December 2007 – Restrictions to temporary work are blocking jobs growth across Europe

New research published by Eurociett, the European Confederation of Private Employment Agencies, says that lifting restrictions on temporary work across the European Union could create some 2.1m new jobs and boost the European economy by Euros 12.5bn in the next five years.

The research* has been undertaken by Bain and Company, management consultants, in six European countries – the UK, France, Belgium, Germany, Spain and the Netherlands – that together accounted for 85 per cent of the Euros90bn market for private agency workers in 2006.

Labour market reforms in countries such as Germany, Italy and France have created significant growth in the European market for temporary agency workers in the past few years. The number of agency workers in the EU more than doubled between 1996 and 2006, from 1.6m to 3.3m full-time equivalent jobs.

But growth could have been stronger still, suggests the report, had there been a greater willingness of some European countries to go further in lifting restrictions on temporary work.

Restrictions have been retained in the French, Belgian and Spanish public sectors and in the German and Spanish construction industries.

Additionally some countries, such as France, impose maximum time limits for temporary assignments and limit the scope for contract renewals. Tightly drawn labour laws in France, Belgium and Spain, insist that employers seeking to enter agreements with temporary worker agencies must outline “reasons of use” to justify the contracts.

Trade unions must be notified of some of these arrangements and in a number of countries - Belgium for example – unions have the power to intervene if they object to specified reasons of use.

National variations in labour laws have hampered past attempts to create greater harmonisation of European labour laws. Italy, for example, operates a quota system limiting the percentage of agency workers that can be allocated to any one employer.

Attempts to introduce an EU Agency Workers Directive were shelved some years ago when the UK, Ireland and Denmark, supported by Germany and Poland, objected to a central proposition that temporary workers should have the same pay and conditions as those doing the same work full time.

The directive was back on the agenda at the European Council this week but the UK’s Recruitment and Employment Confederation is still arguing that in its existing form, the directive would result in more rather than less regulatory red tape.

“There simply isn’t the abuse on the ground to support the need for this directive. It is not in the interests of recruitment agencies to treat agency workers badly, as without them they would not have a business,” says Helen Reynolds, the REC’s acting chief executive.

Whatever the status of the directive, the Eurociett report seems to be placing greater faith on national bodies and governments to introduce specific reforms. “The message in the report is quite simple. If you lift certain restrictions there will be a substantial positive effect in the growth of jobs,” says Annemarie Muntz, president of Eurociett and head of public affairs at Vedior, the staffing services and recruitment group.

The Eurociett report welcomed industry initiatives aimed at securing better co-operation with trade unions. Industry bodies have also committed themselves to cleaning up the agency business that has been undermined by sharp practice, including the illegal use of temporary labour by unscrupulous employers.

Beyond such abuses, however, the industry must also overcome a persistent suspicion of temporary working underpinned by historic trade union opposition to the use of casual labour.

It goes against the grain for trade unions to give ground on temporary working when they have struggled in the past to establish better pay and conditions for full-time workers. The full-time job remains the ideal for many within the labour movement.

But organised labour has been faced with seismic structural change across industry in the past 20 years with the decline or uprooting of entire industries, the emergence of cheaper labour markets, and the globalisation of product and labour sourcing.

Companies today are balancing their need for skilled labour against the regulatory framework that can restrict employment flexibility. The provision of flexible labour using agencies, says the report, is sometimes crucial to investment decisions.

Such arrangements, it points out, can help to protect the jobs of permanent workers since the work allocated to agencies can be expanded or contracted depending on cyclical or seasonal demand.

“Staffing jobs are a terrific bridge into employment, as agencies are able to match supply and demand in a very efficient way. Our sense is that Europe needs to move boldly on introducing much greater flexibility into labour markets,” says Peter Siderman, managing director of the Adecco Institute, a research organisation established by Adecco, the staffing company.

He points to a flexible arrangement created by a number of big European employers, including Airbus Industries that has 11,000 permanent and 4,500 temporary workers (30 per cent of them engineers) in Germany.

BMW’s futuristic car factory in Leipzig has 2,500 permanent and 1,000 temps in addition to having special production lines focused on employing workers over forty years of age.

Trade union intransigence can be an obstacle to such arrangements that are led by competitive demands. Another issue for labour markets is the way that robust job protection can make it difficult for “outsiders” to get jobs.

Yet temporary work, when used as a conduit in to the labour market through the so-called “temp to perm” route, creates greater opportunities for the long-term unemployed.

Not all agency work, however, should be seen as a route to full-time working. The Eurociett report points out that temporary work can prove attractive for disabled workers, older workers and those among ethnic minorities. Full-time working for some of these people may be impractical or undesirable, so the promise of an organised, protected, full-time job can prove unintentionally discriminatory.

The rolling back of labour restrictions across Europe has been a slow, often piecemeal and occasionally turbulent process. Today, with an expanded European Union, including former communist regimes, the labour markets of individual states are at different stages of maturity.

While the European Council continues to debate broader reform, Eurociett has shown that action in just two specific areas could make a substantial economic difference.

Removal of sector bans and broadening the “reasons of use” restrictions, says the report, would be sufficient to create an extra 2.1m full-time equivalent jobs both directly and through structural growth of the agency industry over five years. “The jobs created by lifting restrictions in sectors that have been walled-off to temporary work, would tend to be overwhelmingly new, and not in replacement of permanent employees, simply because these sectors also need the flexibility to react to needs as they arise,” says Mr Siderman.

The accompanying Euros12.5 bn boost to the European economy, says the report, would be achieved through the generation of stronger economic activity supplemented by greater tax income and savings in unemployment benefit.

That seems powerful evidence to support Eurociett’s argument that the private agency sector has established itself as an “engine for job creation” within the EU.

*More Work Opportunities for More people, unlocking the private agency industry’s contribution to a better functioning labour market, is available the Eurociett website: www.euro-ciett.org/

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