Should we embrace the four-day work week?  

Andrew Allum at L.E.K. Consulting asks whether shorter working hours will boost UK productivity

 

The campaign for a four-day work week is gaining momentum in the UK. The 4 Day Week Foundation recently announced that 200 companies had decided to adopt the practice permanently after taking part in the latest trial.

 

The arguments for a four-day week coalesce around three key factors. First, it is claimed that the reduction in hours improves employee well-being by promoting a better work-life balance and reducing burnout. It is then claimed that this boost to well-being increases productivity by encouraging employees to be more focused and efficient within shorter working hours. Finally, it is suggested that the increased leisure time offers wider benefits such as reducing childcare costs and increased leisure spending.

 

For employers and employees, the prospect of greater productivity, more free time, and less stress is clearly alluring. Moreover, after 20 years of flatlining in UK productivity, we ought to be exploring new ideas. However, the question remains, would the four-day week achieve these aims? 

 

Is the five-day work week outdated?  

Proponents of the four-day week argue that we suffer from a long-hour’s culture. Joe Ryle, director of the 4 Day Week Foundation, has said that the “9-5, five-day working week was invented 100 years ago and is no longer fit for purpose. We are long overdue an update.”  

 

Whilst there are certain jobs in which people work longer hours, the average full-time working week is just 36 hours. This is just over a fifth of the total number of hours available in a full week. This number had been falling consistently from more than 50 hours per week in the Victorian era to settle in the mid-high 30s since the 1990s. 

 

At the same time, the trend of falling working hours slowed, and growth in productivity (i.e. output per hour worked) also slowed. The ONS records show that labour productivity grew at more than 2% p.a. on average through the 1980s and 1990s and slowed to 1.2% p.a. in the 2000s and just 0.5% p.a. in the 2010s. If we had continued to increase labour productivity faster, we could have continued to reduce working hours and still earn a living.

 

As such, whilst Ryle is right that many would prefer that productivity has gone up faster and so hours could come down, those who argue the four-day week’s case are wrong in their view of causality. We should be looking for the increases in productivity that could allow people to earn a living while working only a four-day week.

 

Productivity is key  

At the heart of the four-day week campaign is the proposal that workers work 80% of the time and receive 100% of their current pay. In order to maintain this level of pay, workers have to produce 100% of their current output in 80% of the time, requiring a +25% gain in productivity. This is hard for any one company to achieve, let alone for whole industries or the entire economy, and the findings from the four-day week trials to date do not suggest that this has been achieved.

 

Some of the businesses that have adopted a four-day week were special cases that could manage the productivity issue by cutting less productive hours instead of increasing overall productivity. For example, a restaurant in an earlier trial adopted the four-day week by deciding to close on their quietest day of the week, and a manufacturing business cut Fridays upon realising that all of their deliveries were sent out by Thursday, meaning that closing had no impact on revenue.

 

Another theme in the trials is the number of small businesses in creative industries. In these cases, it is entirely possible to see how increased well-being and more time away from work to think and refresh could result in better ideation and delivery during work hours. Indeed, of the 200 companies that adopted a four-day week after the latest trial, most (18) were in the Creative Arts & Design category, substantially over-represented compared with their role in the whole economy.

 

There are two things to unpick here. Firstly, it shows how the four-day week may work for some specific types of businesses. The nature of creative work may lend itself to working four days instead of five, but that does not indicate it could work at scale across the entire economy. In many of the example firms, it seems that an enlightened (or generous) owner-founder is accepting less output per worker and less profit in exchange for other benefits such as improved retention and morale.

 

Is there a viable path to a four-day week? 

In the short term, businesses that want to boost productivity must think about how their people spend their time. Smarter working methods that create controlled, uninterrupted periods of time that enhance efficiency can help businesses deliver productivity gains, but these are unlikely to help them reach the levels needed to offset losing an entire day of work. 

 

If we are to unlock productivity gains that might in time lead to a four-day week, we need more business investment. The Productivity Institute has identified that the UK economy suffers from chronic underinvestment when compared with the other 6 countries in the G7 and has for many years been below the fourth quartile across all 38 countries in the OECD.

 

This is not just about automation and use of AI, although they would help. It is about much broader increase in investment. Improving productivity requires running experiments to see what might work better for your business or in a new market. Experiments are expensive and there is no way to ask workers (labour) to pay for them – they require capital. We need more business investment in existing firms and the creation of new businesses that are willing to innovate more aggressively and displace incumbents.

 

If more businesses choose freely to adopt the four-day week then the normal pressures of competition will force businesses towards the most productive option for their specific industry and niche, and we can all benefit from whatever improvements are made. Nothing to worry about. But also, no need for a campaign.

 

However, campaigners do not stop at voluntary adoption. They are calling for a cap on the working week of 32 hours by 2030 and a right to request a four-day week without the loss of pay. These measures risk gravely damaging the economy because there is no evidence for the +25% productivity gains that would be required.

 

Such measures would lead to businesses shrinking as fewer working hours deliver less output. Many businesses would become unviable as a result. Unemployment would increase. For those that survive, albeit at reduced profit margins, all that has been achieved is a transfer from business owners (i.e., capital) to the remaining workers. But in light of the chronic shortage of business investment described above, we can ill afford to make business investment less attractive like this. We need more investment not less.

 

We can all understand the allure of working fewer hours for the same pay, but this will prove gravely damaging without massive improvements in productivity. Those campaigning for the four-day week should be asking how we can address the fundamental issues that have prevented such improvements – which would be a real way to earn a living within a four-day week. 

 

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Andrew Allum is Senior Partner at L.E.K. Consulting

 

Main image courtesy of iStockPhoto.com and Jerome Maurice