SPECIAL REPORT

Reward or sacrifice?

Europeans clash over psals to introduce a four-day week

BRUCE WALLACE March 14 1994
SPECIAL REPORT

Reward or sacrifice?

Europeans clash over psals to introduce a four-day week

BRUCE WALLACE March 14 1994

Reward or sacrifice?

Europeans clash over psals to introduce a four-day week

BRUCE WALLACE

It was not supposed to happen this way. When British economist John Maynard Keynes gazed into the future in 1931, he foresaw a 15-hour work week and a world in which “man will be faced with his real permanent problem—how to use his freedom from pressing economic cares, how to occupy the leisure which science will have won for him, to live wisely and agreeably, and well.” Increasing prosperity would liberate mankind from the burden of toiling long hours, he predicted. People would work less, play more. And they would all be better for it.

Six decades later, the idea of abandoning the five-day work week is no longer the exclusive purview of economists, or even pop futurologists. Shorter work hours are being proposed by politicians in France, debated in the Spanish media and on shop floors in Italy, and implemented at Volkswagen assembly plants in Germany. But the forces propelling the issue are not those envisioned by Keynes. Europe’s economies are stagnant, not booming. They are in worse shape now than at any time since the Second World War, leaving

record numbers of people jobless and frightening many of the rest. Cutting the work week is not intended as a reward to those who are employed, but as a desperate measure to distribute a limited number of jobs among a larger number of people.

Nothing illustrates the climate better than Volkswagen’s move last November to reduce its work week from 37 hours over five days to 29 hours over four days, with an accompanying 10-per-cent reduction in gross pay. The company’s workers agreed to the move only because the alternative proposed by Volkswagen’s management seemed even worse: laying off 30,000 employees, almost a third of the company’s German workforce. To protect jobs at a time when the country’s auto industry is in a terrible slump, the workers voted for reduced hours and a rollback of a promised 3.5-per-cent wage increase this year and one per cent next. On top of that, they gave up benefits—paid holidays and break times—equivalent to 10 per cent of their incomes. “It is an historic moment,” says Barbara Grimm, an executive on the workers’ council at Volkswagen’s main plant in Wolfsburg, Germany. ‘We have shortened hours to save jobs.”

Management and workers at Volkswa-

gen are hoping this month to finalize a scheduling system to implement the new arrangement. But they have already fired up a debate in Germany about whether the four-day week is a solution to spiralling unemployment. “Volkswagen has legitimized the issue and encouraged public discussion about it,” says Markus Dingier, a consultant with McKinsey & Co. in Munich, who predicts the concept will gain greater acceptance. “It used to be a taboo subject, but now there are articles about it in the newspapers every day.”

But a debate it is. Many workers and employers, as well as a chorus of economists, argue that the four-day week is, at best, a short-term solution for companies in crisis. At worst, they regard it as a gimmick that will only worsen Europe’s unemployment problem. Far from imposing new rules on working hours, some experts say, governments should be trying to relax some of the rules and regulations that make labor in Europe more expensive there than anywhere else in the world. “The four-day week is the counsel of despair,” argues David Metcalf, a professor of industrial re lations at the London School of Economics.

“It says that there are not enough jobs to go around, so we have to divide up a finite income among more people. We should be seek ing ways to expand our economies and ere ate new jobs.”

In particular, European managers are pushing for changes in the continent’s rigid labor laws and agreements to allow for more flexible hours and part-time work. Throughout Europe, employers argue that generous benefits and iron-clad job protection clauses make it extremely risky to hire new workers, even when business is booming. “It is very difficult to fire somebody because the courts can prevent it, and because society vilifies you for doing it,” says Maurice Levy, chairman of Publicis, France’s second-largest advertising agency, whose clients include L’Oréal and Renault. “The fear of being stuck with employees you can’t fire makes entrepreneurs try to get by without hiring new workers.” As a result, most of the jobs created in Europe since 1974 have been in the public sector. The 24-country Organization for Economic Co-operation and Development (OECD) says that every year from 1974 until 1988, the number of jobs in the private

tor actually shrank; since then, it has recovered only slightly. Now, huge debts are forcing governments to trim their own workforces, at a time when unemployment is widely recognized as the European Union’s most pressing problem. In France, an economic powerhouse by comparison with some of its neighbors, the official unemployment rate is 12 per cent. In weaker economies on Europe’s periphery, it is even higher: 18 per cent in Finland, 23 per cent in Spain. The German economy, historically Europe’s strongest, shrank by 1.3 per cent last year. A record four million Germans are registered as unemployed—more than 10 per cent of the workforce.

What worries economists and politicians most is the severity of the EU’s long-term unemployment rate: nearly half of all unemployed job hunters in Europe in 1991 were out of work for 12 consecutive months, compared with about six per cent in North America. It is a potentially explosive social problem, made all the more volatile by the fact that unemployment among those under age 25 is now 20 per cent or more in most of Europe—and as high as 32 per cent in Spain.

Those strains on the social fabric make the debate over changing labor rules and practices more than an exercise in economic theory. It cuts to the heart of the kind of society Europeans hope to fashion for the next century. Most Europeans pride themselves on having crafted a different economic system from the American model, one that tempers cutthroat free market forces with a social conscience. They see their generous vacation benefits, unemployment provisions and subsidized social programs, such as day care, much the way Canadians view medicare and unemployment insurance: as symbols of a caring society. In a New Year’s interview, French Prime Minister Edouard Balladur argued that those comforts had to be defended, in spite of their costs, if Europe is to remain a civilized fortress against the law of the capitalist jungle.

With rare exceptions, few politicians have the nerve to tamper with those benefits. Europe’s leaders are far more likely to act like Balladur, who retreated from a confrontation with workers last November. He may be the most popular politician in France, but Balladur was not about to take on angry Air France employees, who went on strike when their bosses tried to slash 4,000 of the airline’s 40,000 jobs. Balladur not only intervened to scrap the restructuring proposal, he also fired the chairman of the money-losing, stateowned company who proposed the plan.

In such circumstances, the idea of institutionalizing the four-day week is probably far too revolutionary a concept. “Nobody will make any bold moves,” predicts Levy. “There is nothing the French like more than talking

about innovation, but nothing they hate more than change, especially when it affects them.” The response to the four-day-week from France’s left-wing unions tends to support that view. ‘We are in favor of a four-day week,” says Chantal Rey, an executive in the radical General Confederation of Labor, which represents one million workers. “As long,” she quickly qualifies, “as there is no cut in wages.” Rey says that the union is willing to consider some changes to working hours. “But some things are sacred, like no work on Sundays,” she

says. We say, ‘Respect people, not capital.’ ”

Employers have a huge stick with which to beat employees into accepting reduced work weeks: the threat of packing up and moving production elsewhere. The French subsidiary of American-owned Hewlett-Packard convinced its 250 employees to accept a four-day work week last year by bluntly suggesting that if the proposal was rejected, the plant would relocate to Singapore.

For companies that rely on skilled workforces, such as in the auto industry, the benefits of a shorter week are obvious: it reduces their wage costs and allows them to hang on to trained employees who might otherwise have to be laid off. That saves the company from having to retrain workers when sales pick up and production increases. But from the perspective of workers themselves, the advantages are less clear. In fact, any concerted push towards institutionalizing a four-day week might end up dividing workers, pitting those who already have jobs against the rising number of those without—another ingredient for potential social upheaval.

As a result, the four-day work week has mostly been offered as a voluntary option. France’s National Assembly and Senate passed a law last year that will give companies greater flexibility to introduce new work hours, including a four-day week—provided that it is done with union approval. France has tried, and failed, to reduce work hours before. After coming to power in 1981, the Socialists sliced an hour off the work week, to 39 hours, while keeping incomes stable. But they backed off their campaign pledge to take it

down to 35 hours by 1985 when it became apparent that French businesses would not be able to compete internationally unless other countries matched the step.

Since then, Pierre Larrouturou, a Paris management consultant, has emerged as a highprofile crusader for a national four-day week coupled with an average five-per-cent reduction in pay and tax credits for companies that increase their payrolls. Claiming that his proposals would create two million jobs, he has called for a referendum next year on whether to make the switch. At the same time, Larrouturou is getting support from the opposition Socialists, who are desperate for policies that will help them take on the popular Balladur in next year’s presidential election. Likely Socialist presidential candidate Michel Rocard has joined some leading industrialists in suggesting that the fourday week might “jump-start” the economy. And German Chancellor Helmut Kohl, who initially sneered at the idea with the admonition that Germans needed to work harder, not less, has since adopted a less rigid public posture.

In addition, European leaders agreed last December on a plan by EU President Jacques Delors to create 15 million jobs by the turn of the century. Its most important element is a proposed public works campaign, similar to the $6-billion infrastructure program advocated for Canada by Prime Minister Jean Chrétien. But it also includes a pledge of support for increased work-sharing. Although the EU said in a statement that it was not in favor of imposing any reduction in the work week, it called on governments to relax labor laws so that it would be easier for people to work shorter, more flexible hours. One way to do that, it noted, was to ensure that workers would not have to give up social benefits to do so.

As in North America, a number of other factors—including an increase in the number of women in the workforce and the growth of service industries—are breaking down traditional hours of work in Europe. But beyond the current economic pressures that have led some companies to introduce shorter hours, the question remains as to whether employees will voluntarily sacrifice a portion of their incomes for more leisure time. Most evidence, argues American labor historian Gary Cross in his 1993 book Time and Money, suggests that they will not. Even in Europe, workers have generally preferred the lure of consumerism rather than the vaguely defined goal of free time. And the weight of history suggests that it will be difficult to convince those who already have jobs to accept a lower standard of living in return for the common good of lower unemployment. □