Working time reduction
This section reviews the impact of working time reduction policies and practices on productivity, employment, wages and on broader economic and social outcomes.These broader impacts include the potential restructuring of employment by sector, gender, and type of contract; the impacts on workers’ well-being and its spill-over effects; and, finally, potential impacts on the environment. The discussion starts with the economic impacts of working time reduction on employment, wages and productivity, and then it moves on to discuss the impacts on individual well-being and broader societal impacts. It provides insights for the pilot project on working time reduction currently being implemented by the European Commission, with the involvement of Eurofound, at the request of the European Parliament . While the section focuses on the impact of reductions in hours worked during the working week, Box 3.3 provides additional insights into the economic and social impacts of working time compression, which is a way of shortening the working week without reducing working time.
Box 3.3: Impacts of a compressed working week
Working week compression, which entails condensing a typical working week’s hours into fewer days, has multifaceted impacts on productivity, employment and workers’ well-being. It can have a number of positive impacts: it can lead to increased productivity due to reduced time spent on daily commutes and heightened morale (Munyon et al., 2023) and to employees taking fewer days off (Gatlin-Keener and Lunsford, 2020). Moreover, companies can reduce overhead costs such as utilities. Yet the evidence on the impact of a compressed working week on employees’ well-being and work–life balance is not conclusive (Bambra et al., 2008; Paje et al., 2020). Compressing the working week implies longer daily hours worked, which may lead to greater fatigue and risk of burnout (especially for individuals with caregiving responsibilities) (Delaney and Casey, 2021; Volle et al., 1978), thereby negating initial productivity gains and raising concerns about safety (Jeanmonod et al., 2008). Several studies show that the positive impact of working week compression on workers’ well-being is dependent on the employee having a choice of working schedule (Hyatt and Coslor, 2018; Wadsworth and Facer, 2016). Policymakers should thus encourage the strengthening the role of employees and social dialogue in implementing organisational changes to working time.
Productivity effects
The argument that productivity diminishes above a certain level of hours worked provides support for capping working time.While initial work hours are linearly related to output, the fatigue, stress, errors, accidents and illnesses associated with long work hours lead to a diminishing increase in output, and thus to a decrease in labour productivity per hour (Cette et al, 2011; Golden, 2012; Pencavel, 2015). According to some studies, the standard working week lies above this threshold and a reduction in working time would lead to an hourly productivity increase (Batut et al., 2022; Haraldsson and Kellam, 2021). According to them, the same output could theoretically be produced in a shorter amount of time, thereby justifying a reduction in working hours while increasing the real hourly wages.
However, working time reductions could affect labour productivity differently between sectors and occupations.While for some occupations it might be possible to maintain the same level of output even with reduced working hours, other occupations are subject to technical constraints that make output more directly proportional to the number of hours worked. For instance, this is the case for some manufacturing and service sub-sectors, in particular in the case of labour-intensive services , where the nature of the work does not allow full compensation for the reduction in working time by an induced increase in productivity (Haraldsson and Kellam, 2021). These differences could lead to structural changes in the sectoral and occupational employment distribution (Acemoglu and Guerrieri, 2008; Hartwig, 2015; Ngai and Pissarides, 2007) . These supply-side and demand-side sectoral and occupational shifts could impact skills mismatches in the labour market.
Effects of working time reduction on wages and employment
Most empirical studies find a positive impact of working time reduction on wages.This has been observed in both Germany (reductions in weekly hours through collective bargaining; see, for example, Hunt, 1999) and France (mandatory legislative reduction of the working week to 35 hours; see Chemin and Wasmer, 2009; Du et al., 2013) and matches experiences in broader groups of European and OECD countries .
However, empirical evidence finds that the employment effects of legislative working time reduction are contingent upon specific contexts.Box 3.2 in Section 3.2. explains that, in theory, the impact of working time reduction on employment is ambiguous. The employment effects empirically estimated by the same studies do not provide support for the work-sharing argument, which is based on the ‘lump of labour fallacy’, as reductions in working time have not necessarily resulted in increases in employment. Rather, estimates tend to vary. In some cases, the impact of working time reduction on employment has been negative, for example for male workers affected by the reforms in Germany and France, especially those who had been working overtime or who saw their wages increase the most. In other cases, small positive impacts are estimated, for example for women affected by the reforms in Germany and France, and for workers affected by a recent reform in Portugal (see Raposo and Van Ours (2010), who assessed the 1996 Portuguese reform to reduce the working week from 44 to 40 hours). Batut et al. (2022) and Kapteyn et al. (2004) both found no employment impacts (for five European countries between 1996 and 2004 (Batut et al., 2022) and for OECD countries from 1960 to 2001 (Kapteyn et al., 2004).
Impact of working time reduction on the well-being of workers
Empirical studies find a positive impact of working time reduction on several aspects of workers’ well-being.First, recent working time reduction pilot projects, such as the ones implemented in Iceland and the United Kingdom (Haraldsson and Kellam, 2021; Schor et al., 2023), led to improved worker well-being and work-life balance in several countries . These studies report improved well-being, less stress and burnout and more time for activities outside work, including time for family. All of this contributed to higher morale, fewer absences, and better performance at work, along with more satisfaction with the level of hours worked. However, these evaluations provide information on the impact of small-scale working time experiments only in the short term and there is a lack of information on the medium-term impacts of these pilot projects . Second, evaluations of past legislative working time reductions in France and Portugal found a positive impact of legislative working time reduction on workers’ everyday lives . The findings show that, in France the reduction from 39 to 35 weekly working hours has had a positive impact on workers’ everyday lives for more than 60 % of workers (Lenhdorff, 2014) and for parents with young children (Fagnani and Letablier, 2004), and has resulted in an improvement of workers’ health (Berniell and Bietenbeck, 2020). Evidence from France and Portugal (Lepinteur, 2019) also suggests both increased job and leisure satisfaction, with lasting gains.
Working time reduction can have unequal impacts on the well-being of different groups of workers, with some not benefitting or benefitting less.For instance, due to the implementation of the 35-hour working week in France in 2000 through the Aubry 2 Law, workers in sheltered economic sectors and family-friendly companies were more likely to experience improved well-being than workers who had to accept unsocial hours or irregular schedules in exchange for reduced working time (Fagnani and Letablier, 2004). Moreover, job turnover, dual job holdings and transitions from large to smaller firms increased (Estevao and Sa, 2006). This means that the legislative reduction in working hours created constraints for a part of the workforce, and changes had to be made to adjust to them. For those who opted to take additional jobs, the new rules may have led to underemployment in their first job.
Yet working time reduction can also be associated with risks to workers’ well-being.These include a resulting intensification of work and, in some instances, the stress generated by some performance measurement and monitoring practices adopted in response to the reduction in working time (Delaney and Casey, 2021; Kelliher and Anderson, 2009; Rudolf, 2014). A study carried out in Iceland between 2015 and 2019 found that the reduction in working hours while maintaining the same wage led to a significant increase in hourly productivity but also to increased work intensity (Haraldsson and Kellam, 2021).
There can be trade-offs between the impacts of working time reduction on well-being and on economic outcomes.The productivity gains of shorter hours may not be sizeable enough in all sectors and occupations to allow for a move towards a significantly shorter working week without a reduction in wages or without a decline in productivity. Working time reduction may not bring about a substantial increase in employment or a decline in unemployment. Yet shorter weekly working hours may be justified by their positive impact on the well-being of some groups of workers, their families and their social environments.
A general reduction in weekly working hours could reduce gender bias in the labour market, especially if accompanied by policies supporting a greater inclusion of women in the labour market.Studies show that working time reductions generally benefit the female population proportionally more (Estevão and Sá, 2000; Haraldsson and Kellam, 2021), as they are more likely than men to react to wage increases with an increase in hours worked (Afridi et al., 2022). However, the impact of working time reduction does not influence the gender division of labour unless it is complemented by policies that support the full-time inclusion of women in the labour market, improve the provision, accessibility and quality of care services and encourage more equal gender division of domestic unpaid labour (Fagnani and Letablier, 2006).