Think tank Autonomy has been looking into what a post-COVID economy could look like, with a focus on the possibility of adopting a four-day week as an alternative to an increase in unemployment.

They argue that, as contributions from the government furlough scheme come to an end in October, a significant rise in unemployment is inevitable, unless sufficient supportive measures are taken. They report:

“The true impact of COVID-19 on the labour market has so far been hidden by wage subsidies covering an estimated 9.3 million jobs, with retail and hospitality accounting for well over a third of those furloughed.

“Many businesses are not only struggling to reopen as lockdown eases, but are facing the problem of significantly reduced customer demand. As the furlough scheme ends, many sectors associated with high fixed costs and limited cash reserves – namely hospitality, retail and the arts – will be forced to reduce flexible costs, i.e. the workforce. This will not only mean higher levels of unemployment in these sectors but also overwork, as employees kept on are forced to shoulder more of the work of those laid off.”

Autonomy recalls that after the 2008 financial crash, the increase in unemployment was largely due to layoffs, whilst the hiring rate stayed roughly stable. But in the current economic crisis, retaining staff is of singular importance. Shorter working weeks have been a tried and tested instrument to prevent runaway unemployment and to ensure decent working practices in the labour market.

Past examples of the shorter working week model include President Roosevelt’s New Deal measures (Fair Labour Standards act of 1938), which reduced the working week to 40 hours maximum. In the UK, the first Thatcher government inherited and maintained a similar initiative during the 1979-1982 recession.

The COVID recession again necessitates that a subsidised shorter working time scheme should be offered to employers in sectors particularly damaged by lockdown and social distancing measures – namely hospitality, retail and the arts. This would act as an alternative to mass layoffs, with the aim of making the scheme as comprehensive as possible within these sectors. Over the period of its operation, the ultimate aim of the scheme is to gradually transition employers to shorter working hours, so that 32-hour weeks become a new gold-standard for employment in the post-COVID economy.

Will Stronge, Director of Research at Autonomy, said:

“As the furlough scheme comes to an end and firms across the economy continue to suffer, bold economic strategies are required to support the economy now and forge a recovery process that prioritises secure and decent work. Shorter working time has been used throughout history as a way of responding to economic crises as it enables work to be shared more equally across the economy.

“Instead of propping up an already failing economy, the government could act to save jobs and create more desirable working patterns for the future.”

Clive Lewis, Labour MP for Norwich South, said:

“A Shorter Working Time Subsidy Scheme is a fantastic idea as it would retain jobs and create more desirable working hours in our labour market. Post COVID-19, the four-day week is gaining in popularity across the world and I sincerely hope the Treasury will agree to explore these proposals.”

Howard Beckett, Unite’s Assistant General Secretary, said:

“This campaign should be supported unequivocally by Labour. It is only by reversing out the intended changes to the Job Retention Scheme and extending it into 2021 that we can avoid mass job losses. The scheme should now be adapted to support shorter working weeks and job sharing. Such steps are essential to ensure workers do not pay for this crisis with their jobs and austerity.”