0 James Gribben, Ciett Communications and Economic Affairs Advisor Private employment services’ contribution to more efficient labour markets.

1

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-basedExpectations-based Fundamental-basedFundamental-based

5-year firm op margin volatility (%)2

4

3

2

1

201020001990198019701960

5-year firm revenue growth volatility (%)2

5

25

20

15

10

201020001990198019701960

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

60

50

40

30

20

201020001990198019701960

Increase1990-2010 vs. 1960-1979

1. Weighted average across all firms, based on market cap 2. Weighted average across all firms, based on revenueNote: 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

(%)806040200

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 AWMain 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 downturnGermany: higher revenue growth when agency work is used

1. Including construction and other sectorsSource: IW Consult GmbH study "Zeitarbeit in Deutschland" 2011

6%

Revenue growth 2009 – 2010

Small (< 50 employees)

IndustryMedium and large (> 50 employees)

0

13%

6%

11%

20

Service1 With export activities

15

> 5% of revenue

TOTALNo R&D spendings

< 5% of revenue

5

No export activities

1010%

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


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 ...

Critical to managing seasonality and economic cyclicality ...

... as well as allowing flexibility for workers who need it, i.e. sick or maternity leave

... 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


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

Alternatives to agency workAlternatives 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 dothe work

8%

Internal flexibility

54%

Total

100%

No job creation

62%No substitution

74%

ConclusionsConclusions

• 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 ItalyRegulatory changes in favor of AW and their positive impact on the level of unemployment

0.5

5

20082006

10

0.0

1.515

AW penetration rate (%)Unemployment rate (%)

1.0

2000 20021996 1998 20041997 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


PrES allow lower level of GDP growth needed to create jobsAnalysis 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 estimatedSource: federgon

Employment recovery

AW recovery

The diversity of agency workers’ profiles increases labour market participation

StudentsStudents

(make money to fund studies

and/or vacations)

Workers reentering the labour market

Workers reentering the labour market

(work as temps after period of

unemployment/maternity leave)

Workers looking for a

permanent job

Workers looking for a

permanent job

(Second best choice but see AW a stepping

stone)

First time entrants

First time entrants

(enter the labour market and gain

first work experience)

Flex Professionals

Flex Professionals

(not looking for a permanent contract)

Senior workersSenior workers

(remain employed to get

additional incomes)

3 Driving down segmentation

Agency workers in South Africa are predominantly young2 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

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

Population (%)100

50

0

Employed open-ended

Employed fixed-term

Temporary agency worker

Unemployed

StudentOther

Inactive

Czech Republic France Netherlands1 Norway Sweden1 Switzerland

Note: 2010 data if not otherwise stated1. 2009 dataSource: 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%


Stepping stone effect also applies in South Africa

South Africa 2009South Africa 2009

%

100

80

60

40

20

0

Post situation of AworkersPrevious Situation of Aworkers

15%

wor

king

61%

wor

king

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

FindingsFindings

Source: APSO


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 first job? Is AW effective to find a permanent job?Is AW effective to find a permanent job?

Note: AW – agency workSource: 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


% AW3

2.0

1.5

1.0

0.5

% Illegal economy2

19

18

17

16

15

14

20092007200520031999/00

Reduction in illegal economy correlates with increase in AWIncrease 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 penetrationNote: Two year averages for 1997/98, 1999/00, and 01/02Source: 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 ...Changes in the level of illegal activity ...

... correspond with changes of AW levels... correspond with changes of AW levels

European average1

AW penetrationIllegal 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

252015105

United Kingdom

U.S.A.

SwitzerlandSweden

SpainPortugal

Norway

Netherlands

Japan

Italy

Ireland

Greece

Germany

France

Finland

Denmark

Belgium

Austria

Agency work contributes to the fight against undeclared workCountries 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 inGermany and the other OECD-countries in 2010: a (further) increase" by Dr. Friedrich SchneiderNote: 2008 figures used in order to remove impact of crisisSource: Prof. Dr. Friedrich Schneider, Department of Economics, Johannes Kepler University of Linz, 2010

R2 = 0.41


A sector committed to social dialogue

Source: Eurofound & Ciett

Notes1) 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 countries1) in Japan, AW sector refers to a single agreement between Rengo and JASSA rather than to collective bargaining as such.


Key dimensions of PrES Regulatory Efficiency IndexAssesses 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, renewalsSource: Ciett, BCG analysis

A B

DC

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 indexSignificant differences between countries

Note: Further clarification outstanding for Eastern European countriesSource: National federations, BCG analysis

14

83

2

Est

onia

38

18

11

8

Arg

entin

a

41

20

12

36

Chi

le

45

23

12

3

10

Lith

uani

a

54

22

16

3

13

Luxe

mbo

urg

56

20

6

15

4

Gre

ece

46

20

8

11

6

Cze

ch R

epub

lic

49

23

15

11

9

Mex

ico

63

27

10

17

10

Hun

gary

66

27

12

7

21

Italy

67

23

8

17

19

Sou

th A

fric

a

69

30

13

13

14

Pol

and

73

27

10

15

22

Japa

n

74

27

17

15

16

Aus

tria

75

23

13

18

21

Fra

nce

76

23

8

20

24

Ger

man

y

76

30

14

18

14

Nor

way

76

30

13

18

15N

ew Z

eala

nd

76

25

18

15

19

Bel

gium

79

27

8

20

24

Aus

tral

ia80

30

18

10

23

Un

ite

d K

ing

do

m

83

30

18

15

20

De

nm

ark

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

the

rla

nd

s

93

27

17

20

3080

60

40

20

0

Ø 65

Tur

key

PrES Regulatory Index score

100

20

4

15

17

Slo

veni

a

57

27

14

3

13

Spa

in

57

17

11

17

13

Irel

and

58

23

18

8

9

Sw

itzer

land

59

Establishment

Provide services and to contract

Negotiate and social protection

Contribute to labour market policiesRight to:


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

Market typeMarket 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

CountriesCountries

• 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 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


-0.8

Pol

and

-0.6

Fra

nce

-0.6

Luxe

mbo

urg

-0.4

Gre

ece

-0.4

Por

tuga

l

-0.2

Slo

veni

a

-0.2

Mex

ico

-0.1

Cze

ch R

epub

lic

-0.1

Ger

man

y

0.1

Fin

land

0.1

US

A

0.2

Aus

tria

0.3

UK

0.4S

wed

en

0.5Ja

pan

0.5

Can

ada

0.5

Net

herla

nds

0.7

Aus

tral

ia

0.7

Den

mar

k

0.8

Nor

way

0.8

New

Zea

land

0.9

Sw

itzer

land

1.3

Labor Market Efficiency Index1

1.5

1.0

0.5

0.0

-0.5

-1.0

Hun

gary

-1.0

Chi

le

-0.9

Spa

in

-0.9

Italy

-0.9

Slo

vaki

a

-0.9

Bel

gium

Labor markets performance is related to country clusters

Mean

1. See appendix for methodology discussionSource: OECD, Eurostat

Market driven

Social dialogue based

Legislator driven

Emerging markets


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

100908070605040

2

1

USA

Denmark

UK

Poland

Argentina

Chile

Czech Republic

Austria

Germany

GreeceSlovenia

HungarySpain Norway

Belgium

JapanSwitzerlandSweden

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, DenmarkNote: 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 LUSource: National federations, BCG analysis

Social dialogue - Asia

Social dialogue - Nordics

Social dialogue - CE

Legislator driven

Market driven

Emerging markets

R2 = 0.42

Our global pledges to better labour markets

Thanks!

Questions?

More info at:

www.ciett.org

[email protected]

0 James Gribben, Ciett Communications and Economic Affairs Advisor Private employment services’ contribution to more efficient labour markets.

Documents

higher revenue growth

temporary agency work

revenue note

training slide

year firm op margin

greater use of aw

bcgciett discussion

challenges source