Henry Ford cut working hours as productivity rose: why can't we do the same 100 years later?

This year, Ford Motor Company marks the centenary of the weekend: Henry Ford allowed his factory workers to reduce their work week by a day, not just from the kindness of his heart, but to help stimulate the economy. With all the chatter around flexible working and the potential for a four-day working week, can the logic behind Henry’s decision be applied today to introduce something akin to a three-day weekend?

Ford was a major innovator in his time, boosting productivity through new methods of production and employment. Across the economy as a whole, it is fundamentally only increases in productivity that provide scope to reduce the average working hours of the population, whether measured over a week, a year or a lifetime.

In this respect, one striking difference between then and now immediately stands out. Labour productivity in the United States during the 1920s was growing by around three per cent a year. Today, in the UK, productivity has been flatlining for the last decade or so. Ford found ways of boosting productivity to create space for a five-day week. Similarly, some of the leading lights in today’s move towards four-day week working are high-productivity companies, particularly in areas such as software engineering. The parallel is clear, but it is only a partial one.

The service economy hurdle

The wider economy that Ford operated in was predominantly goods-based. Today, around three-quarters of western economies are services-based. Productivity in services is more problematic, because services are often produced interactively, with the customer acting as a “co-producer” of the service.

This has two implications: first, it may not be practical to reduce the labour elements of a service where the whole purpose is to receive personal service. A hairdresser cannot sensibly spend 20 per cent less time doing a haircut, and a personal trainer cannot spend 20 per cent less time with a client than they have paid for. Second, productivity improvements in services often require customers to take on more of the co-production themselves. Sometimes this is welcome, as seen in the rapid uptake of online banking. At other times it appears to undermine value, as suggested by recent surveys showing falling customer satisfaction with supermarket self-service checkouts. In these cases, supermarkets increase their own productivity while lowering the productivity of their customers.

There are also practical differences between Ford’s manufacturing era and the modern services economy. Cars could be manufactured and stockpiled until customers needed them. Demand for services, by contrast, is often specific to time and place. If Friday were to become a widespread day off, many people working a four-day week would nevertheless expect staff to be available to serve them on their day of leisure.

A big employer: the government

Another important difference lies in the role of the state. Government expenditure now accounts for a much higher proportion of national economies than it did in the 1920s. Henry Ford’s innovation gave him higher profits than his competitors, and he could then choose any combination of higher wages or shorter hours. Rival firms were not compelled to follow suit if they could not afford to. Market forces shaped the relationship between profitability and pay.

In public sector services, however, this link between productivity and working hours is weaker. The UK government has recently sought to curb the practice of local authorities paying five days’ wages for four days’ work, illustrating how the productivity–hours relationship operates differently when market discipline is absent.

But what about AI?

It would be unwise to assume that future productivity growth will simply be delivered by artificial intelligence. A more plausible path may resemble the early development of the internet. New jobs are already being created to develop and manage AI, as well as to address compliance issues. A further demand for labour may arise as customers seek escape from the monotony of AI-driven content and instead look for the authenticity of real-life experiences.

The jury is still out on a shorter working week, but it is dangerous to assume that AI will produce a work-free society. Though (incorrectly) anticipated for more than 50 years, technology has yet to deliver.