In my previous post, I wrote about the knock-on effects of Covid-19 on the world’s economy, lending my voice to the many predicting a substantial period of recession.
And it seems we were onto something. Since then, the World Bank has announced its agreement, with president David Malpass stating that ‘for many countries, recession will be hard to avoid’, and warning of the looming onset of a 1970s-esque period of “stagflation”.
It’s every bit as ominous as it sounds, with stagflation describing an environment of low growth and rising prices. World Bank predicts that global economic growth will slow down by the end of the year, with the pandemic-related downturn further exacerbated by war in Ukraine. However, at the same time, we’re seeing high inflation that’s massively increasing our outgoings.
This is all a matter of cause and effect. We’re experiencing an increase in prices, with less work being done and more people quitting their jobs in the post-Covid “Great Resignation”. Job vacancies are high, and so is demand for some goods and services – but with too few staff to service customers, businesses can’t always benefit from this demand. Money that could be flowing into areas such as hospitality, tourism, retail and…well…just about anywhere, is instead getting stuck behind a dam of staff shortages, which is feeding into a rather bleak picture overall.
The widespread increase in wages is a manifestation of this supply and demand compression. But, perhaps counter intuitively, as the cost of employees rises, there’s also a move to reduce the number of hours in a working week. This month, thousands of businesses trialled a move to the four-day week, with employees receiving 100% pay for 80% hours, while promising 100% productivity.
The desire to work fewer hours is both understandable and predictable; if there’s one thing that many of us took from Covid-19, it’s a sense of perspective and a compulsion to enjoy life while we can. But it’s also somewhat problematic. While a four-day week might feed our lifestyles, can it also feed our economy?
Proponents of the shift argue that offering the four-day week is a way for companies seeking workers to gain the edge over their competition. With morale higher among employees, business productivity and customer experience could also improve.
However, at a national level, I can’t see how working 20% fewer hours in a week won’t lead to a reduction in GDP output. It’s a common mistake to view profit as being earned equally, in convenient chunks, throughout your day or week. However, it’s the uncomfortable truth that many businesses only begin earning money at 5.10pm each day. Until then, the hours of work have been spent covering running costs – it’s only at the close of play that many begin to make any profit. Let’s say (for ease of numbers) that you work a 10-hour day and make 10% profit. If you make no sales in your last hour of trading (e.g. the final 10% of your day), you’ve made no profit for that day. If hours are reduced by 20% – i.e. the four-day week – it could wipe out the profit margins of most companies in the world.
Perhaps four days of output really can be just as effective, or even more effective than five (though that rather awkwardly raises the question of why the work took five days previously), but we’ll have to wait to find out. A cynic might argue that if productivity decreases, the natural solution for most companies will be to simply raise their prices. We could even end up with an inconvenient chain reaction in which we all have to pay more, and ultimately work more.
It could be that we’re looking at this all wrong. As humans, we need a purpose, and it’s when we find one that life becomes most rewarding. Work and life (those two areas seemingly needing balance) are all rolled into one thing: life. Realistically, they can’t be divided. As Nietzche famously said, ‘He who has a why to live for can bear almost any how’. We all inherently need this ‘why’: a higher purpose that inspires us (summarised beautifully by Simon Sinek, who’s well worth looking into). This is why some retirees, when they cease to work, become unhappy or in friction with their spouses. Their purpose has been taken away.
As a society, we’ve become used to the well-worn narrative that work is an inconvenience, but that needn’t be the case. Back in the Victorian days, even a five-day week was largely unheard-of; most people worked seven days and grew vegetables for the pot in their downtime. In many ways, we’ve never had it so good. Of course, this might depend on your level of job satisfaction – if you’re in a role you dislike, or are unsuited for, it’s clearly not going to provide as strong a sense of purpose as one that ticks your personal boxes.
As people live longer, the traditional three-phase life – education, work, and retirement – is becoming outmoded. The boundaries around work and retirement (or “life”) are shifting, with many more phases creeping in. Those that cease to work now may enjoy a period of downtime before meeting a second wind that pushes them down a completely different career path.
In our current economic climate, there are many questions, many hypotheses and many things that are yet to take effect. Ultimately, stagflation, the Great Resignation, and the matter of work/life balance will need to flush through the system together, creating a domino effect. Exactly what that will be? Well, that remains to be seen.
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