A Continent Swarming With Temps

Hard times and rigid labor rules make bosses wary of hiring

When Patrick Lefresne began his working life, the odds were stacked against him. A ninth-grade dropout, he learned a smattering of carpentry and electrical skills in a government program, but he couldn't land a job in his depressed hometown, the working-class city of Laval, France. Undaunted, at age 19 the self-confessed "natural optimist" moved to Paris--and landed a job through the Ecco temp agency. While his pals back in Laval are still on the dole, Lefresne, 23, earns about $14,400 annually from an average 10 months of work a year in warehouse jobs that last "from four hours to two years." Last year, he could afford a U.S. vacation.

Lefresne is one of a new breed of European worker created by hard times and the vagaries of a heavily regulated workplace. Laws giving permanent employees high levels of job protection make bosses wary of expanding their payrolls. But workers willing to take part-time shifts or labor on a short-term contract--that's a different story. In France, both types of employment have risen by 50% since the 1980s and now account for about one in five jobs. Across Europe, companies are taking on temp workers by the hundreds of thousands to help with such tasks as assembling auto parts and writing software. In the process, employers are creating a flexible labor market that they can adjust to the ups and downs of the economic cycle.

Obviously, it would be better if Europe could generate millions of permanent new jobs. But so-called precarious work is better than nothing, especially for the young Europeans desperate to escape the dead-end life of the dole. Many temps see the work as laying the foundations for a career. Christoph Portner, a 28-year-old German, couldn't find a permanent job as a mechanical engineer: "The only way to get a good job is to prove you have experience," he says. So now he temps in technical sales at Siemens in Munich.

WORD OF MOUTH. Yet temp work was unavailable to many on the Continent for a long time, until rising joblessness forced lawmakers to act. In Germany, it was illegal until recently to operate a private employment agency, and job-seekers had to rely on word of mouth, ads, and government placement offices that handled only 30% of vacancies. But since the ban was lifted in 1994, agencies such as Manpower International Inc. have been doing a land-office business. Revenues at Manpower's German branch grew 35%, to $115 million, last year, and the company expects to repeat that growth this year. "It's proof that German labor market conditions have changed dramatically," says Manpower Managing Director Diethelm Bender.

Spain's experience is another sign that temps are here to stay. Desperate to tame sky-high unemployment rates, the government swept away barriers to temporary employment six years ago. Last year, Spain created 372,000 jobs, 70% of them temporary. Companies in Spain, says Stephen G. Lyons, managing director at Ford Motor Co.'s Spanish unit, now "hire temporary employees as a strategy to avoid layoffs."

That's a strategy employers are pursuing throughout Europe. In many cases companies will avoid hiring full-time workers, because in the event of layoffs they are legally entitled to huge severance packages. In this regard, Spain is in a league of its own. Employees have a right to 30 days' severance for every year of employment and sometimes can get up to 45 days per year. The price is steep in Germany too, where it costs companies routinely around $55,000 to lay off one worker. Daimler Benz's aerospace subsidiary, for example, took a $340 million charge last year after it announced 5,100 layoffs.

SICK DAYS. Apart from savings on potential layoff costs, though, temporary workers offer another plus. "They work a lot harder because they hope their temporary contracts will be converted to a permanent job," says Gonzalo Hinojosa, chairman of Spanish apparel retailer Cortefiel. Absenteeism, for instance, is just 2% among Cortefiel temps, vs. 12% for permanent employees.

Despite the attractions of temporary work as a palliative in a period of downsizing, many governments are still keeping a rein on it. The fear among politicians and unions is that employers will quietly build up armies of temps to assume the work once done by full-time employees and so wipe away all job security. Germany insists, for instance, that temps shouldn't work for more than nine months for any single employer. In Spain, the maximum contract is for three years, then it's out the door. French employers have negotiated a pact with unions, putting a number of restraints on contracted labor.

Those limitations may be politically necessary while lawmakers figure out how to loosen the regulations that impede permanent hiring. Yet the need to make Europe more competitive is so strong that the payoff for removing most limitations on temporary work can be enormous, despite the political risk involved. Britain, where 30% of the workforce now has a precarious job, is attracting billions in new foreign investments. On the other hand, Germany, with barely 10% holding temporary work, is facing disinvestment.

And for leaders such as German Chancellor Helmut Kohl, a bolder approach could have other advantages. He has promised to cut German unemployment in half and create two million jobs by 2000. Studies performed by management consultants suggest that he could make good on his promise by actively promoting part-time work. Perhaps Kohl should hire a few executives from Manpower to help him do that. Part-time, of course.

Before it's here, it's on the Bloomberg Terminal.