This month saw the launch of a six-month-long pilot scheme in the UK, in which 30 companies are set to experiment with a four-day working week. Under the scheme, which will run alongside other pilots in at least five other countries, workers’ hours will be reduced by a fifth with no loss of pay. However, whilst the four-day week could have the potential to unlock significant productivity benefits in some industries, it is unlikely to be a suitable approach for all.
The pandemic has seen a broadly praised shift toward remote and hybrid working, giving workers flexibility in the location of their work. In our 2021 report for Virgin Media Business, we found that hybrid working could boost employee productivity by the equivalent of two hours per day, improve employee satisfaction, unlock hours for part-time and marginalised workers, as well as provide significant health benefits. 
Could similar benefits also be expected from reducing the length of the working week? Whilst flexible working (flexibility over the distribution of weekly hours) is likely to have similar productivity benefits to flexibility over location, the viability of the four-day week is a different question altogether: do we believe that workers are able to compress their weekly work into 20% less time?
To the extent that this is possible, productivity (output per hour worked) could see a sharp rise. Workers, with their new-found (likely Friday-based) leisure time, would have greater spending opportunities, potentially providing a boost to business in their local areas. By offering a better work-life balance to their staff, employers could benefit from a more content and healthier workforce. With reduced labour turnover, businesses could make significant cost savings, on top of reductions in the variable costs stemming from staff being present in the office.
Yet, this will not be attainable across the board. Workers in many industries, such as agriculture, construction and manufacturing for example, would likely struggle to compress their working week. For example, the output of a construction or manufacturing worker is more determined by the hours spent engaging in the physical production process than an IT consultant, whose output is a greater function of their ability to focus on a given task and their overall energy levels.
This is not, however, simply a divide between tertiary and non-tertiary sector work. A teacher or doctor would similarly face issues trying to fit their weekly tasks into 20% less time, leading to a fall in output under a four-day week. Instead, we expect that output and productivity is most likely to rise in fields such as IT and communications, finance, insurance, real estate and professional, scientific & technical activities, where employees’ output is more directly dependent on effort and able to be incentivised by extra leisure time. Indeed, it is in such industries that previous trials of the four-day week have proven successful.
Accounting for the fraction of employees that work on a full-time basis in these areas, industry-level productivity could rise by 15-17% if workers are indeed able to compress their working week into four days. Accounting for roughly 19% of all employees, such industries could provide a notable uplift to total UK productivity.
Looking ahead, the growth of digitalisation and automation adds to the case in favour of moving to a four-day working week through the lens of productivity. Our recent research for SnapLogic found that the pandemic-induced uptake of automation and AI spurred by the pandemic could gradually increase UK labour productivity to a level 15% above that seen in the pre-pandemic period.  With new technologies enabling workers to produce more value in a given period of time, introducing a four-day week represents an opportunity to share some of the benefits of increased automation with workers.
Importantly, the net impact of the four-day week will depend on the extent of available labour. Where output falls as a result of reduced hours, firms wishing to take on workers to make up for the shortfall may come up against severe shortages in the current labour market. The latest data show particularly high vacancy rates (relative to workforce size) in the hospitality, IT and communications and health and social care sectors. Introducing a four-day working week in such industries would thus represent a potentially expensive gamble at present.
Industries in which the four-day week proves to make financial sense for businesses to offer are likely to enjoy a stable increase in interested talent in the coming years. According to our soon-to-be-published research for Lenovo, access to flexible working hours (here taken as a proxy for the four-day working week) is one of the aspects of work that employees views as most sharply increasing in importance over time.  Whilst this was an important aspect for a minority (44%) ten years ago, this is set to be the case for more than three quarters (78%) of workers in ten years’ time, with even greater importance attached by Generation Z and Millennial workers.
Finally, an offer of a more attractive work-life balance could be the key to attracting back individuals who left the labour market during the pandemic as a result of a greater desire for leisure time, enabling an easing of workforce pressures.
An across-the-board four-day week mandate is unlikely to prove fruitful, given important differences in the nature of work across the economy. Yet, businesses that embrace the opportunity, appropriately investing in and sharing the proceeds of technological innovation, and accommodating shifts in worker preferences over time, are likely to come out on top. Those that fail to do so may soon find that they have to pay a salary premium to attract the best staff, or risk coming up against even more persistent labour shortages than those witnessed today.
 ‘Three Years of Progress – How Covid-driven digital change is transforming the way we work and live for the better’, Centre for Economics and Business Research (2021)
 ‘Automation: Past, Present, and Future – A Driving Force for Economic Growth’, Centre for Economics and Business Research (2021)
 ‘The Future of You – A Cebr report for Lenovo’, Centre for Economics and Business Research (2022, upcoming)
For more information please contact:
Karl Thompson, Economist Email: email@example.com 0207 324 2850