That’s the self-explanatory headline for my latest piece in The Conversation. Read there, comment here.
I should mention that The Conversation edits quite vigorously, including adding material. So, while I stand by the argument in the piece, not every turn of phrase is exactly what I would have written.
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John Quiggin 
I agree that increasing leisure is likely to increase welfare even if it does result in 5% reductions in incomes. We are a high income economy and leisure is plausibly a luxury good – with higher incomes there is likely to be a higher demand for leisure and experiences. And firms seem reluctant to offer less intensive work options which is why skilled workers are worked to death – presumably fixed costs are incurred in having lower working hours but spreading the work around more workers. This is particularly likely in small-medium businesses but also, it seems in large corporations. Hence you might want to legislate for shorter working hours while recognising the extra costs businesses will face.
I think too that increasing leisure probably reduces “rat race” externalities where workers are encouraged to work harder because their colleagues do. The endpoint of this process is that some workers face health and other problems.
My only qualification is your claim that “now” is the time to enact such changes. We face labour shortages and record low unemployment because the economy is overheating and we do not have the employer-sought flood of cheap migrant labour to “equilibrate” labour markets. Eventually such phony “shortages” will be eliminated by demand-driven wage increases but for the moment effectively cutting labour supplies by 5% when the economy is booming and close to full employment has its own problems. I’d wait until wages start to rise and unemployment moves away from its plausible 3% destination.
Notice how even when right wingers agree with a left wing point, “now” is never the time to do it?
Ikonoclast, I provide a reason for delaying the introduction of a 4-day week. You might want to address the reasons for your rejecting of that argument. I reject the view that John’s argument is a “left-wing” argument – many economists of various political persuasions would accept it for reasons given in the “economics of happiness” literature that John mentions. My claim that labour markets are tight now is not a “right-wing” argument either. It is argued in the Guardian (below) and by the Reserve Bank.
https://www.theguardian.com/business/2022/jan/20/australias-unemployment-rate-drops-to-lowest-point-in-more-than-13-years
I think a period of low unemployment is the only time we can hope to implement a four day week. We need the power to demand it and we’ll only have that when there aren’t lots of unemployed workers waiting to take our places. Cutting labour supply when there is excess demand also means we could demand no loss in income as we worked fewer hours. As John points out, a 5% reduction in output at constant wages would represent only a small clawing back of the increased profit share of income of the last couple of decades.
John I heard you on the ABC radio morning program this morning (Tuesday 15/02/2020). You spoke well but the radio presenter was not that cluey about the economics of leisure. Perhaps this is another area where you may help this debate. My economics training at UNSW certainly was right wing. I was taught that leisure hours tended to get more precious the more your working day veered away from the “Eight-Eight-Eight” principle imbedded in most awards in the 1970s. Just like most right wing economists my lecturers and tutors harped on the demand for and supply of labour as if they were the only determinant factors. Of course most right wing economics assumes full employment so that it can dismiss shorter hours as been untimely. Most often they ignore that the inconvenient truth that the labour force participation rate is rarely, if ever, above seventy percent at any one time.
This way they can come up with complications like:
1. the backward bending supply curve of labour
https://www.oxfordreference.com/view/10.1093/oi/authority.20110803095439778
and
2. the “kinked demand curve”
https://www.economicshelp.org/blog/glossary/kinked-demand-curve/
Yet even that assortment of weird math models, does not even finish their machinations.
There is still to come:
3.Monopsony power in labour markets;
https://corporatefinanceinstitute.com/resources/knowledge/economics/monopsony/
and;
4. the link between productivity increases and wage rises.
Click to access 3.2-Pgs.-168-179-The-Link-Between-Wages-and-Productivity-is-Strong.pdf
Ceteris paribus, it is rare to see major reductions of working hours without some form of social contract. In such social contracts of the past, think of the Prices and Incomes Accord of the late 1980s, working hours, pay and conditions could be traded off against things like compulsory superannuation mandates. If my memory serves me correctly there were also things like mandatory in house (or external) training days. It must be remembered that, in this century, before 2019, there were few labour supply chain issues. It is reasonable to assume that when national borders open up in Australia and New Zealand there may no longer be labour shortages. John you could may well be right in urging action now. It will take some time to work through to new enterprise agreements, labour contract amendments and existing satisfy regulatory institutions. The RBA wants wage rises. That is one powerful influencer that could be harnessed to force at least more debate on this proposal.
At a time when we are faced with a crumbling of the liberal based order and confronting with the real and imagined threats of a growing China and its economic model, I’would hope that such arguments would be examined within the context of Australia comparative economic advantage and not just from the safety of the domestic status quo. I am not sure we can afford to sacrifice any productivity at the margin.
Andrew: I don’t see how working longer hours is going to save the liberal based order or reduce the appeal of the Chinese economic model. If anything, the opposite.
This is an important discussion, especially since the pandemic has exposed so many arbitrary norms as obsolete. The idea of flexible time does however have social drawbacks. How many people are completely free to organise their time without affecting anyone else? If you have a partner or children you need society to allow you to coordinate your time off. This seems to have been forgotten in the rush to make everything available 24/7. People need time for families and community.
Exactly at the point when workers’ power is highest is when labor should use that power. Owners of capital have never hesitated to use their power and exploit workers. Workers should not hesitate to redress the power relations that have become so unequal under neoliberalism. A period of (near) full employment is the right time to do it. The four day working week can and should be part of that push.
Let us not forge the history of unfettered capitalism.
https://www.smithsonianmag.com/history/forgotten-matewan-massacre-was-epicenter-20th-century-mine-wars-180963026/
https://www.4dayweek.com/faqs
4/12 – “Does a 4 day week only work for the most privileged workers?
It is critical that the 4 day week benefit everyone, not just one slice of society. The 4 day week must be extended to everyone in order to truly deliver benefits to our nation. The 4 Day Week Global Foundation is working to ensure employers and employees in all industries and parts of society are part of this transition.”
4 Day Week Global
The Truth Behind Six Major Myths
https://www.4dayweek.com/news-posts/six-myths
“3. The 4 Day Week is only for white-collar businesses and workers
There is an assumption that a 4 Day Week is easier to implement in an office environment, where outputs can be somewhat amorphous or hard to gauge, compared with an assembly line or other manufacturing-type setting where productivity is often measured in more concrete ways. Certainly, there are many efficiencies that can be found in most office environments, where people typically dawdle in conversations around the water cooler or are regularly checking in on social media apps.
However, one of the leading examples of the aptitude of the 4 Day Week to other types of workplaces is found in Germany, where as of late March 2021, the country’s largest trade union, IG Metall, agreed a 2.3% wage increase as part of a switch to a 4 Day Week in a key industrial region; 3.9 million metal and engineering workers are benefitting. Not to put too fine a point on it, German industrial culture is not known for slacking or poor productivity – so this change would not be happening in one of the world’s richest and most productive nations unless there was a strong economic and social case for it.
6. Whole countries will never shift away from a five-day week
We know this isn’t true because historically there has been enormous reinvention of how humans work and massive expansions of the rights of workers, with organised labour driving new legislation and changing conventions across industries and entire countries.”
Scotland to trial a four-day week
4dayweek.com/news-posts/scotland-trial
https://www.bbc.com/news/uk-scotland-scotland-business-58403087
“Scotland is to trial a four-day week, but without a loss of pay. A report out today includes some ideas for how it could be done, drawing on experience in Iceland and New Zealand.
..IPPR Scotland is suggesting a Low Hours Commission, to help drive this forward, and a Scottish trial across sectors. They want to see how this works in non-office employment, on lower pay, and among those with condensed or part-time hours.
Its report suggests that there is a need not only to cap maximum hours (already done, for many, under the EU Working Time Directive) but to put a minimum-hours floor on employment.
This is another bid to get at zero-hour contracts, presented as the need for working people to be employed for sufficient hours to take home a living-wage packet.
And as women are more likely to be in these low-paid part-time roles, one positive that could result might be an acceptance of lower hours as the norm – leaving men to use their increased leisure hours to take on more unpaid family and household roles.”
Four-day week ‘an overwhelming success’ in Iceland
bbc.com/news/business-57724779
“..Gudmundur Haraldsson, a researcher at Alda, said: “The Icelandic shorter working week journey tells us that not only is it possible to work less in modern times, but that progressive change is possible too.”
Spain is piloting a four day working week for companies in part due to the challenges of coronavirus.
And consumer goods giant Unilever is giving staff in New Zealand a chance to cut their hours by 20% without hurting their pay in a trial.”
4 Day Week Pilot – ANZ/Pacific Information Sessions
Tuesday 1:30 PM – 2:30 PM, March 22, March 29, April 12
https://www.4dayweek.com/events
“What a 4-day week can do for your business and employees
What it takes to focus on productivity and reduce work hours
How you can pilot a 4-day week in 2022 alongside other companies and the support of the 4 Day Week Global programme
Following a 30 minute presentation, we’ll open up for questions, so come prepared!
Featuring:
Charlotte Lockhart: CEO 4 Day Week Global and our moderator
Andrew Barnes: Founder of Perpetual Guardian and author of ‘The 4 Day Week’
Joe O’Connor: Coordinator of the global 4 Day Week pilot program.
Dr. Jarrod Haar: Professor at Auckland University of Technology
and more to be announced”
IIRC from the discussions here on drafts of JQ’s Economics in Two Lessons book, it was a bit thin on labour market failures.(apologies if I’m wrong). As demonstrated in Stiglitz’ very plausible efficiency wages model, excessive working hours for those with jobs, paid as overtime, can often look a better deal to employers than the riskier new hires required for full employment. Another reason why we need labour market regulation and unions. The argument does not tell you what an optimum working week would be, only that it’s shorter than the one generated by an unregulated market. Consider an update for the second edition.
“It is critical that the 4 day week benefit everyone, not just one slice of society.”
Yes! The standard working week should be reduced, with an increase in hourly wages that would flow through to part-time workers
John, Have you changed the story now? There will be a 5% reduction in output (according to your guess) and in the first version this reduction would be shared between workers and employers equally so workers would forgo a (guessed at) 2.5% increase in wages. But it sounds to me like you are now suggesting a 20% reduction in working hours followed by increased wages with a flow on increase to part-time workers. If so the proposal would not only be poorly timed (for the reasons I set out above) but irresponsible from the viewpoint of the unemployment it would create. Of course this is all hypothetical as such a proposal has zero chance of ever getting off the ground.
Wages are not just determined by a battle between labour and capital but they are also impacted on by productivity and labour market conditions. It seems that you are now ignoring the latter.
Harry, apparently evidence is mounting globally that a four day working week improves productivity. Given that, and absent the negative impact over recent decades here of the productivity impairing lazy Big Australia ponzi “flood of cheap migrant labour”, capital in its own interest could increasingly support a four day week as one of the strategies sorely needed to improve productivity.
Svante, I am sure you are right if labour productivity is assessed as output/labour hours worked. That could be true even if aggregate output falls. On the immigration Ponzi scheme – this is a business-driven policy designed to put a clamp on wages particularly in parts of agriculture and in service industries. Keeping wages low means labour’s marginal productivity will be lower so, on that, I agree.
Harry, re a pro rata reduction of part time hours. I don’t see how you conclude that it would mean increased wages for part time workers.
In the case of permanent part time employees, a large group, it is said that they all want the benefits of the greater free time it allows. But does it? Do they predominantly say that? They may be guaranteed, say, 20 hours work per week at the standard hourly rate, but many require additional hours elsewhere if they are to earn sufficient to live. In return capital gets employees that mostly work as arbitrarily directed on any work day for more than the 20 hours total per week and anywhere up to full-time hours BUT still at the standard rate, not at overtime or penalty rates if not meeting that threshold on any day. Capital additionally gets those employees at the reduced costs of half the sick, annual, and long service leave, and lower than full time employer superannuation contributions where provided in addition to the employer SG, and for many at much reduced or nil (set to change in 22/23) employer SG contributions.
Capital gets for significantly reduced costs a supposedly part time (wink, wink) employee who may regularly routinely work up to and above full time hours to meet the calculated inflexible yet ‘flexible’ requirements of capital. Employing workers as ‘casuals’, where the need for labour is in fact more uncertain from day to day, delivers capital near the same calculated bottom line reduced costs.
In short, compared to a four day reduction of full time hours a pro rata reduction of ‘part time’ hours by 20% won’t of itself fix any growing national nor ‘part time’ or casual workers’ serious problems with precarious, gig, and under- employment. OTOH, the current reduced costs to capital gained by using those employment categories will flow on pro rata with any pro rata reduction in the standard hour conditions.
Addendum on efficiency wages. Stiglitz only focused on imperfect information on the side of employers, who do not know how conscientious a job applicant really is. But there is another information asymmetry on the side of workers. What will the job with a new employer be like? This depends on the pay, the technical content, company policy and culture, and its financial soundness – all of which can be discovered quite well – but also on the attitudes of the immediate work group, especially the supervisors. These are nearly impossible to estimate outside a face-to-face village economy. A new job carries the risk of becoming subject to petty tyrants. So a number of people will stick with a poor job because of the risk of change. I can’t guess the scale of this market failure, but it’s worth investigating.
“I should mention that The Conversation edits quite vigorously, including adding material.”
This is the most unsettling thing I’ve read in weeks, if not months
From a different Conversation article: “In other words, the significance of the situation in Ukraine cannot be underestimated.” https://theconversation.com/ukraine-what-would-a-russian-invasion-actually-look-like-these-are-the-three-most-likely-scenarios-177287 Any competent editor would have picked up this common mistake.
Double negatives create confusion at the best of times. This one even more so, as the assertion is hyperbole and almost always factually wrong, as written or corrected. If the stated risk is 0%, this cannot be an overestimate. If it’s 100%, it cannot be an underestimate. For all other values, both over- and under-estimation are logically possible.
James, the claim is about the “significance of the situation”, not the probability of invasion. I take that to mean something like “the potential consequences”, which we could model as expected utility; in which case one might underestimate the “significance” by inappropriately weighting various outcomes
Jones, good call “This is the most unsettling thing I’ve read in weeks, if not months”.
I like the idea if we can commit to surplus budgets, local, state, and federal. This could actually help a lot in getting our budgets into surplus since it COULD imply a 20% pay cut in public service salaries costs. I don’t want to sound like a bean counter, but it may mean a great many economic benefits in the longer if our society is sole trader biased. Since people may have the energy to prepare in advance for a part-time business. Not one that would necessarily stay part-time. But there is the importance also of parents spending more time with their kids. And having more energy when they are in the presence of their kids.
But if society is going to try and pull this off, while they are intellectually addicted to Keynesianism, its going to be a catastrophe. Something has to give. Be quits with the Keynesian nonsense and embrace a better tomorrow.
I’d like to see studies of long term medical costs and benefits added to support for a 4 day week. With outliers of all types reintroduced into Qaly evaluations.
There is a lot of evidence that sleep will lessen medical costs long term, and support emerging happiness. A 4 day week may lower brain risks long term. I’d be happy about that.
JQ said ” There’s a lot of evidence that experiences give us more happiness than material goods. But experiences require time as well as money. A four-day week would be one way to get that time.”.
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An example:-
“Circadian control of heparan sulfate levels times phagocytosis of amyloid beta aggregates
“Alzheimer’s Disease (AD) is a neuroinflammatory disease characterized partly by the inability to clear, and subsequent build-up, of amyloid-beta (Aβ). AD has a bi-directional relationship with circadian disruption (CD) with sleep disturbances starting years before disease onset. However, the molecular mechanism underlying the relationship of CD and AD has not been elucidated.”.
…
https://journals.plos.org/plosgenetics/article?id=10.1371/journal.pgen.1009994
“The 4-day work week: Who is trialing it and does it work?
https://m.dw.com/en/the-4-day-work-week-who-is-trialing-it-and-does-it-work/a-60818890
Most employers would be able to cope with the 20% pay-rise, and in some cases the the extra overtime payments, if they got debt relief, or at least interest forgiveness on that debt. Which would mean banks having to sell off a lot of their assets. Big deal right? They have plenty to off-load.
A good deal all round in my book. This is something seldom talked about when the subject turns to getting out of a recession or a depression. The left talk about spending programs, as if fiscal ineptitude were demand management; a theory that was already disproven in the early 1800’s. The right will fall back on reducing wages. But no-one will talk about a total suspension of debt payments and interest accrual until such time as healthy economic growth returns. Check out any employers balance sheet and income statement and you’ll probably find its all doable.
JQ a questiin. Why a cliff? 5 to 4.
Why not a gentle slope – gradual decrease in working hours.
Half hr per year x 16yrs. 4 days by 2038. Society slowly readjusts? Less resistance.