The 40-hour work week is a raw deal both for workers and their employers, this Nordic nation just learned

Iceland seems to believe so. 

The Nordic island nation with fewer than a half-million inhabitants just revealed the results of a near five-year-long study designed to determine whether giving employees more free time actually can improve productivity. 

According to researchers, the exercise proved to be a “an incredible success story,” one that could raise further questions for employers—or, at the very least, add to the raging work-life balance debate—about the future of work in an age where digitalization and automation are reshaping the office environment.

“There is a strong correlation between shorter working hours and increased productivity amongst wealthy nations,” study authors Guðmundur D. Haraldsson and Jack Kellam concluded, citing an established and growing body of evidence that supports this hypothesis.

The researchers included a graphic in the report that showed that, between 2005 and 2015, average worker hours fell in Iceland by about 100 hours per year. That decline in time on the job corresponded with a roughly 10-point leap in productivity—as defined in dollar terms—over the same 10-year period.

With the need to work from home during the pandemic shattering traditional notions of productivity, the Iceland study, published by think tank Autonomy and non-profit organization Alda, suggests there is no need to return to the status quo ante in a post-COVID world.

Employers should listen closely, too, since companies face an intensifying war for talent in a market where workers are gaining the upper hand.

Time off: Iceland

Here’s how the Iceland study went down: Starting in February 2015, and growing in size over time, more than 2,500 staff working for over 100 employers participated in two separate trials in Iceland that saw their hours reduced to 35 or 36 from an original 40 per week. 

At its peak, roughly 1.3% of the country’s eligible population took part in the experiment.

Participants reported feeling more energized. Many used the extra free time for hobbies or exercise, which then spilled over as a positive effect on their work.

Some managers said that by stating in job advertisements that their workplace participated in the trial, they saw an upsurge in job applicants, which had the knock-on effect of raising the company profile.

Unexpected social benefits also emerged. The study reported that the division of labor in family households changed in many cases, with men taking on greater responsibilities at home. The improvement in the lives of single parents was even greater.

Participants discovered shortening the work week required a thought-through strategy that prioritized essential tasks and overhauled unproductive routines.

“Organization was key to working less—and the reward of reduced hours provoked people to organize their work more efficiently—with changes made to how meetings were run, as well as schedules, and in some cases to opening hours,” the study found.

Minimal teething problems

Importantly, the perceived benefits on physical and psychological health described by participants tended to last.

Following the success of the initiatives, Icelandic trade unions were able to negotiate permanent cuts in working hours for tens of thousands of their members across the country, the study noted. 

In total, roughly 86% of Iceland’s entire working population has now either moved to working shorter hours, or have gained the right to shorten their working hours, the study says. 

The authors did not address one crucial aspect, however. Unusually for a Scandinavian country, Iceland suffers from low productivity, at least when compared to its Nordic neighbors. 

The tiny island nation ranks alongside other labor-intensive states like Chile, Mexico, and Japan as one of the countries where employees work very long hours, according to the Organization for Economic Cooperation and Development. 

This could suggest there was sufficient low-hanging fruit to streamline everyday tasks, making the trial less directly applicable to economies further along the productivity slope.

Researchers were nonetheless satisfied by the results, and argued the occasional difficulties were mere teething problems, somewhat easy to manage.

“The overarching picture that emerges is that the Icelandic trials strongly challenge the idea that a reduction in working hours will lower service,” they wrote. “On the contrary, they show that productivity can, in many instances, be increased through working time reduction.“