Edit Metric
|
||||||||||||||||||||
Details
|
||||||||||||||
The staffing industry places individuals into temporary, contract, and permanent positions into firms around the world. In the US, staffing companies placed about 2.96M people per day and the total US market generated $91B in 2007.[1] Other major staffing markets include Japan, Italy, France, Spain, as well as many emerging markets. The vast majority of staffing revenue comes from temporary staffing, for example, 80.8% of US staffing revenues in 2007.[2] Temporary staffing has been growing around the world, but the US temp market has been essentially flat since November 2006.[3] The major challenges facing the staffing industry are strict labor laws and shrinking workforces in major markets due to low birthrates. The staffing market is also highly influenced by economic cycles because unemployment rates and labor productivity both have a large impact on a firm's hiring rate.
[edit] Major Staffing CompaniesThe staffing industry is a highly fragmented industry - the US has 100 national staffing firms and about 10,000 local firms.[4] The following chart compares some of the larger staffing firms.
[edit] Trends and Forces[edit] How Economic Cycles Affect the Staffing IndustryThe staffing industry is highly influenced by economic cycles. In down cycles firms start downsizing there workforce and there are less jobs for the staffing companies to fill. Temporary workers are usually the first to be cut in down cycles, but also the first to be hired in up cycles. A major reason for the growth of the temporary staffing market is because of the flexibility it allows firms. Labor productivity is another factor that affects the staffing industry. When labor productivity increases, firms need less workers to achieve a similar amount of work, therefore there is lower overall employment demand. Clearly, the Employment industry has been sold off by the market due to recession fears reducing the demand for temporary hiring. The nature of this business is very low capital, relying more on human resources than capital resources. However, this is not a field with many natural moats. There is no lock-in effect here as there is in some other business services - a client can just as easily switch to a competitor for contractors. The only true competitive advantage to be gained here is reputation, which famously "takes a lifetime to build and a moment to destroy". Still, cheap is cheap, and many employment providers trade with the job market, making them decent cyclical plays. [edit] More Flexibility Means More Demand for Temporary WorkersLabor markets as well as laborers, are demanding flexibility more and more. This means that temporary workers are in high demand. The ASA has shown a correlation between falling unemployment rates and a growth in temporary workers over the past 20 years. [8] Temporary staffing growth in the US has been flat since late 2006 in part due to the economic slowdown, but other foreign country temporary staffing demand is has been on the rise. For example, as of January 2008, over 33% of workers in Japan are considered temporary workers, this compares to 23% in 1997.[9] Employers like temporary workers because it gives the company more flexibility in its employment options and it is a good way to find quality permanent employees down the road. In a 2006 American Staffing Association survey of human resource managers, 91% of the managers said that flexibility in staffing was important and 95% of those managers said that this flexibility was coming from temporary and contract workers.[10] The managers also cited three reasons the flexibility was so important: 1)To fill in for absent or temporarily vacant employees, 2)To provide extra support during busy times, and 3)To staff special short-term projects.[11] [edit] EU Directive Makes Effort to Reduce Labor LawsIn June 2008, the EU made a directive that addressed the positive impact temporary staffing has on the labor market. The directive requires countries in the EU to make at least the minimum requirements specified by the directive. Some of these actions include banning all laws that discriminate in any way and adding a law against disability discrimination.[12] These discrimination laws are becoming more and more influential given the increasing amount of labor importation to Europe, in particular Muslims, due to decreasing birthrates shrinking native workforces. France has already lifted restrictions on permanent placement; however, restrictions are still prevalent in other countries. In Spain, temporary staffing is prohibited in the construction industry, as well as public services (Belgium does not allow temporary staffing in public services either).[13] A report by Eurociett, the European Confederation of Private Employment Agencies, stated that if only two of the recommended actions of the directive are adopted by six EU countries, then by 2012 about 570,000 more jobs could be created.[14] [edit] Low Birthrates Threaten to Decrease WorkforcesStaffing companies do better when a country's population is younger, as a younger population means more consumers and workers. However, populations in many major staffing markets are getting older and birthrates are low. A birth rate of 2.1 is what is needed to maintain a population,[15] anything below that means that the population is below replacement and is shrinking. Several major markets have this problem: France = 1.6, Italy and Spain = 1.2, Western Europe = 1.5, and Japan = 1.3[16]. A birthrate of 1.2 means that in 20 years the working age population will shrink 30%.[17] Many European countries are importing labor, in particular muslims, to make up for these low birthrates. Over 50% of all births in the Netherlands will be non-European in 12 years.[18] However, there are countries like Japan, that will not import workers. As a result, by 2020 about 20% of the Japanese population will be over 70 years old.[19] The companies that stand to lose the most from this trend are companies like Adecco SA (ADEN-VX) and Manpower (MAN). The industry leading size of these companies, paired with their focus on the commoditized low skilled staffing market, makes them vulnerable to a macroeconomic trend such as this. [edit] References
Companies in the Temporary and Permanent Staffing Industry (21)
|
The Shelf
|
Edit
History
Bookmark
