Back to the overview
December 20, 2007 – Richard Donkin
The European labour market could create 570,000 new jobs in the next five years through the lifting of restrictions on the use of agency work, according to a new report.
The report, published by Eurociett, the European Confederation of Private Employment Agencies, outlines a powerful case for lifting restrictions that have impeded the spread of private agency work in parts of the European Union.
Research for the report, carried out by Bain and Company, management consultants, analysed six European countries: Belgium, France, Germany, Spain and the Netherlands and the UK. These six countries collectively accounted for 85 per cent of the European private agency market that had a combined turnover exceeding Euros90bn in 2006.
The use of temporary agency workers more than doubled across Europe between 1996 and 2006, from 1.6m to 3.3m full-time equivalent jobs but the new research suggests that growth could have been even larger with more widespread deregulation of temporary work.
Growth in temporary work has risen in line with labour reforms in some countries such as Germany, Italy and France. But labour market restrictions have been retained in a number of important sectors such as the public sector in France, Belgium and Spain, and the construction sectors in Germany and Spain.
In addition some countries, France for example, continue to impose a maximum length for assignments whiles also limiting scope for contract renewals. In France, Belgium and Spain, employers must outline specific “reasons for use” defined in law when they seek to engage agency workers.
The report argues that many of these restrictions are founded on outdated, often discriminatory approaches, underpinned by what it says is a “cultural reluctance” in some countries to embrace greater labour market flexibility.
Some temporary work arrangements require trade union notification and several countries, such as Belgium, operate an approval process where trade unions have the power to rubber stamp various reasons for use governing agency contracts. Collective labour agreements in Italy, for example, limit the percentage of agency workers that can be used by an employer.
The report highlights the often piecemeal, attritional progress that has been made sector by sector, country by country in the past few years, often in the face of stubborn resistance among trade unions, reluctant to dilute or reform hard won job protection.
Much of this protection, however, was framed in an industrial age where the structure of employment was based on the assumption that business, sectors and jobs were built to last.
As the Eurociett report points out, such protection today can sometimes undermine rather than promote employment prospects. One large car manufacturer that chose to relocate a new plant in eastern Germany, exploiting the region's excellent manufacturing skills, only did so because it was able to secure flexible working arrangements that included the use of temporary agency workers.
Increasingly companies are making location choices, based on labour market flexibility. Such choices were restricted in the past because of the need for heavy investment in plant and machinery. Coupled to this, many sectors would rely also on a localised inter-connected network of suppliers.
The industrial bedrock that underpinned manufacturing for much of the 20th century is crumbling as production methods and assembly arrangements diversify internationally and as service industry work multiplies. This has extended the labour-sourcing choices of businesses that find themselves trying to balance their desire for cheaper labour with a need for a reliable supply of skilled labour.
Implicit in the Eurociett report is the need for trade unions to adopt more enlightened attitudes to employment protection. Ring fencing agreements made for what to outsiders must look like a privileged class of permanently employed workers is denying access for thousands of people who could otherwise secure a foothold in employment through temporary agency work.
The point is underlined in the research which found that agency work was providing significant opportunities for disabled workers, older workers and those who belong to ethnic minorities.
Many of the temporary jobs secured by people who traditionally struggle to get a foothold in the labour market are converted in to full time positions but as the status and desirability of temporary work improves, increasing numbers of agency workers today are choosing to retain their temporary status.
This suggests that conventional attitudes to temporary work across much of the EU, that continue to view such work as “second class” need to change. Many of the existing reforms have been achieved in the spirit of increasing opportunities for converting temporary work to full time work in so-called “temp to work” arrangements.
In the UK, where labour market deregulation has enabled a significant growth in private agency work, such attitudes appear to be changing rapidly as conditions and rates for temporary employees improve.
Given the evidence accumulated by Bain, it is difficult to disagree with the report's conclusion that the temporary agency sector has established itself as an “engine for job creation” within the EU.
Removal of sectoral bans and the “reasons of use” arrangements, it says, would not only create more jobs, more competition and a fairer jobs market, it would also boost the EU economy over the next five years by Euros 12.5bn, through greater economic activity, improved tax revenues and savings on unemployment benefit.
At the same time, Eurociett promises to improve its dialogue with trade unions and to work, through national agency bodies, to improve the image of the agency sector that has been undermined by poor practices and inadequate standards in some countries.
The report should be welcomed as an important addition to the European policy debate on labour market flexibility.
Back to the overview