In today’s Finshots, we dive into whether shorter workweeks make any economic sense.


The Story

It’s Friday. Most of us are probably hunched over our desks working. And we’re dreaming about the weekend.

But in the UK, Iceland, and Belgium, some people are already spending time with family. They’re having elaborate lunches in the parks. And even volunteering at their local charities. Their weekend has already begun.

These folks are living the 4-day workweek fantasy in real life.

Now some people reading this will scoff at this idea. They’ll call it insane and say that it’s bad for the economy. And some others will even go as far as to say, “Look at this absurdity. This is why there aren’t great tech companies from Europe.” (Yup, this conversation happens all the time on Twitter).

But just think about it for a moment — Did you ever pause to wonder how you got to a 5 day work week in the first place?

So back in the 1800s, such a concept was quite alien. US factory workers were always hard at work. The employer dictated the terms and it could be 14 or 16-hour days. Maybe it would even be a 7 day week. And at some point, people had enough. They banded together and organized strikes. They even had a slogan, “eight hours for work, eight hours for rest, eight hours for what we will.”

But most employers didn’t budge.

A few trials happened in England and the US for a shorter work week. But it took a decision by Henry Ford, the man behind the Ford Motor Company, in 1926 to propel the change. He cut the workweek from 48 to 40 hours. And some people say it wasn’t really union pressure that forced his hand. Rather, he understood that a 40-hour work week would make employees happier and actually could boost productivity.

But guess what actually gave a huge boost to the 5 day work week?

The Great Depression!

You see, unemployment was through the roof. The US economy was in the doldrums. And the folks in power thought the solution was if people worked less (for less money too), the workload could be shared with the unemployed. It would at least lead to shared prosperity.

Pretty soon, people realized that this worked better for everyone. And in 1938, the US passed a law mandating the now ubiquitous 8 hours a day for 5 days schedule.

Did it hurt economic output?

Not in the least bit. Countries showed phenomenal growth rates in the decades to come. And worker productivity soared.

Alright, so what’s the deal with the 4-day workweek then?

Well, it’s still quite early to tell. But the results seem promising for now. For instance, Microsoft trialled it out in Japan in 2019 and found a 40% boost in worker productivity.

In the UK, employers found that rising employee satisfaction and falling employee sickness actually resulted in savings of 2% of their sales each year. Maybe because they didn’t have to deal with attrition and training costs for new employees.

And when the UAE implemented a 4.5-day workweek for all government employees, the results were quite outstanding too. Absenteeism reduced by 55% and 70% of folks said they felt more productive and efficient at work. Simply because people were happier.

Wait…this can’t possibly work in the service industry though, right? In hotels and hospitals and such.

Well, let’s look at the case of a nursing home in the US that was struggling with employee attrition. The nursing staff was exhausted by the long hours which also didn’t pay much. So the bosses decided to reduce the working hours to 30 a week. But the staff got paid for the full 40 hours. Sure, they had to hire more staff to make up for this. And that led to an increase in costs. But there was an indirect benefit — the end result was the infection rates for patients in the nursing home dropped and they felt more cared for.

You’d think that’s good for business, right?

So yeah, fewer hours seem to be a win-win for everyone. At least in most cases.

But here’s something that we bet you didn’t know.

4-day workweeks aren’t really a new idea. Nope! In fact, in 1956, Richard Nixon, who was then the US Vice President actually floated the idea. And when the 1960s rolled around, more people were clamouring for 6-hour days or shorter workweeks.

So why didn’t the idea become more widespread?

For one, there’s the economic aspect.

The Economist plotted the hours worked against productivity per hour and found an inverse correlation — fewer the hours, greater the output. Seems reasonable, right? People are less burnt out and put in more effort. But…as Pencavel of Stanford University points out, this is only valid if the initial number of hours worked itself is extremely high. Beyond a point, dropping the hours actually doesn’t boost productivity since people are more or less well-rested. So dropping down from a manageable 40 hours a week to less may not move the productivity needle by much in the long run.

But not everyone listens to economists, right? So there must be something else.

And that’s the social aspect. Historian Benjamin Hunnicutt has a theory about changing culture — “job became a religion-like source of meaning for many people.” Also, “the blossoming of advertising and consumerism around this same time, which set people on a course of working more in order to buy more.” So that’s the infinite loop we all find ourselves in even today.

Anyway, the 4-day workweek might not be the panacea that workers hope for.

After all, if you end up packing in more hours of work every day to get to the same output, it could actually hurt your work-life balance in a big way. Your daily activities can be severely dented. You might start work at the crack of dawn and end after sunset. And this leaves you with no time at all on a weekday. You might end up feeling more burnt out over the long run.

And since most 4-day workweek trials don’t have enough history, we can’t accurately gauge this impact too.

Also, from an organization’s point of view, bosses are also worried that if people are laser-focused on efficiency every day, it could lead to less socialising at work. This would have a negative impact on knowledge sharing in the long run. And it could hurt the organization’s culture too.

So yeah, it’s quite a tricky situation. And it might be a while before we reach some sort of consensus.

What are your thoughts on a 4-day workweek? Tweet at us or , we’d love to know.

Until then…

Don't forget to share this article on WhatsApp, LinkedIn and Twitter


Ditto Insights: Why Millennials should buy a term plan

According to a survey, only 17% of Indian millennials (25–35 yrs) have bought term insurance. The actual numbers are likely even lower.

And the more worrying fact is that 55% hadn’t even heard of term insurance!

So why is this happening?

One common misconception is the dependent conundrum. Most millennials we spoke to want to buy a term policy because they want to cover their spouse and kids. And this makes perfect sense. After all, in your absence you want your term policy to pay out a large sum of money to cover your family’s needs for the future. But these very same people don’t think of their parents as dependents even though they support them extensively. I remember the moment it hit me. I routinely send money back home, but I had never considered my parents as my dependents. And when a colleague spoke about his experience, I immediately put two and two together. They were dependent on my income and my absence would most certainly affect them financially. So a term plan was a no-brainer for me.

There’s another reason why millennials should probably consider looking at a term plan — Debt. Most people we spoke to have home loans, education loans and other personal loans with a considerable interest burden. In their absence, this burden would shift to their dependents. It’s not something most people think of, but it happens all the time.

Finally, you actually get a pretty good bargain on term insurance prices when you’re younger. The idea is to pay a nominal sum every year (something that won’t burn your pocket) to protect your dependents in the event of your untimely demise. And this fee is lowest when you’re young.

So if you’re a millennial and you’re reading this, maybe you should reconsider buying a term plan. And don’t forget to talk to us at Ditto while you’re at it. We only have a limited number of slots everyday, so make sure you book your appointment at the earliest:

1. Just head to our website by clicking on the link here

2. Click on “Book a FREE call”

3. Select Term Insurance

4. Choose the date & time as per your convenience and RELAX!