere, France’s attempts to cut the working week are widely recognised as a costly failure, especially for public services.
Interestingly, even the Scottish government seems to have cooled a little on the idea of a four-day week. It now seems keener on a shorter week in return for lower pay or, in other words, more part-time working, partly as a means to save money.
Even where it is possible to make big productivity gains, it is not obvious why the Government needs to get involved at all. Businesses and their staff can, and should, be left to work this out for themselves. The pandemic has already accelerated the trend towards a more dynamic labour market, including home working and the growth of the gig economy.
Put another way, what is the market failure that justifies state intervention? I get that some on the ‘progressive left’ might think that bosses are evil. But are bosses also so stupid that they are missing out on an obvious opportunity to boost productivity and save costs?
The only decent argument I have heard here concerns the ‘coordination problem’. At the moment, if some businesses switch to a four-day week, what happens when customers want to be served on the fifth day? The Government might have a role to play in deciding that (say) Friday is the day that businesses will add to the usual weekend. However, we are a long way from that point yet.
Supporters of a four-day week also often argue that it could help to level the playing field between those who can work longer hours and those with other responsibilities, including childcare, who are more often women. However, this is really an argument for more flexible working in general, rather than a ‘one-size-fits-all’ policy.
Indeed, lower paid workers in customer service roles are perhaps the least likely to benefit from a four-day week. Could someone in social care easily look after 25% more clients every day? Could a barman really pull 25% more pints in an hour, or waiting staff serve 25% more tables? Do they really waste a lot of time in pointless management meetings?
In short, there is a lot of utopian thinking here – and significant risks too. It is perfectly reasonable to believe that cutting working hours would have a positive effect on people’s wellbeing, and that they might be more productive. But it is dangerous to pretend that a four-day week could be rolled out across the whole economy without substantial costs in terms of output, service levels – and pay.
This piece was first published by CapX on 10th June 2022