Temporary work - stepping stone or dead end?

Newsletter articles

1 Feb 2013

Employment Studies Issue 17

Andrea Broughton, Principal Research Fellow

In the current difficult labour market climate, finding a job can feel like a major achievement, even if it is on a temporary or fixed-term basis. There is a view that entering the labour market through the medium of temporary employment can give individuals valuable work experience, leading to more stable, open-ended employment in the future. However, there is also concern, often expressed by trade unions, that temporary employment is, for many, a dead end, with individuals moving from one insecure job to another and never gaining the employment security that would enable them to lead a stable and settled life. This debate is particularly acute in the case of young workers, a high proportion of whom are employed on temporary and insecure contracts.

In order to try to find some answers to this question of temporary work as stepping stone or dead end, the EU-level social partners in the temporary work sector – Eurociett for employers and Uni-Europa for trade unions – undertook a research project in 2012 looking at temporary work in six EU Member States: the Netherlands, France, Italy, Belgium, Germany and the UK, with IES carrying out the research for the UK.

Trends in temporary working

The number of temporary agency workers in the European Union has grown significantly over the past decade, largely as a result of deregulation in many countries, such as Italy and Germany. The UK, by contrast, has always had a relatively flexible labour market in terms of the operation of temporary employment agencies. Overall, however, temporary agency work only accounts for around 1.4% of total employment in the EU (in the UK, the figure is rather higher, with an estimated 1.3 million temporary workers, around 3.7% of the workforce).

Temporary agency work also functions largely on a cyclical basis, for example acting as a buffer in times of economic difficulties. At the start of the current economic crisis in 2008, for example, the incidence of temporary work fell faster than the overall fall in employment in the EU, as employers cut back on temporary workers rather than their permanent workforce. The incidence of temporary agency work has begun to increase again as employers remain cautious about hiring staff on an open-ended basis.

Since 2008, the operation of temporary employment agencies in the EU has been governed by the temporary agency work Directive, which states that temporary agency workers should enjoy equal treatment, in terms of pay and other basic working conditions, with employees of the user company. Member states had to comply with this directive by December 2011.

Temporary agencies and their role in active labour market policy...

The question of whether temporary agency work can function as a stepping stone into the more regular labour market, or whether it acts as a dead end, leading into further precariousness or inactivity, is the main focus of the report, and the project found a mixture of evidence. On the one hand, temporary employment agencies are involved in active labour market policy in some countries – often in cooperation with public employment services – and play a particular role in helping to integrate marginal groups such as the long-term unemployed, welfare recipients, the elderly and ethnic minorities into the labour force.

The report notes: “There are grounds to suppose that agencies may represent a useful tool in publicly financed labour market policy … the opportunity to earn a wage while being able to sample different jobs and employers, and to gather professional experiences, may make agency work an attractive option for marginalised groups. It may also provide the opportunity for stigmatised job seekers to gain a foothold in a user firm. However, these experiences need to be evaluated by solid research in order to validate expectations and indicate factors of success as well as failure.”

... but trade union concerns remain

Conversely, trade unions have raised concerns about the role of temporary agency work, questioning in particular the bridging, stepping-stone and insertion effect described above. Trade unions voice concerns that temporary agency work too often functions as a dead-end for workers, and they are also worried that strong growth of temporary agency work during the past decade may indicate a process of substituting direct employment relationships by temporary agency jobs.

This research found that there is no easy way to determine empirically whether agency work is a 'bridge' or 'stepping stone' to integration and inclusion in the labour market. This is largely due to the fact that there is no one single simple measure of job transitions, and a solid assessment requires data not only on agency workers but also for a similar control group who do not experience agency work. Further, there are 'composition' effects or factors that are hard to control: for example, the fact that the individuals who choose to work on temporary agency contracts differ from those who do not.

From a statistical point of view, moreover, it is not only the conclusion of a specific employment contract such as a temporary agency contract that matters, but also its duration and frequency. Finally, if some individual characteristics can be observed and controlled (such as sex, age, and qualification level), others are much harder to control (such as occupational experience) or cannot be measured (such as individual efforts) but are still key factors in terms of individuals' trajectories in the labour market.

The role of temporary work in facilitating transitions

Overall, and despites these difficulties, the study does confirm, however, that the role of temporary agency work in the transition from unemployment to work is widely accepted: a large proportion of temporary agency workers come into temporary agency work from unemployment, for example more than in 60% Germany and more than 40% in countries such as France and Italy. The study also found that temporary agency work facilitates transitions from temporary to permanent work, under certain conditions. However, this finding is not entirely clearcut, as the stepping-stone function differs according to the methodology and to the profiles of temporary agency workers - for example the individual employability of those involved.

Value of temporary work for young people

One key finding of the study is that temporary agency work is of great importance for young people entering the labour market. It notes that a range of comparative and country-specific surveys show that temporary agency work has developed as an important entry channel for young people coming on to the labour market for the first time, thus functioning as a bridge into the labour market for young people. For example, in Germany, 49.5% of agency workers are under 35; in Italy 44% of agency workers are under 30; and in the Netherlands 46% are under 25. This high share of young people indicates that temporary agency work is of considerable importance for the transition between education and work. In France, 84% of temporary agency workers were under 25 and before coming to agency work they had never worked before, because they were either in education or were unemployed. After a year of agency work, 61% of them were in employment. The report states, however, that national background, the level of education and qualification and personal background have a significant influence on the outcome of transitions from education to work.

Conclusions

This study concludes that the social partners in the temporary work sector play an important role in fostering transitions, by means of collective bargaining, and joint positions, initiatives and programmes. Addressing whether temporary agency work itself fosters transitions into more stable employment, it concludes that the question as to whether or not temporary agency work also contributes to "quality transitions" is much less evident and controversial, also resulting from a lack of common understanding, agreed indicators and the availability of data. Nevertheless, it found that social dialogue and the joint practices of the social partners seems to be key in terms of transforming numerical transitions into "quality transitions", i.e. enabling situations and frameworks where not only bridges into work are provided by temporary agency work but also stepping-stone effects and upward/ progressive transitions are supported and fostered.