The 40 hour work week is over, but our wages are on the up

Although overlooked in recent economic debate, paid working hours are falling as real wages are steadily climbing, writes Phil Ruthven AM.

Working hours in Australia have been falling since Governor Lachlan Macquarie set the maximum at 60 hours per week. Previously, it had been “sunrise to sunset” in the New South Wales Colony — up to 65 hours a week. In the early 1900s, agreed working hours for full-time employees were about 49 hours a week. By 1948, all state industrial tribunals and the Commonwealth Court of Conciliation and Arbitration had adopted the 40-hour (eight-hour day/five-day) week. These days, the working week is around 36 hours for full-time employees. However, with almost a third of the workforce now part-time or casual, the actual average has been steadily falling over the past four decades. That “36 hours” is also misleading. With about two months off work each year (four weeks’ annual leave, two weeks’ public holidays on average and two weeks’ sick leave), the average is closer to an annualised 28 hours a week. Interestingly, this was also the average in Rome at the height of its power, around 150 AD.

Real wages are rising. Over the past four decades they have doubled as average hours have fallen by over eight per cent. One of the strange constants when it comes to paid work is that over the past three centuries, the average male has always worked 75–80,000 hours in a lifetime. If you include unpaid work, it has been around 130,000 hours; the same as females, but with a different mix of paid and unpaid. Recent Australian Bureau of Statistics surveys show the same similarities between male and female adult working weeks. We are now in paid work for twice as many years — but at only half our forebears’ hours per year.

By the end of this century, the average annualised working week will be around 25 hours, with us working for 55–60 years out of a lifetime expectancy of 100-plus years. This is almost three times the 38-year life expectancy for both men and women in 1800 — when they also squeezed their lifetime’s work quota into 25 of those 38 years. One outcome of our current approach is that we’re able to begin our working life with part-time and casual work (as students), do the same while raising our children, then once more in the final years of working life.

The additional good news is that our standard of living (real GDP per capita) has risen over the past 220 years — from $5000 per annum (in 2018 price terms) in 1800 to more than $75,000 in 2020.

Working smarter aided by technology — as opposed to working harder or longer hours — with no change to our working modus operandi, is the answer. Since the mid-1960s, the pervasive supporting utility has been information and communications technology (ICT). Over the previous decade, these advancements have been turbocharged into the hyper-digital utility of fast broadband, big data, artificial intelligence (AI) and analytics. As a result, around 70 per cent of the economy is now generated by service industries, rather than goods industries such as manufacturing, mining and agriculture.

For many, the term “digital disruption” is more apt for the modern age. Online streaming has eradicated the video store. While online shopping still represents less than 10 per cent of retail sales in Australia, it has hit 20 per cent in some countries. Blockchain technology will have a sizeable impact on the finance industry.

One of the societal benefits from ever-falling working hours is full employment through job-sharing. Today’s unemployment figures would be over 60 per cent — instead of five per cent — had our average working hours not been reduced from over 60 per week in 1815 to around 28 today.

What does all this mean for businesses and directors? Firstly, we can ignore doomsayers who suggest robots will take over jobs, leading to massive unemployment. It won’t happen, partly because of job-sharing.

Secondly, AI will reduce the need for conscious decisions by us in our working lives, leaving more time for learning and creativity. The challenge for directors and C-Suite executives is to ready their businesses for a different world. We are now grappling with paying workers contractually for outputs rather than inputs.

For the adapters, this will lead to survival and success. For the unready, it will mean displacement by the more-ready.