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Working in the global economy

05 Aug 2017Other Essays

During the early 1970’s the temporary agencies were only really visible in the US, and the European markets of the UK, France and the Netherlands. The industry has now become truly international. Estimates suggest it is now worth some US $120 billion annually. (Staffing Industry Analysts, Inc, 2003). The development of temporary agencies forms an integral part of these new dynamics of labor market regulation. Growth of multi national investment in the 1990s and the entrance of one or two multi national agencies created the conditions for agency business to expand slowly in the absence of formal legal recognition.

Temporary agencies are increasingly playing a systematic macro regulatory role in the US labor market, where they now account for a big share of costs of labor market adjustment. Temporary agencies’ development is closely linked with the wider restructuring of the US economy where it has assumed a significant presence as a low cost flexibly mediated labor.

During the last thirty years, the temporary agencies have moved from the role of staffing provider, supplying short term cover for eventualities such as seasonal spikes and maternal leaves in demand. They now have a more systematic and continuous function, mediating between companies personnel offices and their preferred labor suppliers across an increasingly broad array of industries and occupations.
Temporary agencies ability to embed themselves in the labor market has been remarkable so that now it can be seen as a sign of flexibility not just at the ‘micro’ level (meeting the needs of individual enterprises), but also at the ‘macro’ level mediating socio-economic risks ad macro economic pressures across the labor market as a whole.

Some employers have turned to temporary staff agencies to source workers for high-turnover or undesirable jobs such as assembly, loading and packing which demand physical work). Others utilize temporary workers as a recruitment and screening pool for permanent employees as is often the case now in clerical labor market. The form and rationale of temporary employment relationships therefore vary significantly; they range from the large-scale deployment of replaceable day-laborers in construction and manual service work through to few assignments of professionals with unique skills set in fields such as IT and healthcare (Melchionno, 1999).

Standing between employer and the employee, staffing agencies have assumed important, third party roles in screening, recruitment, placement and reassignment in job design, in supervision and labor control and in the structuring of remuneration and incentive systems. By this they shield firms from regulatory costs, such as exposure to worker’s compensation claims or unemployment insurance, while also denying temporary workers benefits such as health insurance and pension entitlements.

There is strong evidence in the historically dislike pattern of the employment restructuring around the 2001 recession that temporary agencies are beginning to register significant economy wide effects. They performed a ‘shock absorber’ function enabling businesses to externalize the costs of economic fluctuations and regulatory risks. They absorb all the employment related costs of a cyclical downturn, thereby preventing the need to lay off permanent employees. Employers are adding temporary workers well in advance of permanent employees. They are also making flexible employment strategies a central elongated process of workforce adjustments which include adding workers employed on temporary contracts while continuing to shed permanent employees.

It seems that the temporary agencies no longer perform a benign and marginal function, as a ‘leading indicator’ of wider labor-market conditions. Increasingly, it is implicated in establishing and maintaining these conditions.
Over the years the temporary agencies have evolved from small scale service providers; located in a handful of large and industrial and major administrative centers, to diversified business sector, offering a various services in competitive markets across the country. They can now be regarded as a stable component of the regulatory infrastructure of the labor market. As a result, the temporary option is now factored into hiring and human-resources decision, in ways that would be unthinkable in the 1970’s (Silber 1997’ Lenz, 2004)

Temporary agencies with their characteristically narrow margins and low barriers to entry, has been enabled to wean itself away from the high volume business model. Download pressure on billing rates makes the service increasingly attractive to employers, but also places stubborn limits on the remuneration of temporary workers. As employers continues to use temporary agencies as part of ongoing recruitment and cost entertainment policies there are serious consequences on systems of social protection and insurance (Peck and Theodore, 2002).

It is possible to observe some common trends, such as the tendency for young people in particular to be employed as temporary workers, as they enter very different types of labor market to that which their parents entered a generation ago.

There are countries with no data on temporary agencies as most they remain unregulated. For example in Czech Republic and Poland, where legislation was introduced in 2004 that for the first time recognized temporary agencies, there is no data on them and the workers they place.

Temporary agencies are here to stay and will continue to affect the flow of labor markets between countries and in essence affecting the global economy.

References

  • Grabelski, J (2001). Temporary employment agencies: strategic challenges ahead, NEIS E- Bulletin 17, Washington DC: New Economy Information Service.
  • Segal, L and Sulliram, D (1997).The growth of temporary services work. Journal of Economic Perspectives. Vol.11 pg177-36.
  • Theodore, N and Peck, J (2002). The temporary staffing industry; growth imperatives and limits to contingency, economic Geography, Vol. 78 Pg 463-93.

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