Iceland's economy is outperforming most European peers following the universal implementation of a shortened working week with no pay loss, according to a study released on Friday.
Between 2020 and 2022, 51% of workers in the country accepted the offer of shorter working hours, including a four-day week, according to two think tanks, with the proportion expected to rise further today, as reported by CNN Business.
Iceland experienced greater economic growth last year than other European countries, and its unemployment rate is among the lowest in Europe, according to the Autonomy Institute in the United Kingdom and Iceland's Association for Sustainability and Democracy (Alda).
“This study shows a real success story: shorter working hours have become widespread in Iceland… and the economy is strong across several indicators,” Gudmundur D. Haraldsson, a researcher at Alda, said in a statement.
In two significant trials between 2015 and 2019, public sector employees in Iceland worked 35-36 hours per week with no pay cut. Many participants had previously worked a 40-hour week.
The studies covered 2,500 people, or more than 1% of Iceland's working population at the time, and were designed to maintain or increase productivity while improving work-life balance. Researchers discovered that productivity remained stable or improved in the majority of organizations, while workers' well-being improved "dramatically" on a variety of metrics, including perceived stress and burnout, health, and work-life balance.
Following the trials, Icelandic trade unions negotiated reduced working hours for tens of thousands of members across the country.
According to the International Monetary Fund's most recent World Economic Outlook, published earlier this week, Iceland's GDP will increase by 5% in 2023, trailing just Malta among rich European economies. That is significantly greater than the country's average growth rate of about 2% throughout the decade 2006-2015.
However, the IMF predicts much slower growth in Iceland this year and next.
“Growth is expected to decline in 2024 on further softening domestic demand and decelerating growth in tourism spending,” the agency said of the tourism-dependent economy in an assessment in July.
Iceland's low unemployment rate is "a strong indicator of the economy's vitality," according to the Autonomy Institute and Alda.
