This article is part of our special report Jobs and Growth.
As the economic crisis lengthens and many industrial sectors restructure, private employment agencies are uniquely well positioned to help young people and redundant workers to find jobs in the new economy, argue Elmar Wiederin and Dennis Pennel.
Elmar Wiederin is senior partner at the Boston Consulting Group and Denis Pennel is managing director of Eurociett, the European Confederation of Private Employment Agencies.
"Today's labour markets are experiencing fundamental change. Each year in Europe, 20% of jobs are being 'created' and 'destroyed' resulting in an increasingly volatile and complex labour landscape. Major shifts are taking place on three key axes: seasonal, cyclical and increasingly, structural.
Seasonal change is a familiar feature of the labour market. Industries such as the postal service, construction, tourism and financial auditing manage an anticipated fluctuation in demand and need to adapt their workforce needs accordingly. Cyclical fluctuations too, while less predictable, are increasingly a fact of life as economies alternate between periods of positive and negative growth.
However, it is the increased incidence of structural change that has brought a new set of challenges. Economies across the world are experiencing deep sectoral shifts alongside both geographic and demographic changes.
Here in Europe, jobs in agriculture and manufacturing are declining while demand for labour in the service and creative industries continues to rise and workers today require a completely different skill-set from even a decade ago.
For economies to navigate this new reality successfully and drive both higher employment and economic growth, it will be essential to ensure a better and faster match between supply and demand for work.
Both workers and employers will need a broker to identify and train the right candidate for the position to be filled and ensure maximum levels of labour market participation in order to avoid shortages of labour.
As labour market intermediaries, private employment services are well equipped to facilitate the adaptation to change. Their expertise lies in matching the supply of workers with the demands of business and investing in the training of workers in order to increase their employability and equip them with the skills that the labour market demands.
Private employment services provide ongoing career guidance to workers to enable them to identify growth sectors and to transition smoothly from education to work, from unemployment to work and from one job to another. Their international set-up also allows them to address geographical imbalances between supply and demand for jobs.
Some 35% of agency workers in Europe are under 25 years and for many of them the private employment services sector is their first introduction to the workplace.
At a time when youth unemployment is causing major concern across the EU27, private employment services represent a real opportunity to reduce segmentation of labour markets. The sector also promotes inclusive labour markets by placing disadvantaged and underrepresented groups in society, enabling them to access the job market and join the world of work.
With labour markets in perpetual motion, experiencing 'constant job creation and destruction' as Commissioner? László Andor has observed, governments across Europe will need to embrace active labour market policies with strong cooperation between public and private employment services in order to secure the career progression for workers.
An estimated 12 million workers in Europe each year use the services of private employment agencies to enter the labour market, change jobs, upgrade skills or move into permanent positions.
If economies are to fully unlock the contribution that private employment services can make in facilitating adaptation to change, then governments will need to establish an appropriate regulatory framework for the sector. There is strong evidence that labour markets can only operate truly efficiently if relevant and up-to-date regulation is in place.
Countries with mature and appropriately regulated private employment services enjoy better functioning labour markets, resulting in job creation, lower undeclared work, smoother transitions and higher labour market participation and diversity. Those markets which embrace the principles of 'flexicurity' and social dialogue to suit their national labour market model are also seen to have the highest levels of regulatory efficiency
Private employment services create jobs at very low levels of GDP growth, ahead of the classic job creation curve. More than 900,000 jobs in Europe have been created by the industry since the low point of the economic crisis. Countries across the EU should create an appropriate regulatory framework for the sector, recognising it as an industry in its own right and lifting existing unjustified restrictions as stimulated by the EU Directive on Temporary Agency work.
With this framework in place the private employment industry can act as a valuable partner to policymakers, governments, companies and workers in the decades ahead, smoothing adaptation to structural change and meeting the demands of the new economic reality."