Can a four-day workweek help fight jobs crisis?
Feb 27th 2009 12:45PM
Updated Dec 4th 2009 10:33AM
This post was chosen to be included among Innovative Ways to Stimulate the Economy suggested by DailyFinance contributors. See them all.
When gas prices were high, many companies considered moving to a four-day workweek to save on energy costs. Indeed, many environmentalists believe it is time to change the standard workweek -- which has remained largely the same since 1938 -- to help use less energy, conserve resources, and reduce pollutants.
Last August, Utah implemented a mandatory four-day workweek for its state workers for this reason. New York is now considering doing the same thing, figuring it could save $30 million a year by shortening the workweek. Other counties, townships, municipalities, and even school districts are considering or have implemented a shortened workweek. Atlanta, for example, has cut hours and pay by 10% due to a budgetary shortfall.
While moving to a four-day workweek for environmental reasons or to save on overall costs of states with increasing deficits, given the recession, the struggles of companies, and the massive layoffs, can a four-day work week also help the employment crisis?
There are several ways to implement a four-day workweek. One is to keep the same number of hours worked spread over four days. Another, is to reduce the number of hours worked by varying degrees, up to 20%. This can help companies save money and therefore lay off fewer workers during this time of already high and rising unemployment.
Some companies have already moved to a shortened workweek following the recession. This was done either instead of layoffs, or in addition to layoffs, depending on the company. In some cases, this was done at the expense of vacation days, but in others it meant a pay cut.
Applied Materials (AMAT), for example, in addition to firing 200 workers in a plant in Israel, also announced the plant would be open Monday to Thursday only. The remaining employees' pay would be cut by 20%, but the company allowed them to use vacation days instead. It likely means a 10-15% pay cut overall until the company resumes the five-day work week, maybe at the end of the quarter. Similarly, Amdocs Ltd. (DOX) has notified its employees that they should use their vacation days during March as it would be working Monday to Thursday as well. The salaries in this case would not be affected by the measure, unless the company extends the four-day workweek after March. The Financial Times is offering staff the opportunity to work a three-day week as part of cost-cutting measures designed to avoid the need for job cuts. JCB shuts down every Friday now as it struggles to survive the recession. It is also leading the call for the UK government to subsidize wages, as it considers a three-day week.
According to the U.S. Bureau of Labor Statistics, the number of employees who normally work full-time but now clock fewer than 35 hours a week because of poor business conditions climbed 72% in November 2008 compared to November 2007. These are alternatives to layoffs most workers prefer, despite cutting into salaries and vacation time, as well as benefits.
As it is, many companies are already shutting plants for some days due to recession. Other than the obvious automakers shutdowns we've heard of to reduce production, many American tech companies like Dell (DELL) are shutting down for a few days and allowing employees to take days off without pay. If already such measures are taken, the natural progression is to four-day workweeks.
As for productivity, statistics and experiments are actually very encouraging, showing that a shortened workweek almost always results in higher overall productivity to the employer as workers are rejuvenated, refreshed, are happier and can focus better.
Of course, not everybody is happy when a pay cut is involved, not to mention the implication of all this -- that we are in a recession. While for some the pay cut may not substantially affect their lifestyle, for others, it may mean serious financial problems, especially if the pay cut remains in effect for a prolonged period. Also, while some are happy with the extra time off, others are used to stressful work environments and may not adjust well to so much rest time.
Still, there's no doubt such measures can help with the employment crisis as companies lay off fewer people. Companies may even benefit once the recession is over and they have all their experienced staff available. In general, this seems as a normal progression, evolution, where a four-day workweek becomes the norm, especially as the planet's population continues to grow, and given its limited resources. Besides, during this period of market turmoil, wouldn't it be nice if markets had one less day to sell off?
So while this may not feel right to some who may see this as some form of socialism where a collective "punishment" is imposed on all workers, they may want to consider all the benefits: improving the jobs market, decreasing pollution, and increasing personal quality time.
What do you say? Four days of work, three days of rest -- would you be willing to give up some of the pay if this would mean avoiding layoffs and riding out the recession like that? Should this be implemented more widely to help the job market? Should it become the norm?
Do you think this would stimulate the economy? Tells us why, or share your stimulus ideas. And see more of our Innovative Ways to Stimulate the Economy.