THE MONEY OR THE FUN: WILL AUSTRALIA ADOPT A FOUR-DAY WORKING WEEK?

You know times are changing when the Productivity Commission raises shorter working hours as a (possible) future for the Australian economy.

The PC is not known for its flights of fancy. It is a sober institution, which brings a traditional market-focussed economic framework to its work.

Every five years, the PC examines Australia’s productivity performance. Its latest nine-volume report contains 29 reform ‘directives’ and 71 high-level recommendations. Simply listing them takes 32 pages.

The report contains a lot of worthy analysis. Its bottom line is that productivity in Australia, like other rich nations, is slowing. Creating GDP growth is getting harder and new productivity strategies are needed.

Luckily, the PC had a few ideas up its sleeve. Hence all those recommendations.

Perhaps the most interesting part of the report is not about productivity but what we could do with the ‘dividend’ it produces.

 According to the PC, closing the productivity gap between Australia and Belgium, would allow Australians to work fewer hours a week without reducing income. Put simply, upping our productivity game could deliver a nationwide 4-day working week. The PC calls this - the leisure dividend.

To be fair, the PC also notes that we could work the same hours and take the dividend as extra income. In this case, matching Belgium would increase GDP per capita by 25 per cent – drawing us level with the US.

The PC does not say what we should do. But the choice presented is intriguing.

Behind PC’s work lies a finding that Australia’s high standard of living is due less to our productivity and more to the hours we work. Australians work longer hours than about 60 per cent of our OECD peers.

More leisure is not a new idea.

Converting productivity into leisure is not a new idea. In 1930, John Maynard Keynes predicted that labour saving technologies could result in his grandchildren working 15-hour weeks. Their views, alas, will never be known as the openly bisexual Keynes had no children.

A few years later, Bertrand Russell argued that existing technologies would keep people in ‘sufficient’ comfort if they worked just 4 hours a day. Russell’s argument was different to Keynes. Keynes argued that new technologies would reduce the future cost of leisure. Russell argued that the benefits of leisure were undervalued by society right now. 

A four-day working week (roughly 30 hours) is less ambitious than that promoted by Keynes or Russell. This is perhaps surprising given how much technology has changed since the 1930s. Johnathon Martineau would likely put this down to capitalism alienating (worker) time. An alternative is that it reflects the non-financial value work has in our lives – at least for those with ‘good’ jobs.

Having it all.

Recent European thinking is different again. Rather than a dividend from future productivity or a reflection of the current value of leisure, proponents argue that working less will itself increase productivity.

It is a seductive thought.

The Economist has reported on a number of trials pursuing this goal. One, in Iceland, involved 3000 workers moving to shorter hours (not quite four days a week) on the same pay. Output did not dip and in some areas improved. Workers felt healthier. Men did more around the house.

Another involved 3300 workers from 70 companies moving to a four-day week in Britain. A mid-point review found that output had improved in 49 per cent of companies; in 46 per cent it was unchanged.

Looking across Europe, Benjamin Laker and Thomas Roulet found mixed results. Benefits included lower absenteeism and higher work quality. Workers, particularly Gen X and Y, enjoyed a higher quality of life.

One benefit was a ‘diary detox’ triggered by rethinking time management and meetings. It seems better meeting practice can improve both productivity and worker wellbeing. 

Costs were highest where service continuity is critical. In Gothenburg Sweden, moving to a 6-hour day caused major scheduling problems in hospitals due to a shortage of nurses. The idea was abandoned.

Lessons from the 60s and 70s.

Interest in a four-day week is itself not new. In 1971, Janice Neipert Hedges wrote “The 4-day workweek has caught the imagination of the public”.

Hedges found that workers prefer taking leisure in blocks rather than as shorter working days. She argued that channelling future productivity gains into leisure, would allow the US to achieve a 4-day, 32-hour a week standard by 1980.  Sound familiar?

The Soviet Union also experimented with fewer working days. In 1962, Premier Krushchev cut non-farm working days from six to five and set a goal of instituting a 35-hour week within 10 years. By 1965, 4 per cent of the industrial workforce was on a five-day schedule.

Economists found that early trials improved productivity by 14 per cent. Despite this, the average soviet industrial worker still laboured more than 40 hours a week in 1986. So much for the workers’ paradise.

Are women the key?

US and Soviet experience highlighted potential gains for one important group – women.

More recently, Claudia Goldin and Arlie Russell Hochschild independently concluded that working women suffer from a ‘time bind’. As Goldin puts it “career and family are each trying to occupy the same space”.

Goldin’s focus was on women with university degrees over the last century. She found that much had improved, but that a temporal overlap in peak child-raising and peak career-building remained a problem.

The time bind Goldin found was worse in ‘greedy’ professions (finance, law, management). Here, a culture of long and on-call hours stymied the chance of women having both career and family. In other professions (pharmacy, vets, medicine) a more positive story emerged. There work had been reorganised in ways that facilitated women to have satisfying career and family lives. Change is possible.

Hochschild studied workers of all skills at a company promoting workplace flexibility. She found a paradox. People said they wanted less work and more time with family. But when offered the opportunity to do so, most did not.

The reasons for people preferring work were varied and complicated. Two seem especially important. First, was a difference in how valued and supported people felt at work compared with at home. Second, was a concern that they would get less recognition and fewer opportunities than their longer working colleagues.

Do we really want to work less?

Society has always been able to create new norms around working hours. Our current conception of the weekend is itself a creation of the industrial revolution. Over time, workplaces have become more flexible and accommodate more individual choice.

Despite this, many people still work very long hours.

In Australia, Mark Wooden found that a significant and relatively steady proportion of men and women have worked more than 45 hours a week since the 1990s. 45 hours represents a 6-day week at 7.5 hours a day. It is a far cry from the PC’s 4-day week proposition, let alone the visions of Keynes and Russell.

Longer hours were not, however, associated with less wellbeing. Wooden found that job satisfaction, life satisfaction and mental health varied little with hours of work. What matters, according to Wooden, “is not the number of hours worked … but whether those hours accord with worker preferences”.

Where to from here?

The PC’s decision to highlight society’s choices around the ‘productivity dividend’ should be applauded. It is an important recognition that GDP is not everything.

The PC says nothing about how change, if desired, could be achieved. Doubtless, this was intentional. A traditional PC view would be to allow individuals to make choices according to their own circumstances. Mark Wooden would agree. As, one suspects, would Claudia Goldin.

Historically, significant reductions in the standard hours of full-time work have only come via government action in response to societal pressure rather than market evolution. Change has been fiercely contested and hard won.

History also shows that, despite challenges, economies do adjust and thrive. When Australian standard hours were reduced to 40 hours a week in 1948 growth remained strong, albeit in the context of a post-war boom. There is no intrinsic reason why major change cannot be done again.

Shifting to a standard 4-day week would involve adjustment and some disruption. Particular challenges exist where continuity of service is needed, as Swedish experience demonstrates. Requirements for substantial, often university based, credentials make it hard for labour supply to adjust quickly in some areas. It is, perhaps, an area of economic inflexibility the PC should look more closely into.

Ultimately, decisions to reduce standard working hours are about the type of society we want to be. The question posed, implicitly at least, by Bertrand Russell feels right – what value should we place on the things more non-work time would allow? Could it, for example, reduce the time bind faced by women?

Some people will work long hours no matter what standard is set. A recent legal case revolves around whether it was reasonable for a parliamentary chief of staff to be asked to work 70 hours a week - hours many would find unacceptable. You can guarantee though that some people are, and enjoy, working even longer hours.

Human ambition needs an outlet. But we also need to recognise that not everyone wants a ‘Goldinian’ career. Setting standard hours is about a norm for society as a whole. The balance most of us feel is right.

At the end of the day, despite some interest, no great societal clamour exists for change. Without it, things are likely to remain as they are.