Working less may perhaps lift productivity

Kieran Madden – 

New Zealand has a productivity problem.

For decades, we have each been putting in more hours than most other OECD countries, but producing relatively fewer products and services for our labour.

“Productivity isn’t everything,” said Nobel-winning economist Paul Krugman, “but in the long run it is almost everything.”

Productivity seriously matters, because, as Krugman continued, a “country’s ability to improve its standard of living over time depends almost entirely on its ability to raise its output per worker.”

Slower growth

Economic theory suggests that countries with lower productivity should catch up to the higher ones over time, as good ideas, technologies and investments flow across borders.

This is not happening. Instead, we are lagging behind more as time goes on. The Productivity Commission, for example, showed that Australia’s output increased by around 4.5 times since the late 1960s, while New Zealand increased by only 2.8 times. This is primarily why our incomes are much lower on average.

We have tried working longer to catch up, but it clearly is not paying off. Of around two million workers surveyed in the 2013 census, about half work somewhere between 41 and 80 hours a week. These do not include the hours spent stuck in Auckland traffic either. It looks like the 40-hour work week is faring about as well as our productivity.

Swedish experience

So what else can we do? Perhaps, paradoxically, we could try working less.

This is what Sweden has been doing for years. Only about 1% of Swedes work over 50 hours per week, compared to the 13% OECD average.

Several Swedish Councils and businesses have also been trying the less is more approach—the six-hour workday.

Notably, the Gothenburg Council introduced shorter days at the Svartedalens Nursing Home as part of a two-year controlled experiment, with a similar home sticking with eight-hour days.

According to New York Times, an interim audit has suggested “sharply reduced absenteeism, and improved productivity and worker health.”

Shorter Week

Many Swedish small business owners have tested the idea too, claiming that shorter workdays “can reduce turnover, enhance employee creativity and lift productivity enough to offset the cost of hiring additional staff.”

One owner thought that “doing a shorter workweek would mean we would have to hire more, but it hasn’t resulted in that because everyone works more efficiently.”

Other attempts have not been so successful. After 16 years, the council in the city of Kiruna pulled the plug on their six-hour workday program, claiming that it was too expensive and created ‘resentment’ amongst those still stuck working eight-hour days. Many also attack the experiments as a waste of taxpayers’ money, and argue that if all of Sweden took these on it would be an economic disaster.

Working less may-Productivity Graph Web

Working less may-Productivity Table Web

Now all this is not to advocate for the government to suddenly enforce six-hour workdays here. But, our gloomy productivity statistics and the promising potential shown by the Swedish experiments suggest that alongside increased investment in technology and training, there is merit to considering how we can change the way we structure work.

Maybe less is more after all.

Kieran Madden is a Researcher at Maxim Institute based in Auckland

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