A three-day working week or higher pay: what a more productive economy could buy Australians

The Guardian

7 hours ago

Australians would have a three-day working week if we had collectively decided in 1980 to spend all the productivity gains of the following decades on leisure time instead of buying more stuff, according to the Productivity Commission.
Jim Chalmers has kickstarted a national conversation about reforming the economy to make Australia more productive to underpin the next generation of prosperity. There are plenty of disagreements about how this can be done, but there is general consensus that we should try.
But another question has been left unasked: if we are successful in lifting productivity, what should we do with the dividends of our success? Or more simply: do we want to work less and spend the same, or do we want to work more and spend more?
Looking at history, the answer has been a combination of the two, according to Rusha Das, a research economist at the Productivity Commission.
In a new paper, Das calculated that Australians used only 23% of the productivity 'dividend' from the past 40-plus years to work less, while we banked the remaining 77% as higher income.
'Rather than spending our productivity dividend on more spare time, we have largely traded it for higher incomes, and more and better stuff,' Das said.
This choice of how to spend the fruits of higher productivity is rarely presented to us in such simple terms. A typical employer doesn't ask if their staff want to work 5% less or have a 5% pay rise, for example.
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'Instead, the effects of productivity gains are more subtly embedded in our lives, granting us more agency over how we live and work,' Das said.
'It may be taking a half-day each fortnight, investing time in professional development rather than taking on additional clients, or deciding to expand the number of cattle on a dairy farm.
'All these are choices that reflect the underlying freedom that productivity growth makes possible.'
The economist John Maynard Keynes in 1930 famously predicted that technological advances meant his grandchildren would be working just 15 hours a week without being any worse off materially.
Das said that prediction was not necessarily wrong, it's just that we have made different choices.
'With the growth in labour productivity Australia has enjoyed since 1980, Australians could have reduced their average hours worked by 15 hours per week without lowering consumption levels,' she said.
Or we could have used all of the productivity dividend on working more and spending more – in which case GDP per capita would be 11% higher now than in 1980.
Das said the choice between leisure and consumption can be influenced by a number of factors.
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If we feel like the changes that are making us more productive are short term, then we'll work more to take advantage of it while we can, and vice versa.
Government policy plays a part – whether it's higher tax rates that disincentivise working that extra hour, or workplace rules that allow people more flexibility.
Cultural values also have a hand, Das said. In France there is a strong tendency to choose more leisure time, while in the US it is the opposite, her research showed.
'For example, there is a saying that in the UK the last one to leave the office is seen as the hardest working, whereas in Germany the last one to leave is seen as the least efficient.'
And these values change through time. Next year will mark a century of working five days a week, after carmaker Henry Ford reduced it to five days from six.
As we approach this milestone, more companies are implementing or trialling four-day working weeks, while the Greens before the May election launched a four-day work week policy.
Das said keeping up our high levels of work 'could be a good thing if it reflects greater voluntary participation in the workforce': workers choosing to improve their living standards, or it's the result of removing historical barriers that have held some segments of society back.
'But it is concerning if Australians have been working more out of sheer necessity, sacrificing study, rest or time with loved ones just to maintain their standard of living.
'For example, people may need to work more just to keep up with rising house prices, which has outpaced wage growth over a long period of time.'