A 1/5 hit in revenue might have a larger impact on profits. It would completely wipe out many businesses with small margins. Are we saying that those businesses should not exist?

Edit: increased productivity needs to be a huge part of the argument here

Think of the number of businesses that could exist if we had a sixth workday. Are we saying those businesses properly have never existed?

What's magic or received about five days?

First off, if you want that profit back, hire more people. Unlikely that labour is 100% of your costs. If it’s 10% of your costs you’d have to hire 1/5 more people, and costs would go up 1/5*0.1 = 2%

If your business dies at a 2% loss of profits, i’m ok with that.

But frankly i doubt you’d lose 1/5 of your worker productivity by cutting hours by 1/5 (assuming pay rates stay the same) - so that’s a worst-case scenario where productivity is directly tied to time-spent-working.

I'm sure no legal business ever set out to make their employees lives miserable (not being sarcastic there, either).

But the point was that the loss of pay due to working only 4 days, vs 5 days, is not going to make any workers happy. Business paying 5 days of wages for 4 days of work is not going to make anyone happy, especially shareholders.

You might make up some of the loss by cutting vacation time, but there's no extra room to make up 42 days of lost productivity.

Prices will have to increase to make up for lost profits, but with less money for people to spend, this sounds like a recipe for economic disaster.

My argument is actually that you should not decrease pay but should decrease hours. I suspect you’d make up most or all of what you lost in hours by way of increased productivity. I also think “economic productivity” is just capital efficiency. And i don’t think that is a proxy for quality of life - something i care a lot more about.

Not sure how you came up with 1/5 to the profits at most. If the labor costs increase by 20% it may well mean going from black to red got the company or the profits being reduced by 80% or whatever other number depending on the margins the company is operating on.

1/5 is 4 days a week instead of 5.

If labour is 100% of your company’s costs, then yes you are facing a 20% increase in costs. 100% labour businesses are VERY rare.

It is also very unlikely that cutting hours by 1/5 (while keeping wages stable) would result in a 1/5 loss in productivity. There is so much time wasted in the typical 9-5 workday because nobody can be productive for 8 hours straight.

So if you have a business that’s near 100% labour costs, and the work is such that productivity is very nearly equal ti hours spent working, and your margins can’t take a 20% hit, then yes you are going out of business.

There are whole classes of business that would work if 50 or 60 hour work weeks are legal to mandate - but we don’t care... why do we care about that thin slice of businesses that require a 40 hour work week? 32 hours or bust.

I think the confusion is not where the figure 1/5 comes from, but rather why that is the change in profit. It looks like you meant revenue.

Right. I see how that was unclear. A 1/5 increase in labour costs is a much more precise way to frame it.

It's more precise but the whole point is that cutting 20% of profits sounds like a reasonable price to pay but once you realize increasing labor cost by 20% may mean for example 80% cut in profits it's not so simple anymore.

That 1/5 hit is enough to turn a +10% return to -10%.

Only if labor is 100% of your costs.

If you do it unilaterally, yes. However, if your competitors are forced to make the same change at the same time, prices will adjust to compensate.

Forced to? Even if it forces small businesses out of business?

I don’t think that forcing people to do things is ideal, personally.

We already “force” people to do all kinds of things. We call them labour laws, safety regulations, minimum wages. These are all mostly good things.

They’ll go up to make up for loss in profits.