A Case for the 4-Day workweek

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An interesting TED Talk by Juliet Schor proposes that companies adopt a four-day workweek and pay employees as if they worked five days. Even though this proposal is unique, not all companies across every industry can afford to adopt such a change and pay their staff as suggested in this Ted Talk. The current evidence does not prove or disprove Juliet's theory, although she has some worthy points to add to the discussion, including reducing employee burnout and boosting productivity.

Juliet Schor is an icon in the economics community and a very knowledgeable individual regarding work economics. In her bio, she provides results that complement the subject matter discussed and demonstrate the power of her rhetoric. Although I do not share her views on this particular issue, it's essential to recognize how much she has studied and contributed to the topic. For more information on her bio, you can read it here.

As with arguments for or against remote work, corporations face a widespread trend of quitting (vocally or silently) across all industries. It appears that the trend of cyclical employment and cyclical unemployment is caused by employees not feeling valued or paid enough to motivate them to work. I agree that many ideas may prove that the 4-Day workweek is a good idea, but it would be more detrimental to those who work salary jobs than those who work hourly jobs.

In general, the idea behind a 4-Day workweek is to give employees more time while providing them with the financial means to support their families. The underpinning concern remains that the rising Cost of Living cannot support a single-income wage earner at current wages. Due to this, most American households are forced to have both parents work to make ends meet and save for future expenses (House, car, college, etc.). If this is not corrected, working four or five days a week would be irrelevant. Whether someone works four or five days is moot if you cannot account for the increased costs to survive!

Additionally, it is naive that a company will add a day's wages for only four days' worth of work. In the case of hourly workers who must clock in to start their shifts, you force companies to give them raises equivalent to working 5 days and only being on the clock for 4.

MATHEMATICAL VIABILITY OF THE 4-DAY WORKWEEK PROPOSAL

This would be a basic rundown of how the 4-Day workweek would play out mathematically.

Current System:

• Billy makes $10/hour and works for 8 hours (9:00 am-5:00 pm) 5-days per week for a total of $400 per week in net income (Income before taxes).

• Billy then works 4-weeks a month for a net monthly income of $1,600 per month.

Schor Proposal:

• Billy would shift from working 5-days to 4-days but still be paid for 5-days.

• Billy would earn $320 per week or $1,280 per month. The company would then have to make up the difference and pay Billy an additional $80 per week or a total or an additional $320/month for JUST Billy.

How it looks for a small firm:

• Now let's say 30 "Billys" work in this firm.

• That means the firm would be forced to pay out an additional $9,600 each month in extra payouts to employees to achieve the ideals posed by Juliet in her proposal.

• This figure amounts to $115,200 in additional wages that employees would be paid out if they were paid for an extra day.

AGAINST DR. JULIET SCHOR'S PROPOSAL

A figure like this may seem insignificant to the average American. However, this figure only includes hourly workers. Salaried employees, who are also expected to be paid, would naturally also expect adequate compensation for their work.

Salaried work differs from hourly work in that salaried workers are expected to work until the product is complete. Since salaried workers don't receive more pay for overtime, their work often extends beyond the end of the workday.

Consequently, salaried individuals would suffer a considerable loss while hourly workers would gain. Those who work four days per week could only be productive on those days. To complete the expected tasks, managers and supervisors would have to work five days anyways.

There is more to this than just conjecture for the naive in the room. Managers work for their managers above them and their managers above them. Productivity is measured by the completion of tasks assigned to the relevant projects. We live in a competitive monopoly market where each firm focuses on tasks that can give it a competitive advantage over its competitors. Employees given an extra day off won't "earn" an additional $80 unless their work in 4-days proves they can "earn" it by themselves.

Additionally, most employees are not self-motivated or "A" players. Most employees work to the minimum standards or "just enough" to stay employed. Most "A" players are already headed for supervisory or management positions. That group of employees, however, is extremely small.

The majority of the employee pool is not working to its full potential. Considering Juliet's argument that employees do not have a home-life-work-life balance, this means that the "balance" is dependent on the number of days an employee works rather than how the employee views and takes pride in his or her work. Rather than individual employees taking responsibility for their actions, managers and supervisors are directly responsible for ensuring a high-quality and productive career. It is irrational and irresponsible to suggest this, as each person must be accountable for their quality work.

IN DEFENSE OF DR. JULIET SCHOR'S PROPOSAL

Assuming Juliet's claims are credible, the argument would be reversed. Company management determines work ethic and transfers ownership to another employee on a different level of the corporate pyramid, whom we also consider an employee. The proposal also suggests that companies would be socially responsible for increasing employee well-being while sacrificing profits.

Profits, however, are what pay employees. Where would the money come from if they paid these employees additional wages? Consumers would have to pay higher prices for their goods and services to make up for the difference.

This is not a game of greedy capitalists taking from the poor to give to the wealthy. This is simply because profits pay employees and drive company performance to increase its competitive edge. To balance their budgets, the company must produce more sales or let employees go if profits remain the same.

The supporters of such a proposal would agree that employees' performances would improve and sales would follow suit if it became a reality. There is no proof, and it would only be a conjecture. Even though a small number of companies find this true for themselves, it doesn't create a large enough demographic to prove that the proposal is undeniable across all industries.

This proposal may not be suitable for every firm on a large scale and might only work for a small number of firms. Further, this doesn't address the core issue: having the means to live and work. In our example above, Billy only earns $1,600 per month in net income. Considering the expenses it takes just to live, that's not much.

BUDGETARY EFFECTS OF THE PROPOSAL ON AVERAGE HOUSEHOLDS

To further see the effects on the average of individuals in America, Here are the average weekly earnings per gender and demographic provided by the Bureau of Labor and Statistics (BLS).

median weekly earnings were

$1,242 for men ages 35 to 44,

$1,279 for men ages 45 to 54,

$1,246 for men ages 55 to 64.

Median weekly earnings were

$968 for women ages 35 to 44,

$985 for women ages 45 to 54,

$973 for women ages 55 to 64.

Men and women ages 16 to 19 had the lowest median weekly earnings, $595 and $501, respectively. 

For more information and using 2022 data, you can access an updated document by following this link here.

Finally, for further study, another article summarizes these findings and gives a clearer picture from another point of view. You can find that article by The Balance by going to this link here.

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CLOSING THOUGHTS

While it is true that working four days would increase the ability of people to balance their home lives and careers, it isn't clear if an employee's overall productivity would increase by working four instead of five days. There is no guarantee that what sounds excellent will ultimately lead to the best outcome. The best people to support this type of policy are those who don't have a demanding schedule to adhere to. It may be more desirable for tech employees who serve as 1099s or have more flexibility in their schedules to work in this environment. Workers at high-profile retail stores such as Target, Walmart, and many grocery stores may not be able to see this type of schedule implemented. The situation boils down to employees being moved from full-time to part-time and then being paid as if they were working five days per week.

Let's revisit Billy's example:

• Billy was initially making $10/hour and working 8-hour shifts for 5-days per week. That was a total net income of $400/week before taxes.

• To achieve the results Juliet desires for businesses to consider, Billy would need to be paid as if he worked 5-days/week but in reality only working for 4-days.

• Instead of a company turning around and paying Billy an imaginary $80 for a "free day" of pay, they would be forced to increase Billy's wage to make up the difference.

In the example above, Billy would receive an additional $80 per day for the extra day that he "worked" from the company under the proposed plan. Honestly, this would be an accounting nightmare! Companies would instead move toward the least resistance and raise Billy's pay from $10/hour to $12.50/hour.

• $12.50/hour X 8-hour X 4 days = $400.

• That equates to a $2.50 raise or a 25% raise in pay!

As of 2022, the average raise in the United States is around 3%-3.3%. This proposal would encourage employers to raise hourly salaries by at least 25%, if not more, in some cases. For a large company with hundreds of employees on their balance sheets, the wages category on their budgets would be immensely inflated and unsustainable. It would also be disastrous for a small or medium company to accomplish this.

Businesses can't spend all their funds on just one category. We learn from GAAP Accounting principles that firms must make many trade-offs to remain competitive while offering their employees higher wages and benefits. Even if the firms just payout individuals by offering to increase their hourly salaries by almost 8.5 times what they currently do, it isn't something a firm can do without also raising the prices of its goods and services to both pay their staff and cover the shortfall caused by the increased wages.

It is foolish to ask companies to solve the problem of "burnout" among American workers! Politicians and policymakers are responsible for that. Let them earn the ridiculously high salaries they already earn compared to your average American worker!

Regarding taking care of citizens, that is the responsibility of those we elect and place in positions of authority. To change the situation within your state, get your Mayor, Congressman/Congresswoman, and other elected officials involved in changing the unsustainable living conditions.

Rather than forcing companies to pay more than they can afford, target the root cause of the problem. It would also make more sense to pressure politicians to enact a COLA (Cost of Living Adjustment) instead of what is being proposed. It has been a while since we used a COLA, but it would still be a welcome increase in consumer capacity to spend and save that could offset the already heightened cost of living.