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How a four-day week could boost the economy

Miriam Marra, lecturer in finance, University of Reading

THE idea of a four-day working week is gaining momentum. The Labour Party has included it in its 2019 electoral manifesto, and Microsoft Japan announced positive results from a trial run earlier in 2019. Some fear it will ‘wreck’ the economy.

But, colleagues and I have found in our research that the benefits of a four-day working week, without loss of pay, can outweigh the cons for both businesses and staff. We surveyed a number of businesses that have already adopted the four-day working week and found that they were making savings of almost £92billion (around 2 per cent of total turnover) each year.

Just over half (51 per cent) of the respondents thought that the four-day working week enabled them to save costs. Of those, 62 per cent say their staff take fewer days off sick, 63 per cent say they produce better quality work, and 64 per cent are more productive. Our research also outlines that the businesses who haven’t yet implemented a four-day week could save around £12billion by moving to one. If we add this to the savings made by businesses that already implement a four-day week, we’d get a total combined saving of roughly £104billion a year.

It is interesting to note that our positive results square with the evidence provided by Microsoft Japan. In its trial in August 2019, 2,300 employees were given a paid Friday off each week. The company reported an impressive 40 per cent increase in the productivity of employees in the month (measured against August 2018). But other measures were also adopted to improve productivity — for example, a significant reduction in the time and number of meetings and encouragement to use online platforms for collaboration.

On their day off, workers were encouraged to volunteer, learn and train. Or simply rest to improve their productivity and creativity. After five consecutive Fridays off, the company reported a sales rise by nearly 40 per cent, its electricity consumption dropped by 23 per cent and there was a 59 per cent reduction in the printing of paper pages. This experiment suggests the arrangement might be applicable to larger corporations and other countries affected by a workaholic culture.

Other companies have implemented the four-day working week and also reported an increment in staff productivity. One example is Perpetual Guardian, a New Zealand estate management firm that adopted the policy in November 2018. The company ran a pre and post-trial survey across employees and found that productivity was unharmed by the shortened work week, while staff work-life balance had improved by 24 per cent, sense of empowerment by 20 per cent, leadership and commitment levels respectively by 22 per cent and 20 per cent, and stimulation by 22 per cent.

In our research we have also highlighted that the benefits of this arrangement aren’t just for businesses and the world of work. An extra day off could have a knock-on effect for the wider society. We found 54 per cent of employees said they would spend their day shopping, meaning a potential boost for the high street, 43 per cent would go to the cinema or theatre and 39 per cent would eat out at restaurants.

Upsides of down time: More leisure time can boost other areas of the economy PICTURES: SHUTTERSTOCK

We also see potential environmental benefits to a shorter working week. In addition to the reduction of energy and paper use experienced by Microsoft Japan, we think that fewer journeys to and from work provides a potentially large green dividend with less fuel consumption and a reduction in pollution.

Challenges remain

The hottest question now is: can this work arrangement be easily translated into a change in legislation such as the one proposed by the Labour Party? In its annual conference the shadow chancellor, John McDonnell, said that if the party wins the election, it will reduce the average working week to 32 hours within ten years.

One of the main challenges outlined by our research is that the four-day working week can be difficult to implement in service industries where customer demands need to be met, and particularly for smaller businesses. It would also imply a significant change in public services like teaching and nursing. But Labour did recognise that different sectors will need to respond in different ways.

Meanwhile, research by the Centre for Policy Studies, a centre-right think tank, also found that reducing the hours of public sector employees would mean at best a £17billion cost for the Treasury and at worst a possible £45billion cost, assuming no increase in productivity and a need to expand the workforce in public services.

But the main point is that any legislation change should not just focus on reducing time but also to find ways for employees to enhance their productivity when they are working. Time reduction should be seen as both the conduit and the outcome of increased productivity.