CWS 3.0: October 26, 2011 - Vol. 3.30

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Global: Temporary Staffing Creates More Efficient Labor Markets

The use of contingent workers contributes to social and economic progress, according to a report release last week by Ciett, the International Confederation of Private Employment Agencies. According to the report, countries with mature and appropriately regulated staffing industries have better-functioning labor markets, resulting in job creation, smoother transitions and higher labor market participation and diversity.

The report also shows that the presence of appropriately regulated private employment services drives down the level of illegal work, which is the most precarious form of employment. Ciett plans to use the report as it calls on policy makers, businesses and trade unions to partner with private employment services to develop appropriate labor policies and regulations that will encourage adaptation to change, build better labor markets and deliver decent work. The organization plans to release an action plan at its annual conference next May.

“Like Ciett, we believe that temporary staffing is a vital component of any well-functioning labor market and that proper regulation is essential to enable businesses and workers to benefit,” commented Barry Asin, president of Staffing Industry Analysts, whose research was cited in the report. “Unfortunately, there are still many countries around the world where either an absence of regulation or inappropriate regulation hampers aspirations and dampens employment growth.”

Creating Jobs
The report notes that unemployment and agency work rates follow inverse patterns: the lower the unemployment rate, the higher the agency work penetration rate (the percentage of the overall workforce that is contingent). In recent years, private employment services have been critical in creating new jobs. In the U.S., staffing companies created 401,000 new jobs in 2010, the largest annual growth posted since 1994. In Europe, since the low point of the economic crisis in 2009 through the middle of this year, the sector has provided at least 900,000 new jobs in addition to the 3 million agency workers that have remained employed throughout the downturn.

Where the staffing industry is particularly effective is in its ability to deliver jobs ahead of the classic job creation curve, making it an important partner in managing economic fluctuations effectively. Private employment services actually start to create jobs even at very low levels of GDP growth and thereby help to jump-start economies. While this is positive at a broad economic level, it is also positive for individual businesses. The report highlights a 2009-2010 IW Consult study carried out in Germany, which demonstrated that organizations using agency work recorded revenue growth a full five percent higher than those that did not.

One of the main arguments used by critics of temporary agency work is that it is a poor substitute for (supposedly more secure) permanent work. However, the research notes that 74 percent of user organizations would not consider hiring permanent workers as an alternative to taking on agency workers. In addition, 62 percent of companies would choose internal flexibility solutions (such as overtime) or not to do the work if they had no access to agency work, resulting in no job creation at all. The average assignment length of around 3 months and the high turnover of agency workers prove that these jobs are not substituting permanent jobs, but are distinct and unique.

One interesting insight emerging from the report was the perceived advantages of temporary agency work over other flexible employment alternatives such as the use of self-employed/independent contractors. The two main advantages identified by 37 percent of respondents were the “faster hiring process” and “higher flexibility,” while other key advantages identified were “better regulatory compliance/legal security” (35 percent) and “cheaper solution” (27 percent).

Measuring Efficiency
Ciett endorse the “Flexicurity” model, which seeks to create a rational balance between the flexibility needed by organizations to run their businesses efficiently and the need for temporary workers to benefit from sensible employment protections. With this in mind, the organization has devised a new “Private Employment Services Regulatory Efficiency Index” with the help of the Boston Consulting Group. The Index assesses each staffing market according to 10 (weighted) dimensions of development, grouped into four key categories:

  • Establishment
    • legal recognition
    • limitation on services
    • unjustified restrictions
  • Provide services and to contract
    • ability to offer full the range of contracts
    • removal of restrictions on private employment services
  • Negotiate and social protection
    • recognition of agency work as a sector in its own right
    • sector’s ability to implement social protection for agency workers
  • Contribute to labor market policies
    • access to training
    • public/private partnership between employment services
    • commitment to fighting illegal practices

On this basis, Ciett rates the Netherlands, Sweden, U.S., Denmark and U.K. as the five most efficient labor markets, while the least efficient are Turkey, Estonia, Argentina, Chile and Greece (see chart below).

The full report, entitled ‘Adapting to Social Change’ can be downloaded here.  

Click image to enlarge.

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