The ONS (Office for National Statistics) has reported a reduction in UK productivity for three successive quarters and according to the Resolution Foundation productivity is now 28% below the average rate before the 2008 financial crisis. Yet this is a time when employment levels in the UK are the highest they have ever been.
Business productivity has traditionally been calculated by dividing average output per period by the total costs incurred (capital, energy, material, personnel) consumed in that period and is used as a determinant of efficiency.
Productivity in both national economies and individual businesses is much scrutinised by governments, business commentators and business owners as an indication of performance, efficiency and economic health.
All of this is based on the assumption that perpetual growth and competition are the cornerstones of economic health.
There are good reasons why it may be time to question some productivity assumptions
Two considerations suggest that the element of the productivity calculation based on employee hours worked and improved performance is becoming less central to the assessment.
Firstly, the nature of many workplaces from manufacturing to offices, has been changed by the growth of AI (Artificial Intelligence) and automation. This can have a potentially dramatic impact on overheads, particularly in reducing staffing levels, but it also means that the skills required from employees in the future will change dramatically.
Secondly, there has been a growing awareness that employee health, both mental and physical, is crucial to business productivity and success. There has been mounting evidence that increasing workers’ hours can result in higher staff absence rates due to ill health, not to mention increasing the chances of mistakes being made through tiredness and exhaustion.
UK employees have the longest working week compared to other workers in the European Union. But, despite the long hours, there is growing evidence that reducing hours worked can have a beneficial effect on productivity.
The TUC (Trades Union Congress) has calculated that UK full time employees worked an average of 42 hours a week in the final quarter of 2018 – almost two hours more than the EU average – but that full-time staff in Denmark are 23.5% more productive per hour than UK workers, despite working four hours fewer per week.
TUC general secretary Frances O’Grady explains: “Britain’s long hours culture is nothing to be proud of. It’s robbing workers of a decent home life and time with their loved ones. Overwork, stress and exhaustion have become the new normal.”
Based on this evidence, along with the TUC, the (NEF) New Economics Foundation has been campaigning for a reduction in weekly working time to 32 hours spread over four days without a reduction in pay.
‘Job and finish’ used to be more commonly used by firms although it has been largely replaced by hourly wages for productivity focused workers. This has led to firms trying to get more out of workers without the incentives and sharing rewards with staff. The productivity data would suggest this approach has failed.
There are however examples of companies that have shifted to a 4-day week including one Glasgow-based marketing company mentioned in a recent BBC article, that made the switch three years ago and reports that productivity has increased by about 30%, sickness leave is at an all-time low and there have been unexpected cost savings in that the company no longer needs to pay professional recruiters, as so many people want to work for them.
In July, new research by Henley Business School, as reported by the Independent, found that a four-day working week could save UK businesses an estimated £104bn a year and its survey of 250 companies “indicated that adopting a shorter working week could add to businesses’ bottom lines through increased staff productivity, as well as improved physical and mental health”. The Henley paper, Four Better or Four Worse, also found that nearly two thirds (64 per cent) of those who have already adopted the scheme reported improvements in staff productivity.
But crucially, the third, perhaps currently most important, reason why we should rethink our attitudes to productivity, is the effect on the environment. The Henley research indicated that the four-day week would have a positive impact on the environment with employees estimating that they would drive 557.8 million fewer miles per week on average.