One of my previous employer did something like this, and I loved the idea, initially. Then I realized I was getting the same amount of work done, but being paid less for it and having less time to do it (unless I wanted to work on my own time, for free).
I'm unconvinced this is a bad idea for the worker. It's a good deal for the employer certainly, in that you likely lose some slack in your working day when you are there. It still seems worth it for an extra day off to me although YMMV. I am unhappy because my productivity has gone up seems rather odd to me.