Professor Daniel Garcia discusses the four-day week and how employment models might look like moving forward. Are Fridays the new Saturdays or is this wishful thinking? Can a four-day week actually increase production and employment? Or, if something sounds too good to be true, beware, it just might be too good to be true.
By Professor Daniel Garcia 7.10.2021
Economists are notoriously bad prognosticators. Lawrence Peter, of the Peter Principle fame, joked that economists “will know tomorrow why the things they predicted yesterday didn’t happen today”. Among the long list of failed predictions, two stand out. The first was due to Irving Fisher, who argued in October 1929 that the stock market prices “had reached a permanently high plateau”. Only nine days later, the crash of Wall Street occurred and his prestige as one of the brightest economists of all time was permanently shattered.
The second prediction appeared shortly after. John Maynard Keynes argued in his beautiful essay “Economic Possibilities for our Grandchildren” (1930) that the standard of living at the end of the XXth Century (measured as income per capita) would be four to five times higher than it was at the time of his writing. As a result, Keynes argued, the vast majority of people would devote only fifteen hours a week to work. Keynes was right that income per capita has grown by a factor of at least four in most countries of the world but he was spectacularly wrong in his estimate of the future of the working week. The question that Keynes would ask then is… if you are so rich why are you working so much?
Since 1950, the working life of the middle-class in the western world has changed remarkably little. Most (prime) workers stick to the five-day, nine-to-five working week, commuting daily to the office (at least before COVID shook our world). This pattern has later been replicated across the globe from Abuja to Zagreb, from Santiago to Seoul. In 24 out of 28 EU countries, male workers average between 39 and 41 hours per week, and most of the variation in yearly hours per worker across the globe comes from differences in female employment.
In recent years, however, part-time and non-regular employment arrangements have gained considerable popularity. More and more voices argue for a reduction of working hours and, specifically, for a reduction of the working week from five to four days. Proponents of the four-day working week argue that it will lead to higher productivity, increase life satisfaction and facilitate the conciliation of family and work responsibilities, especially among female workers.
A recent example is the book “Fridays are the new Saturdays” by Birkbeck College economist Pedro Gomes. Gomes argues in favor of implementing an economy-wide four-day week through the lenses of classical economic theory and a little bit of data. While modern politicians may argue that the four-day week is a “crazed-communist” plot, it has been endorsed by many famous economists over the years. Paul Samuelson referred to it in 1970 as a “momentous social invention”. In 1972, the American Management Association surveyed firms that were implementing a four-day week and found that most of them had increased productivity and only 3% had reported lower production. As recently as two years ago, Microsoft Japan moved to a four-day week leading to wide increases in productivity. Why, then, are we sticking to the long week?
Gomes argues that a worker cannot fully enjoy her additional free time if others continue to work on Fridays. Leisure, he argues, is a collective good: traveling, dining, attending concerts, or hanging out are best done with others. Hence, to reap the benefits of the four-day week we would need to collectively change our working life. Similarly, businesses benefit from having the same operating times as their suppliers and customers. It follows, then, that the visible hand of the government is needed for society to adopt the four-day week successfully.
Some proponents of the four-day week go further and argue that a four-day way week will mechanically reduce unemployment by distributing hours more evenly among workers. Unfortunately, this is an example of the famous lump of labor fallacy. There is simply no evidence that reductions in working hours lead to reductions in unemployment. If a reduction in hours worked per worker led to more workers hired (in order to keep production constant), an increase in the production of each hour (higher productivity) would lead to lower employment. Yet the opposite is the case.
There are other concerns that the proponents of this reform have not addressed. First, while it is true that most workers report working 40 hours a week, most firms do not actually monitor their schedules. Some workers are available 24-7 while others work remotely only at times they find convenient. The four-day week is a 2020 reform that fits the 1980 business world. Second, the population of many western countries is aging rapidly, contributing to scarcity of qualified workers in many occupations. A four-day week has been proposed to lure some workers into hard jobs but it is unlikely to be a long-term solution. Finally, it is not clear if it is a good measure to protect workers and working conditions in an era of increasing automation.