Iceland's shift to a shorter working week has coincided with its economy outperforming most of Europe, according to research from organizations backing four-day working weeks.
Between 2015 and 2019, Iceland ran two large trials of the so-called four-day working week across government, later leading to a labor rights agreement led by local trade unions that enshrined the right to shorter working weeks for the vast majority of the population.
The research comes at a time when worker flexibility is being reconsidered by companies, with Amazon calling staff back to the office rather than continuing with hybrid working, despite flexible working and four-day working weeks helping to reduce burnout and sick days while maintaining productivity.
The trials saw a reduction in hours to 35 per week — losing about half a day of work — but with no reduction in pay. Since then, Iceland has seen widespread adoption of four-day weeks, with 59% of workers offered reduced hours by 2022 — a figure the researchers expect is even higher today.
A survey showed that 28% of respondents were working a full day less each week, with a further 22% reducing hours in a flexible way coordinated with their line manager, and 19% working a shorter work day.
The concern with shorter working weeks is naturally a reduction in productivity, but Iceland has reported the opposite. Researchers at The Autonomy Institute in the UK and the Association for Sustainability and Democracy (Alda) in Iceland noted that Iceland's GDP has grown above the European and OECD average, with a growth rate of 4.1% in 2023.
"This study shows a real success story: shorter working hours have become widespread in Iceland since the successful pilot schemes and the economy is strong across a number of indicators," said Gudmundur D. Haraldsson, a researcher at Alda.
Researchers also pointed to Iceland's low unemployment rate of just 3.6% and a 1.5% increase in productivity rates, outstripping Nordic rivals that usually outperform Iceland. In terms of costs, the researchers said the reduced work-time cost the public sector about 0.11% of the total budget.
Four-day working weeks are a balancing act
Of course, it's difficult to pin an entire country's economic performance on one single workplace intervention, but it's clear the reduction in working hours hasn't had a significantly negative impact on Iceland's productivity — and may even have helped boost it during difficult times, helping the tourism-led economy to recover post pandemic.
“Overall, the Icelandic economy has remained strong post the introduction of a widespread shorter working week," said Will Stronge, director of research at The Autonomy Institute. "The Iceland story offers a very different vision to countries across Europe that are grappling with low productivity but trying the same old failed methods."
Strong suggested that the productivity gains may be down to employees leading more balanced lives. The report showed 52% of workers thought working fewer hours made it easier to balance work and private life, for example.
"The evidence we've collected suggests that when workers have a better work-life balance and are better rested – the economy benefits too," he said in a statement.
The Icelandic work is largely focused on the public sector, and the researchers called for more private companies to follow that lead.
"The next step for Iceland should be encouraging even greater uptake in the private sector, so that the benefits of working time reduction can be felt by even more workers and businesses," said Haraldsson.
UK trials showed promise
Four-day work weeks have been trialed in the UK, though the smaller nature of these trials means it's difficult to assess the impact on the wider economy.
A six-month trial that ended in 2023 resulted in 92% of participating firms choosing to keep working reduced hours at the same pay. In the wake of this, burnout fell by 71% and sick days dropped by 65%, the study found.
On an HR front, companies reported a reduction in churn, with a 57% decrease in resignations during the trials. Staff welcomed the drop in hours, with 15% saying no amount of money would convince them to go back to longer hours.
A subsequent trial at a British council drew criticism from the then-Conservative government, but a 15-month experiment at South Cambridgeshire District Council of a four-day working week across office staff and bin collectors resulted in productivity improvements or no change in all but two areas.
The council also reported lower costs due to using fewer freelancers to fill roles, less churn and faster responses to citizen inquiries.
