A four-day workweek? Maybe in a few decades

A four-day workweek? Why not? Amid the general din of millenarianism to which the pandemic has given rise, in which virtually every aspect of our daily lives is firmly declared to be either “over” or in line for “fundamental transformation,” the idea of making every weekend a long weekend comes across as comparatively moderate.

It isn’t only the current, lockdown-induced upheaval in working arrangements that has given the proposal, long championed by labour unions and other “work-sharing” enthusiasts, fresh appeal, including recent endorsements by political leaders from New Zealand to Scotland to Finland. For many, it fits contemporary ideals of work-life balance. For others, it seems to offer a way out of the unemployment crisis.

There’s nothing inherently wrong with the idea. The standard workweek for most of human existence was seven days. In the Industrial Revolution, that was reduced to six, then to five in the past century, where it stuck. Isn’t four the natural next step? Who wouldn’t want more time off, if they could get it?

Hang on, though – on what terms? As with the guaranteed annual income, another idea gathering popular support, there seems little agreement on what a four-day workweek would look like. Would the reduction from five days to four be achieved more or less by decree, with no reduction in pay – effectively, a 25-per-cent increase in hourly wages? That’s not going to happen, and if it did, it would make unemployment (massively) worse, not better.

Or, rather than less work for the same pay, would it take the form of less work for less pay? Some might find the trade-off acceptable, especially the better-paid sort of wage slave. But others plainly would not.

What about a four-day week, but with everyone working 10-hour days rather than eight – the same work for the same pay? Again, some (68 per cent, according to a 2018 Angus Reid poll of Canadians) would find this congenial. But for others it would be a hardship. As in the previous example, there seems little reason to pursue a one-size-fits-all approach.

There is one way we can have our day off and eat it, too. That is to raise productivity to such an extent that workers might produce as much in four days as they did in five – not by working harder, but by working more efficiently, with better machinery and smarter production processes.

The dividend from that higher productivity might be taken in the form of higher pay. But it could also be taken in fewer hours worked. Or, most likely, some combination of the two.

That, after all, is precisely what has happened. As a study released this week by the Fraser Institute notes, between 2000 and 2018, average earnings rose by 13 per cent, even as average hours worked declined by 4 per cent. Workers split the dividend from the era’s roughly 1 per cent annual growth in productivity between higher pay and more leisure.

Leisure is, after all, a good like any other, as far as quality of life is concerned. People value the goods that money can buy, but they also value their free time; depending on the terms of the exchange, they’ll be willing to accept less of the former for more of the latter. So long as they are choosing freely, that’s a choice best left to individuals.

The problem is that too many people are not in a position to choose freely. While some of the reduction in hours worked in recent decades has been voluntary, much of it has also been because of the growing unwillingness of companies to take on permanent, full-time employees. Hence the rise of the gig economy and “precarious” employment.

It’s easy to decry corporate heartlessness for this, but companies respond to incentives: If it was in their interest to hire more full-time workers, they would. Alas, full-time employees come with all sorts of costs that part-timers do not – costs beyond those negotiated between firms and their employees, but rather imposed by the state: mandatory benefits, restrictions on layoffs and the like. The result is to tip employers toward hiring part-time and temporary workers at the margin, even where they might otherwise prefer full-timers.

Mandating a four-day workweek, rather than leaving workers and firms to negotiate the trade-off between higher wages and fewer hours that is appropriate for them, could make a bad situation worse. Certainly, it should not be imposed in the name of reducing unemployment – as if there were only a fixed amount of work to be done across the economy, the classic “lump of labour” fallacy.

Indeed, given the problems we face as a society, shortening the workweek may not be on the agenda any time soon: We’ll need more labour, not less. In the near term, the issue is servicing the massive debts we have taken on in the name of fighting the pandemic. In the longer term, there remains the problem of population aging, and the massive social costs this entails, of which the provinces, in particular, are already acutely aware. Higher costs and less work make an unappetizing combination.

Leisure may be like other goods in some ways, but not in one crucial respect. For whereas an hour of earned income is taxable, an hour not worked is not. The fewer hours worked, other things being equal, the higher the taxes that must be levied on those that remain to raise a given amount of revenue. But at higher income-tax rates, people tend to work fewer hours: unable to buy as many goods as before from an extra hour of work, people opt instead for more leisure. With labour already (postcrisis) in short supply, expect the revenue gap to be filled by higher sales taxes instead.

Which means the trend toward a shorter workweek may stall or even reverse. Even with increased productivity, we’re going to need everyone working flat out – not just five days, but six or seven – just to pay the government’s bills. In the future, the productivity dividend may go neither to higher wages nor fewer hours, but to the state.

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