Despite the lack of strong economic growth in Europe, there is more that can be done to create jobs, says the managing director of Eurociett, who believes EU policymakers have some tools to boost employment in a low-growth, or no-growth environment.
Dennis Pennel is managing director of the Brussels-based European Confederation of Private Employment Agencies. He spoke to EurActiv’s Jeremy Fleming
The current climate buzzwords have been jobs and growth, is there any evidence of growth in your sector?
The private employment services sector serves as a leading economic indicator because it consistently moves in line with GDP. We were one of the first sectors to see decline in early 2008 ahead of the financial crisis and we were also first to detect growth when economic circumstances picked up again in 2010.
At the moment, we see decline or stagnant GDP growth across Europe. Agency work is considered to be a leading economic indicator as it consistently moves in line with GDP figures. Much like GDP in Europe agency work is showing a negative trend at the moment: the number of agency workers is down 8% in September, compared with the same month in 2011.
Can there be jobs without much growth?
Yes there can. Firstly we need to ensure that labour markets are operating efficiently. There are 26 million unemployed people in the EU, but there are over 2 million unfilled vacancies. So an important initiative in creating jobs is to ensure a better and faster match between the supply and demand of work, in order to reduce frictional unemployment. This can notably be achieved through strong cooperation between public and private employment services.
Secondly there is solid data to support the view that well-functioning labour markets create jobs. The OECD has demonstrated the link between employment protection levels and unemployment, and research also shows a clear correlation between labour market efficiency and the employment rate. The [European] Commission acknowledged that efficient labour markets are now actually driving growth in its employment package released earlier this year.
Finally several recent studies have shown how jobs can now be created at fairly low levels of GDP growth thanks to the development of flexible forms of work. A study undertaken by the French Economic Observatory in July 2012 estimated that the level of growth needed to create employment has fallen from 1.5% to just 1%, in markets with flexible, well-balanced labour structures. Another recent study from Switzerland shows similar results.
What types of jobs are these?
While we see growth in jobs in ICT and healthcare, which are both sectors that are doing well, we also see significant potential growth for employment in the area of business and personal services. Companies and individuals are increasing buying in support services. In business this includes services such as accounting, recruitment and HR management, PR and IT while for individuals the services they seek are childcare, care for elderly relatives and domestic support services such as cleaning and gardening.
Can policymakers be persuaded to accept that they may have to start thinking about job creation in a no/low-growth environment?
Well we certainly need to try. The Commission itself scaled back its growth predictions from 1% to 0.1% recently and we are going to have to at least entertain the possibility of sustained period of zero growth. In this case we need to deal with it and to advance policies that will encourage countries to reform their labour markets to ensure that they are efficient and can start to drive growth.
I believe that striking the correct balance between flexibility and security for both workers and employers is the most crucial element of reform. Active labour market policies are also an important element and the fostering of strong cooperation between public and private employment services such as in the Commission’s PARES initiative will serve to smooth transitions and enhance job creation. Other initiatives such as the lifting of any unjustified restrictions to private employment services and seeking to reduce the tax burden on labour will also make labour markets more adaptive and make job creation, and indeed growth, easier.
If policymakers need proof that labour market reforms will work in enhancing job creation then they should take Germany as their example. Having increased the flexibility of its labour markets through reforms taken between 2003 and 2005, Germany currently has an unemployment level at its lowest since 1992. And indeed those countries such as the UK, Netherlands and Scandinavia which overhauled their labour markets some years ago have weathered the economic downturn much better than those who still have policies created half a century ago. Labour markets have moved on since then and governments have to wake up to that.
Agency and flexible jobs are often considered jobs with no security is that so?
Private employment services offer the most secure form of external, flexible work and are comprehensively regulated at national level. As the only form of work that is organised as a sector, agency work also offers complementary benefits for workers. Agencies work in a triangular relationship with employers and with workers and it is in their interests to find jobs for workers and to transition them between sectors and train them to do the jobs that are available thereby ensuring that they are always in employment.
Private employment agencies create jobs that would not exist otherwise and contribute to reducing undeclared work. Some 12 million workers in Europe use recruitment agencies each year to enter the labour market, change jobs, upgrade skills or move towards permanent positions.
What kind of innovations can introduce protection for flexible workers?
We need to recognise the new realities of the workplace and to organise social protection accordingly. Today’s labour markets are highly diversified and multi-segmented. The days of a job for life and the majority of people working under full-time contracts are gone. In the Netherlands, for example, less than 50% of people work under permanent full-time contracts while in France and Belgium there are over 30 different types of employment contract in place from freelance, self-employed and managed service company to fixed-term, temporary and training contracts. Workers need to be flexible in the new reality but this doesn’t mean that they should be penalised.
Currently we have a system in which worker’s rights and welfare entitlements are linked to their employers and based on permanent work contracts. The challenge for the future will be to organise welfare cover and entitlements for workers not as a function of their employer and number of years served in a company, but throughout their career, whatever their status or employment contract. What will be needed is a system whereby rights and welfare entitlements are attached to the person rather than the employer.
To achieve this we will need policy makers and social partners to work together. They will need to focus on modernising labour laws, reinventing health and social protection to ensure portability and transferability of rights, developing security through unemployment and retirement schemes and facilitating labour market transitions to help workers navigate from job to job.
In short Europe will need an entirely new social contract that ensures whatever their contract or employee status, all workers can access the same entitlements, benefits and welfare cover.