Assembly line work at Volkswagen in Wolfsburg: The automotive industry is an important hirer of temporary workers
Photo: SWEN PFORTNER / AFPWhen the German economy was thwarted in the corona crisis, Susanne Wißfeld experienced a rollercoaster of extremes. Wißfeld is one of five managing directors of Randstad Germany, one of the largest personnel service providers. "There were customers with whom nothing worked from one day to the next," says Wißfeld. These customers had to cancel en masse orders and sent the loaned workers back to Randstad. "Other customers ordered an additional 20 workers, for example to load the eagerly awaited extra delivery of toilet paper for supermarkets in the initial phase of the lockdown."
Temporary agency work is often a buffer, as was exemplarily demonstrated. If companies want to process large orders quickly without hiring their own employees permanently, they get people from personnel service providers. And temporary work is also intended to cushion the labor market for employees: Anyone who is employed by a personnel service provider has a permanent employer at different jobs. So much for the theory.
As is the case with buffers: They are the first to feel impacts. If a company gets into trouble, it first orders the temporary workers before it fires its own people. It's quick and easy. And if you want to quickly meet an insane demand for toilet paper, you will quickly find people from the lenders who lend a hand.
10 to 30 percent fewer calls
The bottom line, however, is that the corona crisis has ruined Randstad's business for the time being - just like its competitors. Every year, the business consultancy Pricewaterhouse Coopers (PwC) conducts a survey among German temporary employment agencies, including this April. According to this, PwC expects 10 to 30 percent fewer temporary workers to be placed in 2020 than in the previous year. In the first half of the year, business purred by around a quarter, without exception all of the companies surveyed reported immediate cancellations. Even the financial crisis of 2008 and 2009 did not leave such devastation; at that time there was a drop of 17.8 percent.
However, the pandemic does not fully explain the slump. It was not until the end of March that economic life was slowed down due to Corona, and before that it was already worse. From January 2019 to January 2020, the number of employees subject to social security contributions in temporary workers fell from 763,000 to 689,000. Even during this period, there is only one trend that has been increasing since the end of 2017: temporary agency work is becoming less popular.
What is it In spring 2017, the new version of the Temporary Employment Act came into force, which the then Minister of Labor Andrea Nahles had pushed through. Ultimately, the industry has brought about the regulation itself, the main aim of which is to contain excesses. Because as nice as the idea of the buffer may be: For many companies, temporary work is primarily an instrument for reducing wages. For a long time, temporary workers were usually paid significantly less than permanent employees who do the same tasks. As a countermeasure, the equal-pay principle was now in place: the same wages for the same work - unless there is a collective agreement that regulates the wage differentials. Even then, the differences are limited to nine, in some cases 15 months.
The other innovation was that the maximum leasing period was limited: since then, a temporary worker may be lent to the same company for a maximum of 18 months. This is to ensure that people whose labor is needed on a permanent basis actually get a permanent job with the client. There had been a lot of wild growth here too.
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Both measures have impaired the attractiveness of temporary work, it has become more expensive and more bureaucratic. That was definitely wanted by the legislature, temporary work should not displace permanent employment. The frequent job changes in temporary employment have a stressful effect on many who work there, as evaluations by health insurance companies and other studies suggest: In no company do employees really belong and see long-term prospects for themselves.
In the past year a lot came together:
The economy weakened, especially in industry.
In addition, the change in the car industry was a burden: Keyword diesel scandal, keyword sleepy electric mobility.
Added to this was the uncertainty caused by Brexit - Great Britain is one of the most important export countries for the Federal Republic.
And the raging of US President Trump, who misunderstood trade policy as a series of duels with tariffs.
On the other hand, many companies prefer to employ some skilled workers themselves instead of employing them as temporary workers - keyword shortage of skilled workers.
The temporary employment agencies felt all of this immediately: The number of orders fell significantly.
Then Corona. A fast-moving crisis that nobody knows how exactly it will continue - but that it will definitely cost jobs in temporary agency work.
Is it getting worse?
The question now is: is the industry ahead of another disastrous development? So is it going to get worse in other parts of the economy?
The economist Enzo Weber from the Institute for Employment Research doubts this: "This economic downturn is different. When did you ever experience that business fails for many areas equally, overnight?" That is why he is certain: "In this case, temporary employment does not anticipate a downward trend in other industries." She crashed at the same time.
PwC also says: "The development of temporary work does not allow any conclusions to be drawn about the future economy. The problems are currently largely where they are in the rest of the economy." The new regulations of the past few years would hardly have any more effect: "The price increases due to equal pay were accepted and processed by the market," says PwC expert Ralph Niederdrenk. In part, the new rules would have cleared the market of black sheep.
However, none of this is an all-clear. Because now the market shakeout is imminent, which will be triggered by the recession, car crisis and also Corona. Positions are lost:
It can be seen very clearly: In April, when Corona hit Germany, the number of temporary workers who became unemployed soared by more than 30 percent and was around 30 percent higher than in the same month of the previous year. In May 2020, the value was around 13 percent higher than in May of the previous year. However, you can also see: "In June and July the rental companies apparently threw out fewer people than in the previous year," says Eric Seils from the Hanns Böckler Foundation.
"Quit without notice"
For him, the extremely fast reaction of the industry shows that the buffer effect for employees hardly works. Because, accordingly, such massive burglaries should not lead to such quick layoffs. But, according to Seils: "That's not how it works." Rather, the majority of the employment relationships "depend directly on certain assignments at the hiring company and are often terminated again during the probationary period without long notice".
That's because the industry has been deregulated on one important point. In the course of the Hartz laws, the so-called synchronization ban was lifted in 2004, which was supposed to prevent temporary employment agencies from quick hire and fire . It is therefore the rule today that employees are hired and dismissed synchronously with a specific job. Theoretically, the same notice periods apply as for all employees, "but most employees are still laid off during their probationary period" before these periods take effect. This means that in an emergency, people are on the street within a few days. "Many companies then keep them in lists so that they know who to contact for the next assignment." This is also a controversial practice.
Logisticians have often made good gains in the corona crisis. Photo from Amazon's Leipzig logistics center (before Corona)
Photo: imago / Robert MichaelBecause temporary work is so precarious, the economic slump caused by Corona will hit those in this industry first, says Seils. A survey by the Böckler Foundation in April shows that. Employees in all industries were asked whether they had already suffered financial losses after Corona and whether they are worried about their situation. Nowhere were both values as high as in temporary work - 30 percent and 37 percent. Even mini jobbers did not get quite as high values.
According to IAB researcher Enzo Weber, the temporary work sector still fulfills an important function for the labor market: Personnel service providers are job providers for many unemployed people who might not find anywhere else - even if the jobs are usually short-lived. "But this function can hardly be fulfilled by temporary work in the current situation," said Weber. A yardstick for this is the number of new vacancies reported each month. In 2017 it was around 70,000 per month on average, in July 2020 it was only 30,000. In other words, the labor market actually lacks temporary work - as a buffer.
What happens now? Yes, the corona crash on the labor market seems to have ended for the time being, but no observer wants to see this as the beginning of normalization - the situation is too uncertain. Randstad managing director Wißfeld also formulates her experience with customers cautiously: "Everything is subject to the proviso that the economy does not collapse again as it did in March and April as a result of corona measures," she says.
But at least: "Our customers are starting to concern themselves with shaping the future. In the months before, they could only organize the status quo." That is not yet a recovery, but at least a stabilization.
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