Tom Walker
The Next City
December 21, 1998

Tom Walker, a social policy analyst with TimeWork Web, and Jock Finlayson, vice-president of policy and analysis for the Business Council of British Columbia, comment

Labor costs would decrease. Stanford Business School Professor Jeffrey Pfeffer recently noted in the Harvard Business Review that most managers don’t know the difference between labor rates, which only concerns inputs, and labor costs, which consider inputs as a ratio of outputs. Because of fixed, per employee costs — such as fringe benefits and payroll taxes — a shorter work week does indeed raise labor rates, a fact corporate bean counters use to explain why employers “can’t afford” the change. But a four-day work week would actually lower labor costs — due to higher productivity and new employees commanding fewer seniority-related benefits.

The number of disability claims would decrease. Recently, the American Management Association and the CIGNA Corporation studied the effects of downsizing on long-term disability claims. Firms who had laid off workers experienced more claims from the employees who remained. Stress from long work hours and job insecurity topped the list of factors leading to disability. The lesson is clear: shorter hours = less stress = fewer disability claims.

Employers and employees would benefit from on-the-job training. Employers spend billions of dollars annually on training courses, neglecting more effective on-the-job training because they can’t spare experienced employees from tight production schedules. A lean work force doesn’t have enough slack to replenish itself.

Businesses would create yang, or positive, Kaizen. Shortening the work week is not simply a question of juggling the number of workers and the hours per worker; it could create opportunities for improving the production process. A four-day work week will provide an antidote to the Japanese practice of Kaizen, which sought continuous improvement mainly by subtracting from the workforce. That negative, yin, Kaizen has run its course.

And let’s not forget the side effects. A four-day work week would create thousands of new jobs and more time for family and community.

Most workers would be dissatisfied. A four-day week implies lower incomes for people now employed full time. Few workers want such a trade off. According to a 1995 Statistics Canada survey, two-thirds of employed Canadians are satisfied with their current work hours. Another 27 per cent would prefer to toil longer hours in exchange for more pay. Only six per cent like the idea of working less with a commensurate loss in income.

There’s no free lunch. Some trade union leaders, aware that their members don’t want a smaller paycheque, argue that a shorter work week would miraculously raise productivity, thereby enabling companies to boost hourly wages enough to offset the effect of fewer hours. This happy scenario may be true for a few individual workplaces, but wouldn’t apply at the economywide level. The vast majority of employers would find it impossible to reduce working hours without also cutting pay.

Labor costs would increase. Even if many people wanted to work fewer hours for less pay, a four-day week would still translate into higher employer costs. First, fringe benefits, whose costs are not fully proportional to hours worked, must be paid to any additional employees hired. Second, because of the structure of payroll taxes like the Canadian Pension Plan, companies find it less expensive to increase hours for existing workers than to hire new ones. This option presumably would be less feasible under a mandatory four-day week. Third, adding employees typically requires more office space, additional computers, and expanded administrative support services.

Skill shortages would intensify. Appropriately qualified individuals may not be available to fill the new positions that, in theory, would open up with a reduction in average working hours. The computer software and other advanced technology industries already suffer from skilled labor shortages; a four-day work week would only exacerbate the problem.

Jock Finlayson

Tom Walker