European Central: Navigating The Implementation of Iceland’s Shortened Workweek
Michael Fischer
Regardless of winter shortening daylight hours, work days in Iceland aren’t getting any longer. Following successful trials with just over 1% of the country’s working population between 2015 and 2019, nearly 90% of Iceland’s population are now eligible for shorter hours or already work them— and a number of other European nations have followed suit with similar trials.
Now, as Iceland juggles the competing interests of worker wellbeing and work-life balance with productivity and revenue concerns, the nation has become a window for the wider world to look in on, especially as, six years only from the last of the trials, its benefits, losses, and unique impacts across sectors are becoming clear.
Union Bargaining Pushed National Change
Consistently ranking as the most unionized country in the world, it was Iceland’s unions and their collective bargaining power that brought about the shortening of workweeks. Despite the national parliament quashing an official law on shortening the workweek from 40 to 35 hours in 2015, the unions of Iceland and the governmental Association for Sustainability and Democracy (Alda) continued efforts to shorten the workweek; in response, pilot studies were conducted by the Reykjavik City Council and the national government of Iceland to determine the potential — and sustainability — of shortened workweeks to mutually benefit workers and institutions.
The results were extremely promising. Despite fears regarding a loss in productivity and availability of service to the public ahead of the studies, such worries didn’t manifest in the metrics that came after the end of the second study in 2019. Instead, productivity and service assessments either remained the same or improved across the majority of trial workplaces, and worker wellbeing increased— all without a loss in revenue or a cut in wages. A majority of the companies tested for the trial also indicated a desire to continue on with shortened workweeks following the conclusion of the studies.
In the years since, unions across various sectors of employment have increasingly included shortened workweeks as part of their collective labor agreements, managing to bring about a near total shift in hourly standards across the labor market all without national law requiring it.
Varying Impacts Across Sectors
However, while 90% of Icelandic workers today are either eligible for or currently working shorter hours, just how those hours are shortened varies between sectors and the agreements penned since 2019.
Promptly following the conclusion of the trials in 2019, the Retail and Office Workers' Union (VR) and the Commercial Federation of Iceland (LÍV) included a formal reduction of the workweek from 36.25 to 35.5 hours in their Collective Bargaining Agreement (CBA) with the Icelandic Federation of Trade.
In early 2020, a CBA signed between the Federation of Icelandic Trade Unions (SGS) and the Association of Icelandic Local Authorities (SA) established that the workweek of full-time employees would be shortened by 65 minutes per week, beginning on January 1st of 2021 and ending in 2023. Their 2024-2028 agreement encoded further the right to “to take the initiative on discussions with employers on shortening of working hours.”
The Confederation of State and Municipal Employees (BSRB), “the largest federation of public sector workers in Iceland,” also brought shortened workweek updates into effect on January 1st of 2021 for daytime workers, shaving off 4 hours a week, bringing the workweek of a majority of public employees down from 40 to 36 hours. For shift workers, a workweek shortened by a minimum of four hours came into effect on May 1st, with as many as eight hours being cut for employees with the toughest shifts. However, for other public sector staff, it was reported hours were reduced by merely 13 minutes a day after the conclusion of the trials.
The challenges faced in implementation vary by sector and union as well; 24/7 and essential services have been especially challenged with juggling staffing shortages while abiding by shortened shifts agreements; in some such shift-based fields, such as those represented by the BSRB, filling the gap in coverage of shifts was partly solved by bringing on new personnel— a costly decision, but one whose price BSRB notes “was estimated in the cost benefit analysis of employers before the collective agreements were signed.”
Efling, representing both public and private sector workers, signed a deal covering 2024 to 2028 that secured only “the right to negotiations on the shortening of working hours to 36 working hours per week,” which in itself is dependent on concurrently reaching an agreement on the elimination of coffee breaks.
On the national scale, however, the near complete shortening of the workweek has coincided with the strong recovery in Iceland’s economy following the COVID-19 Pandemic, with GDP growing by an exceptional 8% in 2022 and 5.6% in 2023 and projections predicting further growth after contractions in 2025. Despite prior concerns, the Icelandic Committee on Labor Market Statistics also measured an increase in productivity since 2019 of 1.5%. Worker wellbeing has also increased across the board, with metrics like work-life balance, happiness, and rates of burnout all improving.
As such, in regards to navigating the challenges and successes of shortening working hours en masse, Iceland acts as a compelling case study for the rest of the world. Though the process has been imperfect, nonuniform, and done without the backing of the legislature, Iceland has come through on the other side of it with a healthy projection for growth, profit, and worker happiness still to come.
