efficient labour markets james gribben, ciett...
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James Gribben, Ciett Communications and
Economic Affairs Advisor
Private employment services’ contribution to more efficient labour markets
Ciett at a glance
• Founded in 1967
• Gathers 176,000 branches and employ more than 10 million agency (TES)
workers on a daily average (FTEs)
• Only association representing agency work:
- at large (brings together 49 countries)
- in its diversity (uniting 9 of the largest multinational staffing companies as well as hundreds
of thousands of SMEs)
• Recognised as such by international organisations (e.g. ILO, European Union,
OECD), key stakeholders (e.g. IOE, BusinessEurope, ITUC) and national
governments
• Represents the full spectrum of HR services: temporary agency work,
recruitment, interim management, executive search, outplacement, training
Key messages of Adapting to Change
The world is undergoing fundamental structural shifts
• Globalization
• Volatility
• Demographic evolution
• Sectoral shifts
• New attitudes to work
This brings a new set of challenges to the labour market
• Persistent high level of unemployment
• Stronger segmentation of the labour market
• Increasing mismatch between supply and demand of skills
• Unpredictability and lack of visibility
• New forms of labour contractual arrangements not well regulated
nor organised
The role of labour market intermediaries to enable change
is crucial
• Private employment services industry offers solutions to these
challenges
Source: Ciett RfP, BCG/Ciett discussion
Expectations-based Fundamental-based
5-year firm op margin volatility (%)2
4
3
2
1
2010 2000 1990 1980 1970 1960
5-year firm revenue growth volatility (%)2
5
25
20
15
10
2010 2000 1990 1980 1970 1960
5-year firm mkt cap growth volatility (%)1
60
50
40
30
20
2010 2000 1990 1980 1970 1960
Increase 1990-2010 vs.
1960-1979
1. Weighted average across all firms, based on market cap 2. Weighted average across all firms, based on revenue Note: Based on all public U.S. companies
Rise in firm instability clearly visible
Market cap volatility Revenue volatility Operating margin volatility
32% 26% 50%
Providing flexibility is main reason of use of PrES
(%)
80 60 40 20 0
Other 4%
Uncertainty over medical costs 4%
Uncertainty over payroll taxes 9%
Desire to keep fixed cost low 35%
Can try out potential permanent hire 52%
Desire for greater flexibility 65%
Can respond quicker to business demands 76%
Main reasons to make greater use of AW
Besides the overarching topic of flexibility companies also
use AW to hire permanent staff (extended trial period)
Source: Morgan Stanley Research (interviews with 200 HR managers in the US and Europe)
1 Adaptation to change
Companies using agency work accelerate faster out of downturn Germany: higher revenue growth when agency work is used
1. Including construction and other sectors Source: IW Consult GmbH study "Zeitarbeit in Deutschland" 2011
6%
Revenue growth 2009 – 2010
Small (< 50
employees)
Industry Medium and
large (> 50
employees)
0
13%
6%
11%
20
Service1 With export
activities
15
> 5% of
revenue
TOTAL No R&D
spendings
< 5% of
revenue
5
No export
activities
10 10%
16%
5%
8% 8%
15%
5%
7%
5%
10%
7% 6%
10%
13%
11% 11%
Not using AW
Using AW
Company size Sector Export activity R&D expenditures
Ability to react quickly results in higher revenue growth
1 Adaptation to change
Agency work a key lever in creating flexibility
Share of companies using AW to replace
absent permanent staff (%, 2009)
80
60
40
20
0
Ø 49
Switzerland
35
Germany
46
Sweden
49
Netherlands
65
Share of companies using AW to
absorb activity fluctuations (%, 2009)
100
80
60
40
20
0
Ø 76
Sweden
49
Switzerland
69
Germany
87
Netherlands
100
Critical to managing seasonality and
economic cyclicality ...
... as well as allowing flexibility for workers
who need it, i.e. sick or maternity leave
75% of companies
are using AW to
deal with
fluctuations e.g. in
demand
Half of companies
temporarily replace
absent permanent
staff with the help of
AW
Source: Ciett national reports
1 Adaptation to change
Agency work ensures job creation Most companies would not have created jobs without agency work
Alternatives to agency work
Source: User organization survey, BCG analysis
% of responses (total = 101)
100
80
60
40
20
0
Hire permanent
workers
26%
Other external
flexibility solution
12%
Not do
the work
8%
Internal
flexibility
54%
Total
100%
No job
creation
62% No
substitution
74%
Conclusions
• 74% of companies do not consider
hiring permanent workers an
alternative to agency work
• In 62% of the cases there would
be no jobs created: companies
chose internal flexibility or not to
do the work
2 Reducing structural & frictional unemployment
Agency work helped reduce unemployment in Italy Regulatory changes in favor of AW and their positive impact on the level of unemployment
0.5
5
2008 2006
10
0.0
1.5 15
AW penetration rate (%) Unemployment rate (%)
1.0
2000 2002 1996 1998 2004 1997 1999 2001 2003 2005 2007 2009
TAW penetration rate
Unemployment rate
Unemployment rate started to decline right after
introduction of agency work work
Regulatory changes
in favor of AW
Legal recognition
of AW in Italy
Source: OECD, Ciett national reports, GiGroup
2 Reducing structural & frictional unemployment
PrES allow lower level of GDP growth needed to create jobs Analysis of longer time series for Belgium
01/1
993
03/1
992
GDP / employment year-on-year growth (quarterly, %)
10
5
01/1
992
03/1
991
01/1
991
0
-20
-40
AW year-on-year growth (quarterly, %)
40
20
0
-5
-10
03/2
010
01/2
010
03/2
009
01/2
009
03/2
008
01/2
008
03/2
007
01/2
007
03/2
006
01/2
006
03/2
005
01/2
005
03/2
004
01/2
004
03/2
003
01/2
003
03/2
002
01/2
002
03/2
001
01/2
001
03/2
000
01/2
000
03/1
993
01/1
999
03/1
998
01/1
998
03/1
997
01/1
997
03/1
999
01/1
996
03/1
995
01/1
995
03/1
994
01/1
994
03/1
996
Employment
AW
GDP
Agency work performs in line with GDP and starts
significantly ahead of total employment
Note: GDP YoY growth figures for 1995 estimated Source: federgon
Employment recovery
AW recovery
The diversity of agency workers’ profiles increases labour market
participation
Students
(make money to
fund studies
and/or
vacations)
Workers
reentering the
labour market
(work as temps
after period of
unemployment/
maternity leave)
Workers
looking for a
permanent job
(Second best
choice but see
AW a stepping
stone)
First time
entrants
(enter the labour
market and gain
first work
experience)
Flex
Professionals
(not looking for a
permanent
contract)
Senior workers
(remain
employed to get
additional
incomes)
3 Driving down segmentation
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
> 45
31 - 45
26 - 30
21 - 25
< 21
Agency workers in South Africa are predominantly young
2 Reducing structural & frictional unemployment
Agency work provides needed opportunity for young people
Agency workers under 25 years strongly overrepresented
in agency work vs. total labour market in all countries
Source: Ciett national reports, Euromonitor, ILO Kilm
49% 47%
40%
37%
33%
29%
26% 25%
24%
15% 16%
13%
7% 6%
9% 10%
9% 11%
0%
10%
20%
30%
40%
50%
60%
South Africa Netherlands Switzerland Belgium Italy France Sweden Poland Germany
TAW Employed Population
Percentage of young people (<25) in 2009
Agency work provides a stepping stone into employment Bringing people into employment reduces the segmentation of the labour market
Population (%)
100
50
0
Employed open-ended
Employed fixed-term
Temporary agency worker
Unemployed
Student Other
Inactive
Czech Republic France Netherlands1 Norway Sweden1 Switzerland
Note: 2010 data if not otherwise stated 1. 2009 data Source: Ciett national reports 2009, 2010
65%
45%
Post situation of
Aworkers Previous situation
of Aworkers
% working
after AW
% working
before AW
50
%
70
%
11%
66
%
59
%
68
%
16%
65
%
34%
85
%
47
%
71
%
3 Driving down segmentation
Stepping stone effect also applies in South Africa
South Africa 2009
%
100
80
60
40
20
0
Post situation of Aworkers Previous Situation
of Aworkers
15%
work
ing
61%
work
ing
Employed open-ended
Employed fixed-term
Temporary agency worker
Inactive
Student
Unemployed
Other
• If you are employed as an agency
workers, you are more likely to have
an open ended contract than still be
an agency worker on year later.
• Situation before Agency work was
15% employment
• One year after beginning as agency
worker 61% are in employment
Findings
Source: APSO
2 Reducing structural & frictional unemployment
Stepping stone effect largely recognised
% of respondents agreeing with the statement, 2010
100%
80%
60%
40%
20%
0%
IT
40%
DE
43%
ES
52%
FR
61%
BE
69%
PL
77%
NL
78%
UK
90% 85%
BE
86%
UK
92%
% of respondents agreeing with the statement, 2010
100%
80%
60%
40%
20%
0%
DE
59%
IT
71%
NL
80%
ES
82%
FR
84%
PL
Is AW effective to find a first job? Is AW effective to find a permanent job?
Note: AW – agency work Source: Regards croisés sur l’intérim, l’Observatoire des Métiers et de l’Emploi, July 2010
High perceived value of AW both to get into
the labour market and find a full-time job
3 Driving down segmentation
% AW3
2.0
1.5
1.0
0.5
% Illegal economy2
19
18
17
16
15
14
2009 2007 2005 2003 1999/00
Reduction in illegal economy correlates with increase in AW Increase in illegal economy, decrease in AW in 2009 dues to the crisis
% AW
3
2
1
0
% Illegal economy
18
16
14
Germany
1: Average of 16 countries, for full list see appendix 2. Measured as % of total GDP 3. AW penetration
Note: Two year averages for 1997/98, 1999/00, and 01/02
Source: Prof. Dr. Friedrich Schneider, Department of Economics, Johannes Kepler University of Linz, 2010
5
4
3
2
16
14
12
10
UK
Ireland
Changes in the level of illegal activity ... ... correspond with changes of AW levels
European average1
AW penetration Illegal economy
5 Providing decent work
1.5
0.5
18
18
16
14
12
1.0
2
TAW penetration (% of workforce)
5
4
3
2
1
0
Illegal economy (% of GDP)1
25 20 15 10 5
United Kingdom
U.S.A.
Switzerland
Sweden
Spain Portugal
Norway
Netherlands
Japan
Italy
Ireland
Greece
Germany
France
Finland
Denmark
Belgium
Austria
Agency work contributes to the fight against undeclared work Countries with high agency work have lower levels of illegal economic activity
1. Calculated using the currency demand approach and the MIMIC method; for more information see "The Influence of the economic crisis on the underground economy in
Germany and the other OECD-countries in 2010: a (further) increase" by Dr. Friedrich Schneider Note: 2008 figures used in order to remove impact of crisis
Source: Prof. Dr. Friedrich Schneider, Department of Economics, Johannes Kepler University of Linz, 2010
R2 = 0.41
5 Providing decent work
A sector committed to social dialogue
Countries/
EUROPE
Cross-
sectoral
AW
sector
AW
company
(own staff)
User
companies
Austria
Belgium
Denmark
Finland
France
Germany
Ireland
Italy
Luxembourg
Macedonia
Netherlands
Norway
Poland
Portugal
Spain
Sweden
Switzerland
UK () Source: Eurofound & Ciett
Countries/
Rest of
World
Cross-
sectoral
AW
sector
AW
company
User
companies
Argentina
Australia
Brazil
Chile2 - - - -
Colombia3 - - - -
Japan4 ()
New
Zealand
Mexico
Peru3 - - - -
South Africa - - -
Notes
1) in the UK, cross-sectoral level refers to a single agreement between CBI and
TUC rather than to collective bargaining as such.
2) Collective agreements are not allowed for agency workers (20.123 law, art.
304 & 305).
3) There are no CLAs in these countries
1) in Japan, AW sector refers to a single agreement between Rengo and
JASSA rather than to collective bargaining as such.
5 Providing decent work
Key dimensions of PrES Regulatory Efficiency Index Assesses degrees of flexibility to operate and security for workers
1. Sectoral bans, caps on number of agency workers, reasons of use, maximum length of assignment, obligations to consult trade unions, renewals Source: Ciett, BCG analysis
A B
D C
A – Right of establishment
1. Legal recognition of the triangular work
relationship in all countries
2. No limitation of services to be delivered
(real private employment agencies)
3. No unjustified and disproportionate
barriers to enter the market
C – Right to negotiate/social protection
6. AW recognized as a sector on its own
7. Ability to implement social protection
for agency workers that can be
capitalized and portable
B – Right to provide services/ to contract
4. Ability to offer the full range of labour
contracts (no limitations or restrictions)
5. Removal of key restrictions on the use of
AW1
D – Right to contribute to labour policies
8. Access to training for agency workers
to be as broad and easy as possible
9. Existence of public-private partner-
ships in terms of employment services
10.PrES are committed and involved in
the fight against illegal practices and
unethical agencies
6 Need for appropriate regulation
Results of regulatory efficiency index Significant differences between countries
Note: Further clarification outstanding for Eastern European countries Source: National federations, BCG analysis
14
8
3 2
Esto
nia
38
18
11
8
Arg
entina
41
20
12
3 6
Chile
45
23
12
3
10
Lithuania
54
22
16
3
13
Luxem
bourg
56
20
6
15
4
Gre
ece
46
20
8
11
6
Czech R
epublic
49
23
15
11
9
Mexic
o
63
27
10
17
10
Hungary
66
27
12
7
21
Italy
67
23
8
17
19
South
Afr
ica
69
30
13
13
14
Pola
nd
73
27
10
15
22
Japan
74
27
17
15
16
Austr
ia
75
23
13
18
21
Fra
nce
76
23
8
20
24
Germ
any
76
30
14
18
14
Norw
ay
76
30
13
18
15 N
ew
Zeala
nd
76
25
18
15
19
Belg
ium
79
27
8
20
24
Austr
alia
80
30
18
10
23
Un
ite
d K
ing
do
m
83
30
18
15
20
Den
ma
rk
85
27
20
20
19
Un
ite
d S
tate
s
86
30
18
15
24
Sw
ed
en
89
30
14
18
27
Ne
therl
an
ds
93
27
17
20
30 80
60
40
20
0
Ø 65
Turk
ey
PrES Regulatory Index score
100
20
4
15
17
Slo
venia
57
27
14
3
13
Spain
57
17
11
17
13
Irela
nd
58
23
18
8
9
Sw
itzerland
59
Establishment
Provide services and to contract
Negotiate and social protection
Contribute to labour market policies
Right to:
6 Need for appropriate regulation
4 main types of environment where PrES operate Important sub-groups based on nuances of social systems
Market type
Market driven
Europe
Non-Europe
Western
Europe
Social
dialogue
based Nordics
Asia
Legislator
driven
Western
Europe
Medi-
terranean
Emerging
markets
Eastern
Europe
Lat Am
Asia
Countries
• UK, Ireland
• US, Australia, New
Zealand
• Netherlands
• Switzerland, Austria,
Germany
• Sweden, Norway,
Denmark, Finland
• Japan
• France, Belgium,
Luxembourg
• Italy, Greece, Spain,
Portugal, South Africa
• Eastern Europe
• Latin America
• India, China
1
2
3
4
Cluster characteristics
• Rapid AW development, with appreciable drop-off in the crisis
• Open regulatory environment with limited restrictions
• Liberal economies favoring flexibility over security
• Significant degree of AW penetration in relatively mature markets
• Moderately regulated, varying balances of flexibility and security
• Labor market organized and regulated by collective agreements
between social partners
• Historically low AW penetration and slow industry development
• Unique Nordic social and economic system
• Generally liberal economies but high value on security and social
acceptance challenges
• Penetration depending on level of industry development, ranging
from below to above average
• Highly regulated, weighted towards job security over flexibility
• Historically labor markets with high unemployment relative to Social
dialogue peers
• Nascent industries with AW legally recognised only recently
• Regulatory policies still in development
• Economic policies and market dynamics still evolving
6 Need for appropriate regulation
-0.8
Pola
nd
-0.6
Fra
nce
-0.6
Luxem
bourg
-0.4
Gre
ece
-0.4
Port
ugal
-0.2
Slo
venia
-0.2
Mexic
o
-0.1
Czech R
epublic
-0.1
Germ
any
0.1
Fin
land
0.1
US
A
0.2
Austr
ia
0.3
UK
0.4 S
weden
0.5 Japan
0.5
Canada
0.5
Neth
erlands
0.7
Austr
alia
0.7
Denm
ark
0.8
Norw
ay
0.8
New
Zeala
nd
0.9
Sw
itzerland
1.3
Labor Market Efficiency Index1
1.5
1.0
0.5
0.0
-0.5
-1.0
Hungary
-1.0
Chile
-0.9
Spain
-0.9
Italy
-0.9
Slo
vakia
-0.9
Belg
ium
Labor markets performance is related to country clusters
Mean
1. See appendix for methodology discussion Source: OECD, Eurostat
Market driven
Social dialogue based
Legislator driven
Emerging markets
6 Need for appropriate regulation
Right level of regulation allows AW to contribute to labour market Clear correlation between AW penetration and Regulatory Efficiency Index score
AW penetration rate 20101 (%)
4
0
PrES Regulatory Efficiency Index
100 90 80 70 60 50 40
2
1
USA
Denmark
UK
Poland
Argentina
Chile
Czech Republic
Austria
Germany
Greece
Slovenia
Hungary
Spain Norway
Belgium
Japan Switzerland
Sweden
Italy
Netherlands
France
High correlation also within clusters
representing different stages of maturity 1. Only 2009 data available for Norway, Hungary, Slovenia, Greece, Austria, Czech Republic, Chile, Denmark Note: No penetration rates available for NZ, MX, TR, AU, EE and LT; Not included in correlation due to exceptional situation or data issues: ZA, IE and LU Source: National federations, BCG analysis
Social dialogue - Asia
Social dialogue - Nordics
Social dialogue - CE
Legislator driven
Market driven
Emerging markets
R2 = 0.42
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