James gribben ciett communications and economic affairs advisor
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Private employment services’ contribution to more efficient labour markets. James Gribben, Ciett Communications and Economic Affairs Advisor. 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)

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James Gribben, Ciett Communications and Economic Affairs Advisor

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James gribben ciett communications and economic affairs advisor

Private employment services’ contribution to more efficient labour markets

James Gribben, Ciett Communications and EconomicAffairsAdvisor


Ciett at a glance

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

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


Rise in firm instability clearly visible

Rise in firm instability clearly visible

Expectations-based

Fundamental-based

Market cap volatility

Revenue volatility

Operating margin volatility

5-year firm op margin volatility (%)2

5-year firm mkt cap growth volatility (%)1

5-year firm revenue growth volatility (%)2

4

60

25

50

20

3

40

15

2

30

10

20

5

1

1960

1970

1980

1990

2000

2010

1960

1970

1980

1990

2000

2010

1960

1970

1980

1990

2000

2010

Increase

1990-2010 vs. 1960-1979

50%

26%

32%

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


Providing flexibility is main reason of use of pres

Providing flexibility is main reason of use of PrES

1

Adaptation to change

Main reasons to make greater use of AW

Can respond quicker to business demands

76%

Desire for greater flexibility

65%

Can try out potential permanent hire

52%

Desire to keep fixed cost low

35%

Uncertainty over payroll taxes

9%

Uncertainty over medical costs

4%

Other

4%

0

20

40

60

80

(%)

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)


James gribben ciett communications and economic affairs advisor

Companies using agency work accelerate faster out of downturnGermany: higher revenue growth when agency work is used

1

Adaptation to change

Revenue growth 2009 – 2010

20

Using AW

Not using AW

16%

15%

15

13%

13%

11%

11%

11%

10%

10%

10%

10

8%

8%

7%

7%

6%

6%

6%

5%

5%

5%

5

0

Small (< 50 employees)

Medium and large (> 50 employees)

Industry

Service1

No export activities

With export activities

No R&D spendings

< 5% of revenue

> 5% of revenue

TOTAL

Company size

Sector

Export activity

R&D expenditures

Ability to react quickly results in higher revenue growth

1. Including construction and other sectors

Source: IW Consult GmbH study "Zeitarbeit in Deutschland" 2011


Agency work a key lever in creating flexibility

Agency work a key lever in creating flexibility

1

Adaptation to change

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

Share of companies using AW to

absorb activity fluctuations (%, 2009)

Share of companies using AW to replace

absent permanent staff (%, 2009)

Half of companies temporarily replace absent permanent staff with the help of AW

100

100

80

87

65

80

Ø 76

60

69

49

46

Ø 49

60

49

40

35

40

20

20

0

0

Netherlands

Germany

Switzerland

Sweden

Netherlands

Sweden

Germany

Switzerland

Source: Ciett national reports


Agency work ensures job creation most companies would not have created jobs without agency work

Agency work ensures job creation Most companies would not have created jobs without agency work

2

Reducing structural & frictional unemployment

Alternatives to agency work

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

% of responses (total = 101)

100

80

No job creation

62%

54%

No substitution

74%

60

100%

8%

40

12%

20

26%

0

Total

Internal

flexibility

Not do

the work

Other external flexibility solution

Hire permanent workers

Source: User organization survey, BCG analysis


James gribben ciett communications and economic affairs advisor

Agency work helped reduce unemployment in ItalyRegulatory changes in favor of AW and their positive impact on the level of unemployment

Reducing structural & frictional unemployment

2

Unemployment rate (%)

AW penetration rate (%)

15

1.5

Unemployment rate

TAW penetration rate

Legal recognition of AW in Italy

1.0

10

0.5

Regulatory changes

in favor of AW

5

0.0

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

Unemployment rate started to decline right after introduction of agency work work

Source: OECD, Ciett national reports, GiGroup


James gribben ciett communications and economic affairs advisor

PrES allow lower level of GDP growth needed to create jobsAnalysis of longer time series for Belgium

GDP / employment year-on-year growth (quarterly, %)

AW year-on-year growth (quarterly, %)

10

40

GDP

AW

Employment

5

20

0

0

-5

-20

Employment recovery

AW recovery

-10

-40

01/1991

03/1991

01/1992

03/1992

01/1993

03/1993

01/1994

03/1994

01/1995

03/1995

01/1996

03/1996

01/1997

03/1997

01/1998

03/1998

01/1999

03/1999

01/2000

03/2000

01/2001

03/2001

01/2002

03/2002

01/2003

03/2003

01/2004

03/2004

01/2005

03/2005

01/2006

03/2006

01/2007

03/2007

01/2008

03/2008

01/2009

03/2009

01/2010

03/2010

Agency work performs in line with GDP and starts significantly ahead of total employment

Note: GDP YoY growth figures for 1995 estimated

Source: federgon


The diversity of agency workers profiles increases labour market participation

The diversity of agency workers’ profiles increases labour market participation

Driving down segmentation

3

Workers reentering the labour market

Workers looking for a permanent job

First time entrants

Flex Professionals

Students

Senior workers

(make money to fund studies and/or vacations)

(work as temps after period of unemployment/maternity leave)

(Second best choice but see AW a stepping stone)

(enter the labour market and gain first work experience)

(not looking for a permanent contract)

(remain employed to get additional incomes)


Agency workers in south africa are predominantly young

Agency workers in South Africa are predominantly young

2

Reducing structural & frictional unemployment


Agency work provides needed opportunity for young people

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


James gribben ciett communications and economic affairs advisor

Agency work provides a stepping stone into employmentBringing people into employment reduces the segmentation of the labour market

Driving down segmentation

3

Population (%)

100

71%

Temporary agency worker

65%

85%

70%

68%

66%

50

Employed fixed-term

50%

59%

47%

16%

34%

Employed open-ended

11%

0

Czech Republic

France

Netherlands1

Norway

Sweden1

Switzerland

% working before AW

% working after AW

Other 

Student

Unemployed

Inactive

Post situation of Aworkers

Previous situation of Aworkers

65%

45%

Note: 2010 data if not otherwise stated

1. 2009 data

Source: Ciett national reports 2009, 2010


Stepping stone effect also applies in south africa

Stepping stone effect also applies in South Africa

2

Reducing structural & frictional unemployment

South Africa 2009

Findings

Other

Temporary agency worker

  • 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

Unemployed

Employed fixed-term

Student

Employed open-ended

Inactive

%

100

80

60

40

61% working

15% working

20

0

Previous Situation of Aworkers

Post situation of Aworkers

Source: APSO


Stepping stone effect largely recognised

Stepping stone effect largely recognised

3

Driving down segmentation

Is AW effective to find a permanent job?

Is AW effective to find a first job?

% of respondents agreeing with the statement, 2010

% of respondents agreeing with the statement, 2010

100%

100%

92%

90%

86%

85%

84%

82%

80%

78%

77%

80%

80%

71%

69%

61%

59%

60%

60%

52%

43%

40%

40%

40%

20%

20%

0%

0%

UK

BE

PL

FR

ES

NL

IT

DE

UK

NL

PL

BE

FR

ES

DE

IT

High perceived value of AW both to get into the labour market and find a full-time job

Note: AW – agency work

Source: Regards croisés sur l’intérim, l’Observatoire des Métiers et de l’Emploi, July 2010


James gribben ciett communications and economic affairs advisor

Reduction in illegal economy correlates with increase in AWIncrease in illegal economy, decrease in AW in 2009 dues to the crisis

5

Providing decent work

Changes in the level of illegal activity ...

... correspond with changes of AW levels

European average1

% Illegal economy

% AW

18

3

% Illegal economy2

% AW3

2

Germany

19

2.0

16

1

14

0

18

16

5

1.5

17

UK

14

4

12

3

16

1.0

2

10

18

15

2

18

16

1.5

Ireland

14

0.5

1999/00

2003

2005

2007

2009

14

1.0

12

0.5

Illegal economy

AW penetration

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


James gribben ciett communications and economic affairs advisor

Agency work contributes to the fight against undeclared workCountries with high agency work have lower levels of illegal economic activity

5

Providing decent work

TAW penetration (% of workforce)

5

R2 = 0.41

United Kingdom

4

3

Netherlands

France

Japan

Belgium

2

Germany

Austria

U.S.A.

Ireland

Switzerland

Sweden

Finland

Norway

1

Italy

Portugal

Spain

Denmark

Greece

0

5

10

15

20

25

Illegal economy (% of GDP)1

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


A sector committed to social dialogue

A sector committed to social dialogue

5

Providing decent work

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.

Source: Eurofound & Ciett


James gribben ciett communications and economic affairs advisor

Key dimensions of PrES Regulatory Efficiency IndexAssesses degrees of flexibility to operate and security for workers

6

Need for appropriate regulation

  • A – Right of establishment

    • Legal recognition of the triangular work relationship in all countries

    • No limitation of services to be delivered (real private employment agencies)

    • No unjustified and disproportionate barriers to enter the market

  • B – Right to provide services/ to contract

    • Ability to offer the full range of labour contracts (no limitations or restrictions)

    • Removal of key restrictions on the use of AW1

A

B

C

D

  • C – Right to negotiate/social protection

    • AW recognized as a sector on its own

    • Ability to implement social protection for agency workers that can be capitalized and portable

  • D – Right to contribute to labour policies

    • Access to training for agency workers to be as broad and easy as possible

    • Existence of public-private partner-ships in terms of employment services

    • PrES are committed and involved in the fight against illegal practices and unethical agencies

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


Results of regulatory efficiency index significant differences between countries

Results of regulatory efficiency indexSignificant differences between countries

6

Need for appropriate regulation

Right to:

Contribute to labour market policies

PrES Regulatory Index score

Negotiate and social protection

100

Provide services and to contract

93

89

Establishment

86

85

83

80

79

80

76

76

76

76

30

75

74

73

19

27

24

20

69

67

66

14

23

15

24

19

63

16

Ø 65

21

24

59

22

14

58

57

57

60

56

10

19

54

20

21

15

15

9

20

9

18

18

10

49

18

15

13

13

15

46

13

45

17

13

20

17

18

8

41

11

15

10

6

4

3

7

20

38

40

17

3

18

18

18

6

14

14

3

20

13

13

17

17

17

11

18

14

15

3

8

12

18

10

10

15

15

8

13

16

12

8

8

12

8

11

6

11

4

20

14

30

30

30

30

30

30

30

27

27

27

27

27

27

27

27

2

25

23

23

23

23

23

23

22

20

20

20

20

3

18

17

8

0

United Kingdom

United States

Czech Republic

Netherlands

New Zealand

Luxembourg

South Africa

Switzerland

Denmark

Sweden

Argentina

Germany

Lithuania

Australia

Slovenia

Hungary

Belgium

Norway

Estonia

Greece

Mexico

France

Austria

Poland

Turkey

Ireland

Japan

Spain

Chile

Italy

Note: Further clarification outstanding for Eastern European countries

Source: National federations, BCG analysis


James gribben ciett communications and economic affairs advisor

4 main types of environment where PrES operateImportant sub-groups based on nuances of social systems

6

Need for appropriate regulation

Market type

Countries

Cluster characteristics

  • Rapid AW development, with appreciable drop-off in the crisis

  • Open regulatory environment with limited restrictions

  • Liberal economies favoring flexibility over security

  • UK, Ireland

Market driven

Europe

1

Non-Europe

  • US, Australia, New Zealand

2

Social dialogue based

Western Europe

  • Netherlands

  • Switzerland, Austria, Germany

  • 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

Nordics

  • Sweden, Norway, Denmark, Finland

  • Historically low AW penetration and slow industry development

  • Unique Nordic social and economic system

Asia

  • Japan

  • Generally liberal economies but high value on security and social acceptance challenges

3

  • France, Belgium, Luxembourg

Legislator driven

  • 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

Western Europe

  • Italy, Greece, Spain, Portugal, South Africa

Medi-terranean

4

Emerging markets

Eastern Europe

  • Eastern Europe

  • Nascent industries with AW legally recognised only recently

  • Regulatory policies still in development

  • Economic policies and market dynamics still evolving

  • Latin America

Lat Am

  • India, China

Asia


Labor markets performance is related to country clusters

Labor markets performance is related to country clusters

6

Need for appropriate regulation

Labor Market Efficiency Index1

1.5

1.3

Market driven

Social dialogue based

Mean

1.0

Legislator driven

0.9

0.8

0.8

0.7

Emerging markets

0.7

0.5

0.5

0.5

0.5

0.4

0.3

0.2

0.1

0.1

0.0

-0.1

-0.1

-0.2

-0.2

-0.4

-0.4

-0.5

-0.6

-0.6

-0.8

-0.9

-0.9

-0.9

-0.9

-1.0

-1.0

Czech Republic

New Zealand

Luxembourg

Netherlands

Switzerland

Germany

Denmark

Australia

Slovenia

Slovakia

Hungary

Portugal

Belgium

Sweden

Canada

Norway

Finland

Greece

Mexico

Austria

France

Japan

Spain

Chile

USA

Italy

UK

Poland

1. See appendix for methodology discussion

Source: OECD, Eurostat


James gribben ciett communications and economic affairs advisor

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

UK

R2 = 0.42

Netherlands

Germany

2

France

Belgium

USA

Switzerland

Japan

Austria

Legislator driven

Sweden

Social dialogue - CE

1

Social dialogue - Nordics

Italy

Spain

Norway

Czech Republic

Denmark

Social dialogue - Asia

Hungary

Poland

Chile

Emerging markets

Slovenia

Argentina

Market driven

Greece

0

40

50

60

70

80

90

100

PrES Regulatory Efficiency Index

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


Our global pledges to better labour markets

Our global pledges to better labour markets


James gribben ciett communications and economic affairs advisor

Thanks!

Questions?

More info at:

www.ciett.org

[email protected]


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