Iceland Was the Canary in the Coal Mine When It Adopted the Four-Day Week. Now, Its Economy Is Thriving

As one of the pioneers of the four-day workweek and new work-time models, Iceland maintained wages while reducing hours. Today, 86% of its population works shorter hours, and the country ranks as one of Europe’s fastest-growing economies. These findings suggest that shorter workweeks aren’t incompatible with economic growth.

Pioneer of the four-day workweek. Between 2015 and 2019, Iceland ran a pilot program where 2,500 public employees reduced their workweek from 40 hours to between 35 and 36 hours. The results showed maintained productivity and significantly improved worker well-being, with employees reporting reduced stress and better work-life balance.

The response was swift: Icelandic unions negotiated with companies to replicate the model across other sectors. According to a follow-up study on the shorter work experiment, conducted by the UK’s Autonomy Institute and Iceland’s Association for Sustainability and Democracy (ALDA), 86% of Icelanders now work under some form of reduced-hour schedule.

“This study shows that the world’s largest ever trial of a shorter working week in the public sector was by all measures an overwhelming success. It shows that the public sector is ripe for being a pioneer of shorter working weeks—and lessons can be learned for other governments,” Will Stronge, research director at the Autonomy Institute, said.

After four years, Iceland’s implementation is beginning to yield positive results. Data monitoring of the four-day workweek in Iceland continues to evaluate its long-term impact on employees and the economy. ALDA and the Autonomy Institute recently published a study analyzing these effects, finding that, by 2022, 51% of Iceland’s workforce had access to reduced hours, either through a four-day workweek or shorter hours spread over five days.

At the same time, Iceland’s economy is growing faster than most European nations. According to the International Monetary Fund’s (IMF) April 2024 World Economic Outlook, Iceland’s economy is projected to grow by 5.2% in 2024 and 4.9% in 2025, compared to the European average of 1.6% in 2024 and 2% in 2025.

Prosperity and employment satisfaction. The IMF report cites strong employment as a key driver of Iceland’s economic growth. According to ALDA’s 2024 survey, 78% of Icelandic workers report being satisfied with their job, while 62% of those with reduced working hours say they’re more content with their schedules. Additionally, 97% of respondents say shorter hours have made it easier to balance work and family life.

Implications for Iceland’s economy. The study’s authors note that Iceland has traditionally had longer working hours and lower productivity than its neighboring countries. However, they report that since the shift to shorter hours, Iceland’s productivity has grown by an average of 1.5% per year over the past five years. “This is a potential break with the past, where productivity was lower in Iceland than neighboring countries,” the study states.

The study also estimates a 10% boost in the local economy since the introduction of reduced working hours.

The key isn’t reducing working hours. The study aligns with findings from Germany’s four-day workweek trial, noting that productivity gains may not stem solely from reduced hours. “A likely cause of this change is re-organization of work and better organized shifts, strategies meant to prepare for the reduction of hours, but also widespread consultation on the implementation of reduced working time,” the study explains.

This nuance suggests that the key to the productivity successes of four-day workweek experiments lies less in shorter hours and more in the optimization processes that precede them.

Image | Young Shih (Unsplash)

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