The Four Day Work Week
Pros and Cons
A loyal Econ Soapbox reader recently came across this report that discusses how Iceland implemented a shorter work week (if you see an issue you’d like me to write about, let me know!). In 2021 and 2022, most public and private sector employees worked fewer hours. This follows up an earlier pilot study, where around 2,500 public sector workers worked shorter hours. Both the original pilot and the larger program got a lot of international press attention, including from CNN and the BBC. The general media narrative has been extolling the benefits of a shorter work week, stating that workers are happier and that there is no loss in productivity.
The idea behind shorter work weeks is straightforward. Many employees report that a lot of their time spent working is wasted and that they could be just as productive, if not more productive if they work shorter, more efficient hours. This is theoretically possible. Employees who work for notably inefficient companies have horror stories of being summoned to hour-long meetings that didn’t affect them, and then having to attend similar meetings later on because a key person couldn’t attend the first one. Other anecdotes abound about worthless projects with no deliverables. Workers who are forced to devote their time to such boondoggles would have a negative marginal product, resulting in a net decrease in productivity. By cutting out the inefficiencies, working hours could be reduced while productivity increases.
Unfortunately, neither program in Iceland convincingly makes the case this is happening. First, the pilot study only included public sector workers. I don’t think stating “We reduced the number of hours government employees work and nobody noticed a difference!” necessarily conveys the message the authors intended. Government is inefficient and has employees that aren’t missed if they work less? Groundbreaking. Almost as if they weren’t needed in the first place.
Second, I have no idea where the “four-day week” that the BBC article trumpets is coming from. According to the report, the workers who were part of the study had their hours reduced from 40 hours a week to 35 or 36 hours a week. For most of the workers, it does not say how those hours were reduced. It could have been that daily hours were reduced from eight hours a day to seven, or that employees worked a half-day one day a week. One agency, a local police department, cut the workweek by eight hours every other week, and balanced that cut with a four-hour increase during the intervening weeks. Regardless, there is absolutely nothing in the report that indicates any Icelandic workers moved from a five-day work week to a four-day one.
The pilot program was quite popular, however, and it spurred various trade unions to successfully get many private employers around Iceland to also decrease working hours. This was a big program. Over half the workers in Iceland (59 percent) were offered reduced hours. Of those that were offered reduced hours, most accepted, leading to 51 percent of Icelanders working reduced hours in 2021 and 2022. This has the makings of a good study, unfortunately, the headlines that reduced weeks don’t impact productivity are not supported by the report.
First, take a look at how working hours were reduced:
The most common change is that one day a week had reduced hours (“One day a week shorter” does not mean going from five to four days of work a week). Also note that a significant number of workers did not see a formal reduction in shifts or hours. They just had an increase in “flexibility”.
There are two larger concerns about the report. First, it has a glaring omission: Covid. In 2021 the Icelandic economy was going through the same upheavals as most of the world. Especially because their international tourism industry, a key part of the Icelandic economy, was decimated, it’s hard to justify this omission. Were firms offering shorter hours because of the unique circumstances at the time? I have strong doubts that any conclusions drawn from a large-scale change in working conditions in 2021 are relevant to workers in 2024.
Second, the report does not make any attempt to show that the decrease in working hours does not result in a decrease in productivity. The report states “Overall, the Icelandic economy has remained strong post-reduction of working weeks in the country.” Fair enough. In 2022 the economy grew at a steady clip and tourism rebounded. This does not prove that a shorter work week didn’t damage productivity, however, the same way an increase in North Carolina GDP in 2024 doesn’t prove Hurricane Helene didn’t damage productivity in Asheville. To determine cause and effect, a much more robust argument than “GDP increased, so this policy must not have had a negative effect” is needed.
To add some anecdata, this thread from Reddit about the shorter work week in Iceland is fascinating. The most upvoted comment is “It totally baffles me when foreign media spouts this nonsense as fact.” Everyone (claiming to be) from Iceland agrees that Iceland does not in any way have a four-day work week and that the typical standard is 40 hours a week.
The calls for a shorter work week, especially in America, will continue to grow. Believe it or not, however, data shows that Americans have steadily decreased. The reality is that there is a select group of workers, many highly compensated, who regularly log 55+ hour weeks. That is not the norm, however.
I think discussing how to make American firms more efficient is a fair conversation to have. Are corporations both hurting their employees and themselves by forcing workers to works so much that their marginal product is negative? Could reducing the work week make for happier employees and not decrease output? Possibly. But the studies from Iceland don’t show either.