Four-day work week: How competitive is mental health?

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The Brussels economic policy crowd seems to be positively inclined towards the idea of a four-day work week if a recent debate at the Brussels Economic Forum is anything to go by.

Public debates are usually more interesting the less “important” the panellists are or feel they are. For example, at this week’s Brussels Economic Forum, it seemed that the invited European Commissioners were trying to find the dullest possible ways to evade the already very broad questions posed to them.

In this environment, the debate on the four-day work week between Professor of Economics and Behavioural Science Jan-Emmanuel De Neve and Maeve McElwee, director of employer relations at the Irish Business and Employers’ Confederation, was refreshing in clarity and their willingness to point out each other’s inconsistencies.

More time for you

De Neve, who directs the Wellbeing Research Centre at the University of Oxford, made a case for the four-day work week, arguing that it would benefit mental health and creativity.

Moreover, he said that even though productivity had substantially increased since the 1970s, the number of hours worked per week had stagnated.

“We are starting to pick up the effects of sticking with the old ways of working in terms of our mental health and well-being,” De Neve said, adding that there were “disconcerting increases in anxiety, stress, depression, and burnouts.”

He argued that a four-day work week would allow people more time to do what they want, for example, spending time with their children or caring for an elderly family member. This would give people more energy to be productive when they worked.

“I’m quite certain that we will see productivity gains to the tune of about 10%,” De Neve said, acknowledging that this would not entirely compensate for the economic costs of working a day less.

It’s going to cost something

McElwee, meanwhile, said that the four-day work week was “prohibitively expensive” in places that tried it.

While she didn’t dispute that productivity had increased overall, she said that some sectors barely saw any productivity increases, for example, construction or health care.

“There is simply no way that productivity in these sectors can offset the economic cost,” McElwee said.

She also argued that the four-day work week would just lead people to cram all the current work into less time, leading to even worse mental health outcomes – a rather adventurous argument given that she was debating the director of the Wellbeing Research Center.

Finally, she presented the weapon that industry lobbyists like wielding most to make politicians disregard the progressive wish lists: The competitiveness argument.

“If we are going to put this in place, this can’t be a European initiative, this has to be global,” McElwee said, arguing that European companies would be massively disadvantaged in the global market if Europe were to take this step on its own.

What’s the purpose?

This is a legitimate argument since good things seldom come for free. Nevertheless, the discussion around the four-day work week forces us to answer a question that is too often ignored in public discourse: What is the purpose of economic growth? And who should benefit from increased productivity?

Maybe, the purpose of economic growth is not just to allow us to buy even more things and build bigger houses. Maybe it should also buy us more time.

At least the Brussels Economic Forum participants seem to like the idea of the four-day work week. An unrepresentative online poll at the end of the debate showed that 69% of them favoured introducing it.

Disclaimer: The author of this newsletter is writing this on a Thursday and is ready for the weekend. Moreover, he will try this shortened work week thing next week, which is why the next Economy Brief will arrive in your inbox the week after that.

Chart of the Week

While the Russian invasion is tempering EU economic growth, employment figures are better than they have been in decades, according to the EU Commission’s newest economic forecast.

Unemployment decreased by nearly 1.8 million people in the EU in 2021, and the unemployment rate is set to decline to 6.7% this year and 6.5% next year compared to 2021, the Commission announced on Monday (16 May). The corresponding figures for the euro area are 7.3% and 7.0%, respectively.

In March, EU unemployment was 6.2% and euro area unemployment at 6.8%. According to the Commission, these numbers are expected to increase slightly until the end of the year. However, this is not because more people lose their jobs than find new ones, but because many Ukrainians not yet counted in labour statistics are likely to enter the workforce, while not all of them will have jobs from day one.

Therefore, we can safely say that the unemployment numbers are the lowest in decades for the trading bloc, and a look at this week’s chart confirms this.

Graph by Esther Snippe

“The general picture is very positive,” Commissioner for the economy Paolo Gentiloni said during a press conference on Monday, attributing the positive development to the EU’s and its member states’ actions to save jobs at the beginning of the pandemic.

“Protecting jobs was extremely important in the period of the crisis,” he said.

However, the sharp increase in energy prices is spoiling much of the positive effects of the strong labour market development.

“These good employment news are tempered by the fact that in 2022, purchasing power is set to decline in real terms, as wages are not projected to keep up with inflation,” Gentiloni said.

Already in 2021, purchasing power decreased for many due to inflation. Wages have not kept up with inflation, as the chart of the week from the Economy Brief of 8 April showed.

Graph by Esther Snippe

For the development of European GDP, the Commission’s spring 2022 economic forecast is rather gloomy, having lowered its growth projections from 4% to 2.7% for 2022 and from 2.8% to 2.3% for 2023.

The war and the energy prices make the catch-up growth after the pandemic downturn less glorious than predicted. Nevertheless, Europeans have jobs, and that is already better than much of what we have seen in the European economy during the past decades.

Literature Corner

The unequal economic consequences of carbon pricing: Put a price on carbon! That is usually the first answer you get when you ask a classical economist or a liberal politician about what to do about climate change. In this paper, however, the winner of the 2021 ECB Young economists’ competition Diego Känzig, shows that carbon prices can exacerbate inequality. Not only because they increase energy costs but primarily because they suffer from the economic slowdown that the carbon prices induce.

Advancing the Monetary Policy Toolkit through Outright Transfers: Have you always been suspicious of why the central banks that were desperately trying to pump money into the economy only ever did this via banks and the financial markets? Why did they not just give money to you and me, who were willing to spend it in the economy? Your suspicions were not without reason, it seems. In this paper, the IMF economist Sascha Bützer argues that “in reserve currency-issuing economies at the effective lower bound, outright transfers from the central bank to households are both more equitable and more effective in achieving monetary policy objectives than asset purchases or negative interest rates.”

Regime Change? The evolution and weaponisation of the world dollar: In this article, Mona Ali looks at the post-war history of the global financial system and argues that the current era “is the most weaponised form of the global dollar system yet.”

Networks of resistance: In this column, Wolfgang Münchau of eurointelligence analyses how Germany’s reluctant stance on Russia can be explained by the close industrial relations between German and Russian industry. “Germany’s industrial model is also the main reason why the EU is malfunctioning on so many levels. For as long as Germany pursues a Neo-Mercantilist foreign policy, subordinated to the interests of its manufacturing industry, there is no way the EU can ever develop a strategic foreign policy,” he writes.

Debt suffocates African nations’ ability to respond to climate change: Many European and US politicians and even the financial elites love to pay lip service to how important the fight against climate change is and how a great change will be needed. However, they become awkwardly passive when it comes to putting their money where their mouth is. Many developing countries, especially in Africa, suffer from high levels of expensive debt that make it nearly impossible to mitigate or adapt to climate change. Western countries and financiers could cancel or alleviate that debt, but for that, they would have to actually act on their prose.

[Edited by Alice Taylor]

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