Canadian workers can achieve four-day work week by doubling productivity growth

When businesses across Canada begin to reopen as the COVID lockdown slowly lifts, many businesses will stagger hours and reduce the number of employees in confined workspaces. But in fact, the idea of shortening the work week in Canada has been around for some time. Indeed, a 2018 survey reported that nearly 70 per cent of Canadians would prefer working 10-hour days four days per week rather than eight-hour days five days a week. Presumably, Canadians would have an even stronger preference to work eight-hour days four days per week.

Of course, any such preference would be influenced by whether the reduction in hours was accompanied by a reduction in real (inflation-adjusted) income. Workers would obviously be better off if they could earn the same income by working 32 hours rather than 40 hours, while enjoying three-day weekends. Whether that outcome is attainable depends on the growth rate of labour productivity—the value of output produced per hour of labour.

While imperfect, there’s a long-term positive relationship between growth of labour productivity and growth in hourly compensation in Canada. Increased labour productivity makes employees more valuable to employers, and competition among employers for those employees ensures that workers capture most, if not all, of their improved productivity in the form of increased compensation.

Increased compensation can mean higher monetary wages, more leisure time or a combination of the two. Canadian workers appear to prefer a combination, albeit one dominated by higher monetary compensation. For example, a new Fraser Institute study finds that the average work hours of Canadians decreased by about 4 per cent between 2000 and 2018, while the real average annual compensation of Canadian workers was approximately 13 per cent higher in 2018 than in 2000.

Whether Canadian workers will continue to prefer increased income over increased leisure as compensation for improved productivity remains an open question. But our study shows that Canadian workers could enjoy a four-day workweek by 2030, while also earning a slightly higher (1.5 per cent) real average annual wage income, if the growth rate of labour productivity averages about 2 per cent per year between 2018 and 2030.

How realistic is a 2 per cent per year improvement in labour productivity over that time period? From 2000 to 2018, average annual labour productivity growth increased by only 1 per cent. Hence, if Canadian workers want a four-day work week—while earning a slightly higher real average annual wage by 2030—the annual labour productivity growth rate over the 2018-2030 period must double compared to the 2000-2018 period.

While formidable, a doubling of of labour productivity growth is not impossible. In fact, from 1961-2012, labour productivity in Canada’s business sector grew at an average annual rate of 1.9 per cent.

So in reality, a four-day work week, which produces the same or higher material living standard for Canadians, simply requires a return to an annual rate of labour productivity growth that, until fairly recently, was more the norm than an exception.

While the COVID crisis rightly remains the focus of policymakers, once the crisis passes, they should focus on how to accelerate labour productivity growth, which is fundamental to realizing a four-day work week in Canada.