I agree that happier and less stressed people often (but not always) have higher specific productivity (output/hour), but they are usually less productive per week/month/year.
I also agree that companies should focus on increasing work output rather than hours worked, and many books have been written on this subject (by people like Deming). Indeed, productivity has increased, though I am sure we are all aware of deficiencies; this secular increase in productivity has been responsible for the improvement in living standards over the last few hundred years.
Increasing demand for desirable and attractive jobs is a laudable end-goal, and I agree that we should pursue system-wide reforms to facilitate this, though we probably disagree on which policies would achieve greater prosperity and better options for workers.
My greatest disagreements with you are that you are begging the question by assuming that people want to work less, and that you believe that we can improve total output by reducing total input.