Four-day work week: ACTU proposal a fantasy that would damage economy, hurt workers and make Australia poorer

The prospect is enticing: work four days a week for a higher standard of living.

Parents would get more time with their children. Workers would be happier and more productive. Tourism and other leisure industries would boom.

The reality, unfortunately, is different. As every mainstream economist accepts, the union movement’s work-less proposal out today would increase business costs, make Australia poorer and lower workers’ income.

“Shorter working hours are good for both workers and employers,” ACTU President Michele O’Neil claimed. “They deliver improved productivity and allow working people to live happier, healthier and more balanced lives.”

Melbourne restauranteur Chris Lucas disagreed. “It will have the opposite effect,” he said. “If we take away that flexibility the economy will suffer and it will lead to job losses. That’s certainly the case in countries like France.”

That’s because of a simple and self-evident reason: in an efficient economy, wages are determined by skill and hours. When laws require people to be paid more than they’re worth, such as the traffic controllers on $200,000 a year, others pay through higher taxes or prices.

20 per cent pay rise

Ms O’Neil and other senior union officials must understand this. Their decision to press for what is essentially a 20 per cent permanent pay rise suggests they do not plan to take next week’s government-convened meeting of lobby groups in Parliament House seriously.

The ostensible purpose of three days of meetings is to reach agreement on making Australia more efficient, or productive. Even Anthony Albanese’s left-wing Government must appreciate the ACTU plan would hurt the economy.

In France, where some 4000 companies operate a four-day work week, the government is so desperate to rein in a ballooning deficit (people who work less pay less tax) that it is considering abolishing two public holidays, closing agencies and not replacing one third of retiring public servants.

In denying productivity’s importance, the ACTU’s delegates will go to Canberra refusing to accept the underlying rationale of the whole event. The first sentence in a government document prepared for delegates states: “Lifting productivity is critical to growth in real wages, incomes, jobs and overall living standards.”

While the unionists could change position once in the Cabinet room, the extreme starting position suggests they are more focused on protecting their small membership numbers - about 13 per cent of employees - than using their considerable influence to support policies that might be politically unpopular but beneficial.

Political economics

To support their case that “reducing working hours is key to lifting living standards”, the ACTU relies on research from an academic associated with Sydney University’s Department of Political Economy. The department, which counted the Prime Minister as a student in the 1980s, teaches that political structures and societal factors are as or more important than supply and demand.

Despite the theories having little or no influence over mainstream economics, a political economy paper written by Canadian academic Jim Stanford for The Australia Institute, a left-wing think tank, was cited in the ACTU press release to argue strong productivity growth hasn’t delivered for wages.

“Productivity growth does not automatically translate to higher living standards,” said Ms O’Neil, citing Dr Stanford’s research. “If that were the case over the past twenty-five years, the average worker today would be around $350 a week better off.”

Australia’s greatest economists do not agree, including Chris Richardson, who has an invitation to one day of the meetings. Mr Richardson has pointed out that while Australian productivity stagnated over the past decade, living standards rose by 1.5 per cent. Across the rich world as a whole, they rose 22 per cent. “Productivity or bust,” he wrote this year.

Union leaders’ refusal to place the national interest above their own is a sad indictment of a movement that contributed, under a Labor government in the 1980s, to one the greatest improvements in living standards in Australian history.