5% economy growth despite reduced work hours
Despite reduced work hours, by last year, Iceland’s economy expanded by an impressive 5%, outpacing most European countries. Photo: Ji Seongkwang/Unsplash
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Despite reduced work hours, by last year, Iceland’s economy expanded by an impressive 5%, outpacing most European countries. Photo: Ji Seongkwang/Unsplash
Iceland has emerged as a pioneer in work-life balance and economic innovation, outshining most of its European peers thanks to a bold experiment in reducing working hours to four days a week, without cutting pay.
The country’s recent economic success and positive worker feedback demonstrate that a four-day work week can benefit both people and the economy, according to research published by Iceland’s Association for Sustainability and Democracy (Alda) and the UK-based Autonomy Institute.
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The journey to a shorter work week in Iceland began with government-led trials from 2015 to 2019, states an article by BBC on the matter. During these trials, more than 2,500 public sector workers—about 1% of the workforce—shifted from a 40-hour week to 35-36 hours with no reduction in pay. The results showed consistent or improved productivity alongside major boosts in worker well-being. Stress, burnout, and health concerns declined, while satisfaction with work-life balance increased significantly.
This experiment’s resounding success paved the way for broader adoption: by 2020, unions across Iceland began negotiating shorter hours for tens of thousands of workers, making it possible for most employees to choose shorter work weeks.
Between 2020 and 2022, more than half of Iceland’s workforce had accepted the offer of reduced hours, including four-day work weeks. By last year, Iceland’s economy expanded by an impressive 5%, outpacing most European countries. The unemployment rate remained low, holding steady at 3.4% in 2023—almost half the average for advanced European economies, states the BBC report.
The International Monetary Fund (IMF) noted Iceland’s strong economic performance, highlighting its exceptional growth rate compared to European peers, despite the global economic challenges facing other nations.
Key findings
According to the research by Iceland’s Association for Sustainability and Democracy (Alda), key findings into these reduced work hours paint a compelling picture. First and foremost, 62% of workers on reduced hours reported being more satisfied with their schedules.
97% believed that shorter hours made it easier to balance work with personal life, with 52% noting improvements. Furthermore, 42% felt that reduced hours lowered stress levels in their private lives, compared to only 6% who felt an increase.
Beyond statistics, the results reflect a human story of restored balance and well-being. Icelandic employees across industries report feeling healthier, more focused, and more engaged at work. According to Gudmundur D. Haraldsson, a researcher at Alda, Iceland’s successful adoption of the shorter work week shows how “the economy is strong across a number of indicators”, and workers are feeling better too.
An example to consider?
As many countries grapple with productivity issues and burnout, Iceland’s story offers an inspiring alternative. “Our evidence suggests that when workers have a better work-life balance and are better rested—the economy benefits too,” said Will Stronge, Autonomy’s research director, in a statement. This bold shift might just be what countries across Europe and beyond need to foster sustainable growth and well-being.
For Iceland, the journey isn’t over. The IMF has forecasted slower growth for the country as tourism—a major economic pillar—levels out. However, with low unemployment and positive worker morale, Iceland seems well-positioned to handle these changes.
The Icelandic model of a four-day work week offers a fresh perspective on the future of work—one where both economic growth and individual well-being thrive.