Scotland has announced that it will trial a four-day working week, with the theory being that workers can be more productive while working fewer hours. Scotland is currently the third most productive region in the UK, behind London and the South East.
Potential benefits of this shorter working week include a better work-life balance. Unsurprisingly, 85% of respondents to a recent survey back such a reduction. Some studies have shown that happier employees are more productive employees. Staff may also feel more valued. The generic ‘overworked and underpaid’ gripe of employees would become less relevant. Additionally, one would expect a reduction in carbon emissions with fewer people commuting in peak hours, which are the most damaging to the environment. There would also be knock-on benefits for other industries such as tourism and retail. With an extra ‘free’ day in the week, people would be more likely to increase their demand for such services. If demand is high then it is likely that more staff would be required in these industries, potentially reducing the unemployment rate.
From an employer perspective, a four-day week does not seem as attractive. The primary targets for employers should be productivity (and therefore profits) and employee well-being. If employees are more productive, then does it matter if they work four or five days? Given the changes that Covid-19 has brought to the workplace, such as remote working, employers are certainly more adaptive to change now than they have ever been in the past.
One may argue, however, that if productivity can increase over a four-day week, then could more be expected over a five-day week? Additionally, the trials may give a false positive, similar to that of a ‘new manager bounce’ in football. A struggling team becomes better overnight as players try to impress their new manager and prove their old manager wrong. Inevitably, for most, they end up slumping back to underperforming after a few weeks. The same could be assumed about the trials. It would seem only natural that employees would give their all to be more productive for the trial period to ensure the four-day is passed into law – but is the improved performance sustainable?
It is important to clarify the definition of productivity. A worker could be more productive (output per hour worked) in a four-day week; however, that person may not necessarily produce more when compared with their output over a five-day week.
The potential impact on FDI of a four-day week
One would expect a four-day working week to impact foreign direct investment (FDI) differently depending on the sector. In the manufacturing industry, for example, technological advances may allow for a reduction in human resource without a detrimental impact on productivity. Yet many assembly line jobs are already judged on efficiency. To further increase productivity in these would be difficult.
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Better software packages and advancements in AI and machine learning could also improve productivity in more traditional office-based industries. However, employers may find it difficult to warrant paying staff the same salary (which is the proposal for the Scottish trial) for working less.
There is also the potential for those early-adopting countries to lose out. Companies will need to see conclusive evidence that the four-day working week makes more sense than a five-day working week for an employer. The potential reduction in company profits would provide a warning light to investors. In most countries, a five-day working week is standard. If a small number of countries adopt a four-day week, there are likely to be several more countries with sufficient workforces and other key FDI criteria in which to invest without the risks that a four-day week may bring.
Will a four-day working week attract talent?
With talent the key driver for most FDI decisions, employers may need to concede that to get the most productive employees to create the optimum output, a four-day week could become the never-considered option that becomes a reality, much like remote working. Companies certainly prefer to establish foreign operations in locations with a plentiful supply of skilled workers suited to their industry.
One thing is for sure, many employers and employees will be keeping a close eye on the results of the trial. If it is deemed successful and passed into law in Scotland, other countries could follow suit. If a four-day working week is adopted by a healthy chunk of countries, it would become less of an FDI factor and more of an industry standard.