October 27th 2024.
Recent research has shown that Iceland's economy is performing better than most of its European counterparts, thanks to the implementation of a shorter working week with no reduction in pay. Two think tanks have found that in the period between 2020 and 2022, over half of the country's workers have accepted the offer of shorter working hours, with the number likely even higher now.
Last year, Iceland boasted faster economic growth than most European countries and has one of the lowest unemployment rates in Europe. This has been noted by both the Autonomy Institute in the United Kingdom and Iceland's Association for Sustainability and Democracy, who conducted the research.
According to Gudmundur D Haraldsson, a researcher at Alda, "This study is a true success story. The implementation of a shorter working week has become widespread in Iceland, and the economy is thriving across various indicators."
In two large trials conducted between 2015 and 2019, public sector employees in Iceland worked 35-36 hours per week, with no reduction in pay. This was a significant decrease from the previous 40-hour workweek. The trials involved 2500 individuals, which accounted for over 1% of Iceland's working population at the time. The main goal was to maintain or increase productivity while also improving work-life balance.
The results of the trials were positive, with researchers finding that productivity either remained the same or improved in most workplaces. Additionally, there was a significant increase in workers' well-being, with improvements in areas such as stress levels, burnout, and work-life balance.
As a result of the trials, Icelandic trade unions negotiated shorter working hours for tens of thousands of their members across the country. This has also been reflected in Iceland's economic growth, with the International Monetary Fund reporting a 5% expansion in 2023, second only to Malta among rich European economies.
While this growth rate is significantly higher than the country's average in the decade prior, the IMF projects slower growth in the coming years. They attribute this to weakened domestic demand and a decrease in tourism spending, which is a significant contributor to Iceland's economy.
However, despite this projected slowdown, Iceland's economy is still considered to be strong and vital, as evidenced by its low unemployment rate of 3.4% in 2020. This is significantly lower than the average for advanced European economies, and although it is expected to slightly increase in the next two years, it is still considered to be a strong indicator of the economy's vitality.
The success of implementing a shorter working week has also been seen in other countries, with various experiments and trials taking place. One notable example is a trial conducted in 2022 across 33 companies, primarily based in the United States and Ireland. This shows that this approach towards work-life balance is gaining traction and could potentially be adopted by more countries in the future.
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