Adapting to change How private employment services facilitate adaptation to change, better labour markets and decent work.
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1 Adapting to change How private employment services facilitate adaptation to change, better labour markets and decent work Elmar Wiederin
2 The continuation of a series "Orchestrating the evolution of Private Employment Agencies towards a stronger society" "More work opportunities for more people" "Adapting to change" 1
3 ... involving multiple stakeholders and extensive research Three phases... Collect data and elaborate hypotheses Analysis, interpretation and conclusions Writing the report and aligning all stakeholders...with a joint team... Steering by board members of Ciett/Eurociett Project team from Ciett secretary and BCG team Research committee with federations and corporates... extensive research and... Quantitative and qualitative research Independent survey of user organizations Development of regulatory- and labour market-efficiency index... global expertise Over interviews with stakeholders International organizations, regulators, unions, and user organizations Worldwide BCG experts 2
4 Key messages 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 3
5 Content of our report 1 Private employment services help to adapt to more volatile and complex labour markets 2 PrES reduce both structural and frictional unemployment 3 PrES reduce segmentation of the labour market 4 PrES contribute to matching and developing the skills needed in the labour market 5 PrES deliver decent work 6 Efficient labour markets need relevant regulation of PrES Source: Ciett RfP, BCG/Ciett discussion 4
6 1 Adaptation to change Companies using agency work accelerate faster out of downturn Germany: higher revenue growth when agency work is used Revenue growth Using AW Not using AW 11% 11% 6% 7% 13% 10% 10% 5% 7% 5% % 8% 8% 5% 16% 10% 13% 6% 11% 6% 0 Small (< 50 employees) Medium and large (> 50 employees) Industry Service 1 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" 11 5
7 2 Reducing structural & frictional unemployment Agency work ensures job creation Most companies would not have created jobs without agency work Alternatives to agency work Conclusions % of responses (total = 101) % 54% 8% No job creation 62% 12% No substitution 74% 26% 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 0 Total Internal flexibility Not do the work Other external flexibility solution Hire permanent workers Source: User organization survey, BCG analysis 6
8 3 Driving down segmentation Agency work provides a stepping stone into employment Bringing people into employment reduces the segmentation of the labour market Population (%) % 70% 11% 66% 59% 68% 16% 65% 34% 85% 71% 47% Temporary agency worker Employed fixed-term Employed open-ended 0 Czech Republic France Netherlands 1 Norway Sweden 1 Switzerland Previous situation of Aworkers % working before AW 45% 65% % working after AW Post situation of Aworkers Other Unemployed Student Inactive Note: 10 data if not otherwise stated data Source: Ciett national reports 09, 10 7
9 4 Matching & developing skills Increasing demand for matching labour needs Aging of population and talent gap foreseen as major shifts Increasing talent shortages occurring in the Northern hemisphere 35 million extra workers needed in Europe by 50 to fill employment gap Elderly dependency rate to double by 50 in most G7 and all BRIC countries 25 million extra workers needed in the US by 30 to sustain economic growth Increasing global mismatch 45 million new entrants in global job market annually. Most of them young and from developing countries Employability will continue to be a huge problem worldwide Only 25% of Indian and % of Russian professionals currently considered employable by multinationals Workforce surpluses in many Southern hemisphere countries Source: WEF 11, Global Talent Risk - Seven Responses, CEDEFOP, Eurostat, European Council 8
10 5 Providing decent work Agency work contributes to the fight against undeclared work Countries with high agency work have lower levels of illegal economic activity TAW penetration (% of workforce) 5 4 United Kingdom R 2 = Netherlands 2 1 U.S.A. Austria Switzerland Japan France Germany Ireland Sweden Finland Norway Denmark Belgium Portugal Spain Italy Greece 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 10: a (further) increase" by Dr. Friedrich Schneider Note: 08 figures used in order to remove impact of crisis Source: Prof. Dr. Friedrich Schneider, Department of Economics, Johannes Kepler University of Linz, 10 9
11 6 Needs a efficient regulatory environment Elements and level of relevant regulation have been defined 1. PrES Regulatory Efficiency Index 3. Country Clusters 2. Labour Market Efficiency Index 10
12 Key dimensions of PrES Regulatory Efficiency Index Assesses degrees of flexibility to operate and security for workers 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 A B 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 AW 1 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 C D 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 partnerships in terms of employment services 10.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 11
13 Results of regulatory efficiency index Significant differences between countries PrES Regulatory Index score Netherlands Sweden United States Denmark Note: Further clarification outstanding for Eastern European countries Source: National federations, BCG analysis United Kingdom Australia Belgium New Zealand Norway Germany France Austria Japan Poland South Africa Italy Hungary Mexico Switzerland Ireland Right to: Contribute to labour market policies Spain Negotiate and social protection Provide services and to contract Establishment Slovenia Luxembourg Lithuania Czech Republic Greece Chile Argentina Estonia Turkey Ø 65 12
14 Four main types of countries were identified 1. Market driven AW and labour laws are fairly liberalized and corporations enjoy high level of freedom in determining employment form Self-regulation plays an important part 2. Social dialogue based AW and labour laws are strongly influenced and determined by negotiations between social partners Freedom for the social partners to determine rules by negotiation 3. Legislator driven AW and labour laws are mainly determined by government bodies/legislation both at national and regional levels Mainly based on formal legislation 4. Emerging AW industry is still young and labour laws/legislation are still evolving and being developed Evolving legislation with in some cases significant informal work 13
15 Clusters have very different positions Agency work penetration and Labour Market Efficiency Index AW Penetration (%) 4 3 Market driven (Europe) Average Legislator driven 2 Social dialogue based (Central Europe, Asia) Market driven (USA, ANZ) Emerging markets 1 Social dialogue based (Nordics) Labor Market Efficiency Index Source: Eurostat; OECD; CIETT; BCG analysis 14
16 Overall recommendations to policy makers Requirements of PrES to maximize its contribution to labour markets Ensure that the regulatory framework for private employment services sector is adequate In countries without specific regulation of the industry, a legal framework should be adopted Elsewhere policymakers should ensure that it is not outdated by the new reality Recognise that the private employment services industry is a sector on its own It should benefit from the freedom to enter into collective bargaining Be able to negotiate with trade unions on the level of regulation and working conditions Allow PrES to be involved in designing and implementation of active labour market policies Contribution to facilitate transitions in the labour market To increase labour market participation by creating jobs and reducing undeclared work To deliver decent work should be included in public employment policies
17 Proposed agenda for the PrES industry 1 Work alongside all relevant stakeholders including social partners to optimise regulation 2 Ongoing action to improve governance and quality standards of the industry globally 3 Become an active career agent for workers 4 Communicate its role for efficient markets and against the unethical/illegal side of industry 5 Commitment to expanding its role as a labour market intermediary 16
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