Four-day week could create 500,000 jobs, says think tank

As the furlough scheme begins to wind down, experts say reducing the public sector week to 32 hours would help tackle a looming unemployment crisis

A four-day working week could create up to half a million new jobs, limiting the rise of unemployment expected as the government’s furlough scheme winds down, a think tank has said.

The research, by think tank Autonomy, said it would be possible for public sector workers to move to a 32-hour week with no loss of pay, and that doing so could create between 300,000 and 500,000 new full-time equivalent jobs in the sector to make up for the shorter hours. The current average full-time public sector worker puts in 36.4 hours a week.

It estimated that the gross cost of the extra employees would equate to £17.6bn a year, working off the higher estimate of 500,000 new jobs. But, the report said, once efficiency gains had been taken into account – including a reduction in the amount of sick leave taken because of stress and burnout – the net cost would be between £5.4bn and £9bn a year, with the latter estimate reflecting an increase of just 6 per cent in the total public sector salary bill.

Will Stronge, Autonomy’s research director, said the creation of a four-day week was “the best option” for avoiding job losses.

“To help tackle the unemployment crisis we are facing this winter, a four-day week is the best option for sharing work more equally across the economy and creating much-needed new jobs,” he said. “The four-day week makes so much sense as it would boost productivity, create new jobs and make us all much happier and healthier.”

The report added that areas with the highest levels of unemployment, including Scotland, the North of England and Wales, also had higher rates of public sector employment and would therefore be most likely to benefit from any policies to shorten the working week.

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The report coincided with the date from which employers are being expected, for the first time, to contribute to the wages of furloughed staff. Starting today (1 September), employers will have to contribute at least 10 per cent of the wages, on top of national insurance contributions, of staff who are on the job retention scheme – with the government reducing its contribution from 80 to 70 per cent. The change is part of the government’s plan to wind down the furlough scheme, which is set to end next month.

The rolling back of the furlough scheme has been accompanied by growing fears that a large number of redundancies – which were avoided at the start of the outbreak largely because of the job retention scheme – will happen in the coming weeks and months as government support is withdrawn. 

Already a number of household names – including John Lewis, coffee chain Pret, high street retailer Arcadia and British Airways, among others – have announced headcount reductions because of the economic impact of lockdown.

The most recent Bank of England forecasts suggest the jobless rate in the UK will rise from just under 4 per cent to 7.5 per cent by the end of the year. However, the central bank also forecast that the majority of workers on the furlough scheme were likely to return to work.