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Long standing opposition to the European Agency Workers Directive folded last month when the UK - its staunchest opponent - agreed a deal on employee rights that should pave the way to broader European agreement later this month (June).

A compromise that will allow temporary workers equal rights with those of permanent staff after 12 weeks in a job was agreed by the UK government in negotiation with the Trades Union Congress and the Confederation of British Industry.

Policy makers in Brussels had been seeking a six week qualifying period but the compromise is likely to be acceptable to European Employment Ministers when they meet this month (June).

The CBI described the deal as the "least worst outcome available." The concessions were made in order to secure the UK a permanent opt out from the Working Time Directive that limits the working week to a maximum of 48 hours.

The UK had been facing isolation within European social policy for its stonewalling over both directives. Now the UK government and employers organisations are confident that they will have given enough ground to maintain the opt out.

The agreement, however, has been heavily criticised by representatives of smaller businesses in the UK angry that they were excluded from the talks. The Federation of Small Businesses described the deal as "disastrous," arguing that small and medium sized businesses would suffer through a loss of flexibility and costs associated with administering the directive.

So do they have a point? I don't think so. I think the best that Britain could have hoped for would have been six months' grace. But six months is a long time in a temporary arrangement.

According to the CBI almost half of temporary contracts do not extend beyond three months so there will be no change for much of the agency work handled in the UK. Significantly, while the equal treatment arrangement covers pay and working conditions, it will not require employers to cover sick pay or pensions.

Beyond the UK, however, the changes will be significant, allowing temporary working for the first time in some sectors in countries such as France and Belgium that have persisted with sector specific exclusion arrangements.

The new arrangements will put the whole of Europe on a similar footing and that has to be desirable for harmonisation.

When all the dust has settled in the UK I doubt if there will be any significant loss of competitiveness for businesses. On the other hand some workers whose goodwill has been exploited in the past will have the right to enjoy the same conditions as their permanent colleagues.

The furore over temporary working in the UK is very like that kicked up when a minimum wage was introduced. The same business organisations complained about that with very similar arguments. In the event, the changes went through without a hitch, lending an element of pay protection to thousands of underpaid workers.

Legislation that raises standards in employment has rarely proved detrimental to competition. Yes, it can lead to the export of some low paid work to developing economies but that is no bad thing in the long run.

Today's developing country is tomorrow's export market. But no market for western goods can exist where there is no disposable income. Europe must accept that some low paid work will be lost. Modern industrialised economies, however, should be aiming for high value-added goods and services, not struggling to compete in the low cost market.

Employment agencies have a legitimate concern that the directive will leave them with yet more rules and paperwork. This could drive out some small agencies operating on thin margins. But I would argue that the agency market probably has too many operators at the lower end of the market where standards are not always upheld. If the directive means that some of the low quality operators go to the wall I, for one, won't be shedding too many tears.

It is six years since the directive first emerged. In that time there has been considerable but piecemeal liberalisation of labour markets in many countries. Now it is time to underpin those changes with a blanket undertaking that will put agencies on a proper footing throughout the EU.

Vladimir Spidla, EU employment commissioner, hailed the agreement as a "milestone for social dialogue in the UK and an important step towards fair treatment of agency workers both in the UK and in Europe."

I wouldn't argue with that. The directive will not end abuses overnight but it will give trade union and employee representatives a framework to establish labour relations for a growing employment minority whose rights have been neglected for too long.

I worry that the agreement will lead to higher turnover of temporary workers as some are dismissed and replaced on almost a three-month rota system. But that might have some value if properly administered, allowing employees to gain experience in different employers.

The legislation, I believe, will lead to some reshaping of the temporary agency market in Europe. Whether it will lead to a new kind of temporary worker or whether temporary staff will remain confined within the 12-week qualifying period is unclear.

But it should be recognised by the agency market that what looks to many British employers and agencies as a retrograde step is a step towards greater liberalisation for much of the rest of Europe.

There is still a chance that the deal could be resisted in the European parliament in the autumn if some members dig their heals in over the original six-weeks' grace. But the road to agreement has been rocky enough. I cannot believe there will be the stomach to stall the legislation further. If ratified, the new laws are likely to be introduced in the autumn of 2009.

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Mervyn Davies, chairman of Standard Chartered bank, said at a recent London seminar that he regarded employee well being as one of the most pressing issues facing employers as they approach the end of the decade.

Governments of all western economies are grappling with spiralling health spending that historically has been focused on health treatments typically concentrated in the final few years of people's lives.

Employers too are sharing the burden of ill health through absenteeism. For this reason increasing numbers of employers are abandoning a passive approach to health and adopting instead more interventionists policies aimed at promoting fitness and health issues, thereby reducing costly absenteeism.

The importance of health management in the workplace was highlighted in the Adecco Institute's 2007 Demographic Fitness Survey (http://www.adeccoinstitute.com/research2007.htm).

The survey found that less than a fifth of companies across Europe were offering sports facilities for their employees. Less than 10 per cent overall were offering dietary advice although 76 per cent of companies were offering medical check ups with Italy leading the way among the larger European nations.

But check-ups can vary enormously, ranging from a quick visit to the company doctor to the kind of detailed examination often offered only to the most senior executives.

The problem with comprehensive health screening is that it is expensive and time consuming. Even when senior people have the option to undertake screening, many do not make time in their diaries to visit clinics.

But measuring your blood pressure - one of the most important indicators of potential heart problems - takes very little time. The equipment is relatively inexpensive, simple to use and the readings can be easily explained. Even in the smallest companies, blood pressure equipment and heart monitors could be stored with any member of staff competent in first aid who could be given responsibility (with some additional pay in recognition of their expertise) for helping staff to monitor themselves.

One of the most important health contributions a company can make to its workforce is in health education. Why is cholesterol important? What is the difference between good cholesterol and bad cholesterol? What are triglycerides? Why is it helpful to know your body mass index? If chief executives don't know the answer to these questions, how can they expect their staff to be taking more care of their health?

Why should companies and employees be worrying about health, you may ask? Isn't it something for the family doctor and hospitals?

The Royal Mail found the answer to this question in the UK when it launched a series of management interventions on employee health, including weekly discussions with staff and back-to-work interviews after people had been absent through sickness.

Research undertaken by the London School of Economics found that the new health policies had saved the Royal Mail as much as £227 million over three years by reducing absence across its 180,000 strong workforce from 7 per cent to just under 5 per cent between 2004 and 2007.

Workplace health management, therefore, is not some kind of worthy intervention, it's all about good business, feeding through to the bottom line.

The best way for human resources professionals to approach workplace health is to link the monitoring of health to metrics that might be included in an annual report. Yet very few companies across Europe are reporting on the health of their workforces.

In the UK a campaign launched by the charity, Business in the Community, is seeking to address this issue with a target of persuading at least 75 per cent of Britain's largest public companies (those in the FTSE 100) to report on series of health-related metrics by 2011. Currently just seven companies of the FTSE 100 are including employee health indicators in their annual reporting.

One of the most obvious metrics is the annual rate of employee absenteeism. But there are other ways to learn more about the health of your staff. One way is to carry out an annual survey asking people how many times they have visited the doctor that year plus a few questions about specific health problems.

If companies already carry out staff surveys, these health questions can be added to the list. This sort of questioning enables a company to get an idea of the kind of health issues facing its staff. If heart disease is an issue it might begin to promote exercise and fitness regimes. If a survey exposes high levels of stress there may be a need to look at workloads and staff ratios.

The point I'm making is that workplace health should not be approached in a piecemeal fashion but in an integrated, managed way that understands the benefits of health promotion. In fact I'm not sure how helpful it is to think about workplace or occupational health. Health is a lifestyle as much as a workplace issue.

Nevertheless it is in the interests of employers to be doing their bit. Think of it another way: as the demographic trends begin to squeeze the market for recruits, are people more or less likely to be attracted to a company that seems to care about the health of its employees?

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Staff sourcing across the European Union is relying more than ever before on labour flows between member states, taking advantage of a willingness, particularly among young people, to travel in search of work.

Employers seeking to make the most of these labour flows can benefit from an appreciation of young people's attitudes. But understanding that the so-called "generation Y" has different values to the previous generation is not enough for policy makers and recruiters.

A recent international study of young people has demonstrated that inter-generational attitudes vary markedly, depending on nationality.

The study, Young People Facing The Future, undertaken by the Fondation pour L'innovation politique, was based on a survey of close to 23,000 people - mostly aged between 16 and 29 - across 17 countries.

It discovered significant differences in attitudes to work among young people from country to country. The research found, for example, that young people in France and Italy were far more conformist than those in the UK and Nordic countries. Some 54 per cent of young French adults agreed with the statement that "to have a successful career you must conform to the expectations and wishes of others." In the UK only 26 per cent of young people agreed with the statement.

French youth appeared to be markedly happier than British youth to undertake traditional jobs. While 70 per cent of the French sample said they believed a fulfilling job could deliver a happy life, no more than 43 per cent of young British adults said the same.

This did not mean, however, that the French were optimistic about their careers. While one in four young French adults said they believed their personal future looked bright, in the UK the proportion was closer to one in three. In Denmark more than one in two young people - nearly 60 per cent of those questioned - were optimistic about their personal futures.

Anna Stellinger, the foundation's director of economic and social research, believes the results reflected the differences in national educational and employment systems. Job protection in the UK and Scandinavia, for example, is much weaker than that in France.

This means that British and Scandinavian jobs are more accessible to young people who find it easier to move within the system. Permanent jobs in France, in contrast, are harder to come by, and when young French people do settle in to careers they do so in the belief that they are in the system for the long term.

However this greater sense of security does not seem to be generating enterprising or innovative attitudes. The report suggests that young people in France feel they have little power to change the course of their lives and less control over their careers than those in the Nordic countries.

The study discovered that one of the biggest differences between those in western industrialised countries and those in developing countries was in attitudes towards materialism. Material possessions were less important to young people in wealthy European nations than to their counterparts in developing countries. Those in the wealthier countries placed a higher value on education as a way of gaining access to interesting work.

Unlike their European counterparts, however, young people in the US retained a historical interest in collecting material goods.

A strong area of convergence between countries apparent in the research was the way that attitudes of men and women are uniting in acceptance of women in the workplace, although stereotypes of masculine and feminine occupations remain.

The research also revealed a few generalities, across all nationalities. Young people, it discovered are generally less willing to commit themselves to any available job in the way that their parents may have done. Free time is also valued highly by the younger generation.

A surprising finding in the research that ran counter to a widespread belief that individualism is growing among young people, was that collective structures remained important. Belonging to a group was a significant concern among most of those questioned.

Overall the research confirms that attitudes of young people are shaped largely by the society in which they are raised and educated. It also shows that, differences apart, young people share much the same priorities about their careers.

When asked to list their priorities, the number one concern for 70 per cent of those questioned was "interesting, meaningful work." Personal health was the second most important priority, third was security, fourth, a sense of pride in the job, fifth was good colleagues, sixth a good boss, and seventh, good career opportunities.

Each of these priorities were rated above a high salary which trailed in eighth place. Less popular still, were fixed working hours, suggesting that flexible working is going to be increasingly popular among young people in future.

It is clear from the research that more needs to be done to create better workplace opportunities matching the aspirations of young people. Some countries, it seems, are making more progress than others in this respect. The evidence suggests that Nordic and British policy makers are a step ahead of those in France and southern European countries in creating a more adaptable workforce. Those who wish to create a more united Europe on jobs must accept that some member states have some catching up to do.

Young People Facing the Future, an International Survey, is published by Fondation pour l'innovation politique..

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I am old enough to remember a time when the European Union described itself as the Common Market. There was little that was common about it then and still less today where an enlarged EU seems united as much by its differences as it is by common practices.

While different legal frameworks are an obvious source of attention in the rocky road to harmonisation, it is cultural attitudes, shaped by years, sometimes centuries of historical traditions and practices that are proving the most stubborn barriers to change.

Few European initiatives have demonstrated this gulf in approaches more than the Agency Workers Directive that first appeared in draft form six years ago and which this year may finally succeed in finding its way in to European law, possibly after France assumes presidency of the European Council of Ministers in July.

Opposition, led by the UK and Ireland and supported through various political understandings with other states, including Germany, Denmark and Poland, has been showing signs of crumbling recently.

In the UK, where much of the opposition has been concentrated within a mature temporary agency market, the government is under intense pressure from trade unions and a growing number of MPs to legislate on equal pay and conditions for temporary workers - the main provisions of the directive.

A Private Member's Bill that received the support of 147 MPs at its second reading could yet force the hand of the administration although Gordon Brown, the UK prime minister, has been lobbying the trade unions to sign up to a commission looking in to temporary workers' rights.

The Confederation of British Industry and the Recruitment and Employment Confederation in the UK have mounted a robust rearguard action, claiming that the industry - the UK is estimated to employ more than a third of all agency workers in the EU - does not need fixing.

Trade Union leaders such as Dave Prentis, general secretary of Unison - a union with a large public sector membership - have claimed that companies have been using long-term temporary workers to save money they would otherwise have spent employing permanent members of staff.

Mr Prentis has claimed that unregulated agencies have been exploiting workers by charging illegal fees for health and safety equipment and for meals and uniforms. He rejects fears that legislation could put an end to the market, arguing that temporary nursing staff, who do enjoy equal pay and conditions in the UK, continue to be an important part of the National Health Service.

Few would argue that there are parts of the temporary employment sector - much of it outside the range of the agency industry - where employees are exploited. The problem is that temporary and contract work covers a broad range of employee engagement, from highly paid interim executives at one end to casual, unregistered, agricultural labour at the other.

Employee rights, at whatever level, however, still matter and the principal of equal pay and conditions for individuals doing the same work is one to which most of Europe's governments, whatever else their differences, can subscribe.

A commission in the UK might be of some help in that it could try to shed light on the real implications of equalising legislation. The CBI has estimated that the directive would lead to the loss of 250,000s jobs in the UK. Eurociett, the European Confederation of Private Employment Agencies, on the other hand, believes that industry liberalisation resulting from the directive would create some 2.1m jobs across the EU over five years.

Some in the temporary agency sector believe that the UK private member's bill - it is the second in two years - has been designed as political ploy to force the UK's hand on the Agency Workers Directive which is much clearer than the UK bill in the way it compares temporary and full time jobs.

Indeed the agency sector is largely welcoming of the directive's measures to liberalise temporary working across Europe since it will create business opportunities that do not exist at present while clarifying employment terms. The industry in most of Europe is bedevilled by various restrictions in different countries.

One sticking point has been the qualifying period for equal terms and conditions set at six weeks in the existing directive but which industry organisations such as the CBI have asked to be set at a year. A year's grace looks unlikely but there may be room for compromise on a slightly longer qualifying period.

What is looking less likely is that the continued blocking stance will be allowed to persist much longer. Most of Europe is ready for greater flexibility in the workplace and the Agency Workers Directive, for good or ill, is refusing to go away.

While the UK government continues to deliberate with the Trades Union Congress over the nature of any commission, the time for politicking appears to be running out.

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Some years ago I became a life member of a charity that looks after journalists in their old age. None of us, I suspect, likes to think about future infirmity, but it’s comforting to know there is some kind of safety net in place for our later years.

Now I’m informed that life membership has been cancelled. The problem is that there are too few younger members to look after the growing number of dependents passing in to old age. The charity, like many businesses, has been forced to face up to demographic realities.

I, and others like me, belong to the immediate post Second World War baby bulge. Life has been good for many of us. We lived through a period of growing prosperity as Europe emerged from those dark years of war that scarred the lives of our parents and grandparents.

Some today are close to retirement. Some are in their prime, running companies or working as hard as ever. A few may be planning to work longer for fear that their pensions are underfunded. Others simply want to work longer because they know they are well enough and fit enough to do so.

For these people, retirement is becoming an increasingly meaningless concept. I, for one, hope to work in some capacity for the rest of my life; but there are strings attached to this sentiment: in my later years I want more choice about the way that I work. I want to work differently.

Fitness, health, pensions, quality of life, a desire to remain useful, to extend earnings capacity, even to learn new skills: these are the kind of personal issues behind the demographic debate that has become one of the most pressing concerns for business and policy makers as we move towards the second decade of the 21st century.

The good news from Adecco Institute’s latest demographic survey*, based on more than 2,500 interviews across five European countries, is that more and more companies are beginning to understand that demographics is a business issue that can no longer be ignored.

Perhaps the most telling findings from the survey are that increasing numbers of companies are employing older workers. The short-term attitudes that led to clear-outs of older employees during the 1990s have been replaced by a need to tackle growing skill shortages and to find new ways of attracting experienced employees.

In the previous year some 11 per cent of the large European companies surveyed were planning to recruit older workers. In the latest survey that proportion has risen to 16 per cent, a significant increase, year on year.

But there is evidence that companies have not yet fully digested the lessons they must learn from demographic change. Too many, I fear, are expecting staffing shortfalls to be plugged by a better educated younger generation.

Nearly 70 per cent of all those surveyed regarded improved education and better transitions from school to work as one of the best ways of filling the growing skills gap.

I agree that this can go some way towards tackling the problem. But if the trends in the rest of Europe are mirroring those in the UK, improved transitions and education levels will not be sufficient to fill the broadening skills gap. Employers should not be placing their faith in education systems alone.

As a matter of urgency they should be looking at bolstering their workforces through the reengagement of older workers and of women. Far too many women are lost to the workplace through inflexible employment systems that do not provide sufficient options for varying hours in a way that allows them to raise a family while continuing their careers.

In the past three or four years many employers have sought to fill their skills gaps with migrant workers, particularly from central Europe. This too should be considered as no more than a short-term remedy. As central European economies improve, offering higher levels of earnings, so the skills drain from companies such as Poland and the Czech Republic will be reversed.

Long-term employment policies for the next 20 years must be looking at providing balanced workplaces, more representative of the demographic spread across the wider population, and offering a diversity of working arrangements, running from part-time and contract work to full-time working.

Neglecting the potential of those in the 50-70 age range would be a big mistake. People of 50 are perfectly capable of embarking on a new career should they choose to do so, but employers will need to learn new management skills and adopt more flexible recruiting and training approaches - including the career management tools discussed in the Adecco report - if they are to take advantage of this neglected labour source.

Helping employees to manage their careers in a way that suits their changing needs throughout their working lives will increase loyalty and reduce staff turnover. As the Adecco report suggested, what is really needed is nothing less than a change in corporate cultures and management attitudes across Europe. The winners will be those businesses that pursue such change. The future for those who do not is one of ever more stifling competition for skills in a dwindling traditional labour pool.

*Adecco Institute White Paper, January 2008 – Facing Europe’s Demographic Challenge: The Demographic Fitness Survey 2007. www.adeccoinstitute.com/research2007.htm

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One of the biggest challenges facing European businesses in the struggle to compete in the global marketplace is to maintain and increase productivity among workforces that have developed under social conditions that differ markedly with those elsewhere in the world.

Even within Europe there are broad differences in working conditions, regulations and wage levels from country to country and often between regions within individual states.

Free movement of labour has allowed employers some much-needed flexibility in labour sourcing but this has not relieved human resources professionals from the need to ensure that employees are working enthusiastically, focussing their efforts and abilities in line with the aims of their employing businesses.

This explains why concerns for employee engagement have been moving up the European employment agenda. The theory behind employee engagement is quite simple: it holds that committed employees, demonstrating a desire and willingness to undertake discretionary work – popularly referred to as “going the extra mile” – are going to be more productive than those who are simply going through the motions in return for their pay.

Indeed the theory is becoming reality since research has shown that more engaged workforces deliver higher profits. But how can a business know the extent to which a workforce is engaged with its work and with the aims of the business?

The best way to find out is to ask people using an employee opinion survey. Employers can build their own questionnaires or use proprietary sets of questions such as the Gallup Q12, a 12-item survey instrument refined from research among more than a million employees exposed to hundreds of questions over a 25 year period.

The research was designed to sift out those questions that would identify top performing work groups in addition to measuring how well companies met employee needs in the workplace.

This is significant because there is a direct correlation between the two. People do good work when their working conditions are good, when they are paid fairly and well managed, where they have scope for development and where their efforts are recognised and respected.

Research within some employers has found that there are people who are intrinsically engaged. Conversely there can be people within the same organisation, sharing the same pay and working conditions, who are less contented in their work.

Extensive engagement surveys within Standard Chartered Bank, for example, discovered that people who were continually complaining about their pay levels were usually more disengaged, and less productive than colleagues who were happy with their pay.

These findings demonstrate that employee engagement is a complex issue that is influenced by a series of factors, including individual personalities and working relationships.

In spite of, and perhaps because of, this complexity, engagement is a feature of employment that cannot be ignored. A recent survey by Towers Perrin,* the human resources consultants, based on information from more than 88,000 respondents in 19 countries, found that companies were beginning to understand the need to build engaged work teams. But Towers Perrin said that no more than one in five employers surveyed in the research could be described as having “fully engaged” workforces.

The research did, however, find clear evidence that engagement made a difference. When the researchers compared engagement levels with financial performance they found a correlation between high engagement and higher net profit margins. Studies have found that there are savings to be made in recruitment and employee turnover costs too, since highly engaged employees are more likely to stay with their employer.

It should be recognised that there is nothing new about engagement, except the use of the term by HR professionals. But employers are being forced through changing social and economic conditions to pay more attention to the way they relate to employees.

People must feel they can influence the way they work. There is an imperative therefore for those in senior management to ensure that all members of staff understand how they can make a difference. It is no coincidence that the first Gallup question asks: “Do you know what is expected of you at work?”

Unfortunately, as a study by Watson Wyatt,** another HR consultancy, revealed, many managers know less than they think about the motives and intentions of employees.

The survey of 946 companies in 22 countries worldwide highlighted relatively poor understanding of employee priorities. For example, managers underestimated concerns among employees for the nature of their work. The research also exposed deficiencies in the way that performance management initiatives were being communicated among employees. Typically HR departments would be devising training programmes with poor take-up among employees, barely aware that training was available.

Companies must respond by ensuring that HR departments are liaising closely with management and employee needs. At the same time it’s important that managers ensure that people know exactly what is expected of them, with clear and measurable objectives for which they have received effective training.

Further, as working options become more flexible, affording people increasing choice over contractual arrangements, companies in future will need to develop their employer propositions in order to attract the best workers.

This will involve a degree of attention that goes beyond merely offering competitive pay rates and reasonable working conditions. As employee choice broadens, the winners in tomorrow’s labour markets will be those employers that are willing to extend their working options in a way that meets the changing needs of people at different stages of their careers. Everyone will be seeking better work and work that fits their lifestyles. Employers must ask themselves: “Can we deliver?”

*Playing to Win in a Global Economy, the global strategic rewards report and European findings is published next month by Watson Wyatt, www.watsonwyatt.com

**Towers Perrin 2007 Global Workforce Study, www.towersperrin.com

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The European labour market could create 570,000 new jobs in the next five years through the lifting of restrictions on the use of agency work, according to a new report.

The report, published by Eurociett, the European Confederation of Private Employment Agencies, outlines a powerful case for lifting restrictions that have impeded the spread of private agency work in parts of the European Union.

Research for the report, carried out by Bain and Company, management consultants, analysed six European countries: Belgium, France, Germany, Spain and the Netherlands and the UK. These six countries collectively accounted for 85 per cent of the European private agency market that had a combined turnover exceeding Euros90bn in 2006.

The use of temporary agency workers more than doubled across Europe between 1996 and 2006, from 1.6m to 3.3m full-time equivalent jobs but the new research suggests that growth could have been even larger with more widespread deregulation of temporary work.

Growth in temporary work has risen in line with labour reforms in some countries such as Germany, Italy and France. But labour market restrictions have been retained in a number of important sectors such as the public sector in France, Belgium and Spain, and the construction sectors in Germany and Spain.

In addition some countries, France for example, continue to impose a maximum length for assignments whiles also limiting scope for contract renewals. In France, Belgium and Spain, employers must outline specific “reasons for use” defined in law when they seek to engage agency workers.

The report argues that many of these restrictions are founded on outdated, often discriminatory approaches, underpinned by what it says is a “cultural reluctance” in some countries to embrace greater labour market flexibility.

Some temporary work arrangements require trade union notification and several countries, such as Belgium, operate an approval process where trade unions have the power to rubber stamp various reasons for use governing agency contracts. Collective labour agreements in Italy, for example, limit the percentage of agency workers that can be used by an employer.

The report highlights the often piecemeal, attritional progress that has been made sector by sector, country by country in the past few years, often in the face of stubborn resistance among trade unions, reluctant to dilute or reform hard won job protection.

Much of this protection, however, was framed in an industrial age where the structure of employment was based on the assumption that business, sectors and jobs were built to last.

As the Eurociett report points out, such protection today can sometimes undermine rather than promote employment prospects. One large car manufacturer that chose to relocate a new plant in eastern Germany, exploiting the region’s excellent manufacturing skills, only did so because it was able to secure flexible working arrangements that included the use of temporary agency workers.

Increasingly companies are making location choices, based on labour market flexibility. Such choices were restricted in the past because of the need for heavy investment in plant and machinery. Coupled to this, many sectors would rely also on a localised inter-connected network of suppliers.

The industrial bedrock that underpinned manufacturing for much of the 20th century is crumbling as production methods and assembly arrangements diversify internationally and as service industry work multiplies. This has extended the labour-sourcing choices of businesses that find themselves trying to balance their desire for cheaper labour with a need for a reliable supply of skilled labour.

Implicit in the Eurociett report is the need for trade unions to adopt more enlightened attitudes to employment protection. Ring fencing agreements made for what to outsiders must look like a privileged class of permanently employed workers is denying access for thousands of people who could otherwise secure a foothold in employment through temporary agency work.

The point is underlined in the research which found that agency work was providing significant opportunities for disabled workers, older workers and those who belong to ethnic minorities.

Many of the temporary jobs secured by people who traditionally struggle to get a foothold in the labour market are converted in to full time positions but as the status and desirability of temporary work improves, increasing numbers of agency workers today are choosing to retain their temporary status.

This suggests that conventional attitudes to temporary work across much of the EU, that continue to view such work as “second class” need to change. Many of the existing reforms have been achieved in the spirit of increasing opportunities for converting temporary work to full time work in so-called “temp to work” arrangements.

In the UK, where labour market deregulation has enabled a significant growth in private agency work, such attitudes appear to be changing rapidly as conditions and rates for temporary employees improve.

Given the evidence accumulated by Bain, it is difficult to disagree with the report’s conclusion that the temporary agency sector has established itself as an “engine for job creation” within the EU.

Removal of sectoral bans and the “reasons of use” arrangements, it says, would not only create more jobs, more competition and a fairer jobs market, it would also boost the EU economy over the next five years by Euros 12.5bn, through greater economic activity, improved tax revenues and savings on unemployment benefit.

At the same time, Eurociett promises to improve its dialogue with trade unions and to work, through national agency bodies, to improve the image of the agency sector that has been undermined by poor practices and inadequate standards in some countries.

The report should be welcomed as an important addition to the European policy debate on labour market flexibility.

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The movement of people seeking work in Europe is becoming a difficult issue for governments, confused far too often with immigration concerns of the past that are muddying the political and economic debate.

It sometimes seems that half the world has been sitting on suitcases waiting for the opportunity to seek a better life somewhere else. Economic liberalisation in China has led to mass migration from the farming hinterland to the more prosperous coastal regions creating a need for urban development and planning on a grand scale.

But employment-led migration in Europe is a different story, characterised by temporary concerns as young or unemployed people living in poorer parts of the continent seek out higher earnings in wealthier states, often sending home to dependents the surplus from their wages.

There are so many Polish plumbers and construction workers in London I was moved to ask a recruiter recently if he knew just who was doing this kind of work in Poland these days. “Oh, the Poles are employing Ukrainians now,” he said. So who does the plumbing in the Ukraine?” I asked. “The Turks are doing that,” he said. This is the snake effect of labour migration that finds its tail in the poorest countries.

The cause-and-effect of labour migration is felt at both macro levels – where migration has stimulated business growth in some regions – and at micro levels where pressure on housing in localised areas is creating a strain on public services. There is a clear tension here for policy makers who some politicians believe have focused too heavily on economic benefits without taking full account of social and cultural consequences or of the added pressures on public services.

These tensions in policy, sometimes inflamed within a media that is only too willing to expose historic racial sensitivities and xenophobic sentiments, means that work-led migration has become one of the more controversial consequences of European Union enlargement.

While some may argue that migration is sucking away the best and the brightest from poorer countries, others can point to greater direct labour sourcing among companies willing to transfer some operations to areas of cheaper labour.

Demographic statistics would appear to justify the growth of labour migration in countries such as Italy, Germany, Spain and the UK where the indigenous working populations have been squeezed by declining birth rates and aging populations. Germany and Italy have the second and third oldest populations in the world, respectively, behind Japan.

Indeed the German, Spanish and French governments in the past year have introduced financial incentives for couples to have more children; an extraordinary move in a world where global population is rising to what some fear is an unmanageable level.

In the UK debate has become clouded by confusion over migration statistics. The UK government was forced to issue an apology for underestimating the number of migrants working in the UK, admitting that more than half of new jobs created between 1997 and 2007 had gone to migrant workers. Some 1.5m foreign workers had come to the UK according to the Department of Work and Pensions.

Behind the political disputes over migration, however, is a powerful business lobby that is focused on ensuring a supply of skilled and productive workers, no matter what their background. Many companies have enthusiastically recruited central European employees on the basis of their abilities, commitment and willingness to work hard.

A recent British Council study of integration polices among the 25 EU member states found that Sweden had the most migrant-friendly policies and Latvia the least. The top ranked nations for integration were Sweden, Portugal, Belgium, The Netherlands and Finland. The five countries accounting for half of the EU’s 21m migrants among an EU citizenship of more than 450m – France, Spain, the UK, Germany and Italy - were all ranked mid-table.

A perfect European economy, perhaps, would embrace relaxed attitudes to migration and more flexible working arrangements mixed with some regulatory protection for workers’ rights. But movement towards such an economic base must also take in to account technological innovation, changing social patterns and shorter business cycles.

Earlier this year Jim Murphy, then the UK’s employment and welfare reform minister, told a London seminar that the “shelf-life” of skills in the UK had gone from seven to eight years down to three to five years. This kind of change underlines the need for individuals to perfect a capability to adapt if they are to maintain their value in the labour market. But policy makers must be alive to this need.

Too often, in the past, labour market policy has been moulded by historic concerns, rather than those of the present. The mentality of job creation within the Lisbon agreement is typical of such concerns. Labour markets must be focused on the needs of a vibrant economy and that must include the social concerns of individuals and the way they relate to the workplace.

In doing so it is important that governments look beyond traditional concepts of the permanent long term job fed by a continuing supply of skilled young males. If the European economy is to succeed in its desire for greater harmonization of labour supply it must create a platform for encouraging a more diverse approach to employment, particularly in the way that employers relate to the aging workforce, ethnic minorities and women.

Vladimir Spidla, European Commissioner for Employment, Social Affairs and Equal Opportunities has rightly highlighted legal, administrative and linguistic obstacles to worker mobility. A number of studies have revealed a desire for cross-border working opportunities among young people and such mobility should be encouraged.

At the same time it should be recognised that these needs will be tempered by political pragmatism. The skills-based points system for dealing with labour migrants announced in the UK could prove popular elsewhere. But closing borders to foreign nationals among EU states would be a retrograde step in economic reform. The new European labour market must extend opportunities for all throughout the union.

www.richarddonkin.com

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EUROPE SHOULD NOT ALLOW ITSELF TO BECOME PARALYZED BY "FUROR ASIATICUS." CHINA MAY HAVE A HUGE RESERVE OF WORKERS BUT LACKS HIGHLY SKILLED LABOR – BY KLAUS WIRTGEN

For many years, we in Europe have been following the tidal wave of growth of the Chinese national economy, at first with disbelief and now with great concern. An average growth of ten per cent per annum over the last decade is currently being topped by quarterly figures that are constantly being adjusted upwards. That growth figure is now in excess of eleven percent. According to estimates made by economists from the major international banks and the United Nations Population Division, only between 2011 and 2015 is the Chinese economy likely to float along in calmer waters. Yet, if powerful state intervention also manages to keep inflation under control, the seven to eight per cent forecast is still light years away from the growth of the large industrial nations in the West. A long way too from its Asiatic next-door neighbour, Japan, whose average rate of growth Swiss UBS estimates at a mere 1.5 per cent in the next ten years, which is thus clearly more pessimistic than estimates made by the government in Tokyo.

China’s exceptional economic figures and activities hit the visitor right between the eyes. China, a sea of superlatives. The skylines of Beijing and Shanghai, hotbeds of development for world-famous architects, now confidently rank amongst the major attractions of the 21st century. The 2008 Summer Olympic Games in Beijing and the World Expo 2010 in Shanghai are probably the biggest fully state-financed expansion programmes the world has ever seen. In two years’ time, the colossal, man-made Three Gorges Dam will, at the flick of a switch, increase the electricity supply for this huge country by ten per cent. Financial markets are booming. If spectacular deals are on the agenda anywhere in the world, Chinese delegates will be sitting at the negotiating table. At home, people are queuing up for stocks and shares, the latest yellow alternative to hoarding cash under the mattress for an old-age pension. On international raw material markets, particularly those for steel and oil, China is buying up almost every batch available. When European countries turn up in developing African countries, such as the Sudan, the Chinese have already finished their business, whether it concerns rights for prospecting or production, or whether it concerns contracts for road and railway construction. Backed by an exchange reserve of 1.2 trillion dollars, the Chinese government has recently issued a further 200 billion dollars to its state investment company for investment in foreign industrial and financial products. This company is probably the world's largest state holding company, which according to estimates made by economists at Morgan Stanley, could even have a sum of 12 trillion dollars at its disposal by 2015. This is approximately equivalent to the size of the US national economy in 2005. It is understandable that Western industrial states, including Germany, are currently considering how to deal with the threat of their industrial power being devalued.

Nevertheless, Europe should not allow itself to become paralysed by any "furor asiaticus". Firstly, protectionism for Europe and especially for Germany as an exporting nation has never paid off and secondly, there is no reason to be blinded by superlatives; better to analyse Chinese circumstances more closely. This brings us to a fundamental growth issue, where astonishing parallels with the situation in Germany become apparent: the alarming scarcity of well-trained workers.

Whilst their size and population are totally different, both countries continue to endure a level of unemployment that is much too high. Whilst Germany’s unemployment rate has clearly fallen to below ten percent, there can be no question of full employment. In contrast, according to official figures, only 4.1 percent of people in cities in China are unemployed. However, the realistic estimate is that this figure stands at 10 to 15% in cities and up to 30% in rural areas, where some 737 million people reside (56.1% of the population). The State Research Office estimates the number of itinerant workers at 120 million in cities and 80 million in rural businesses. They slog day and night, are often separated from their families for years at a time and earn a pittance, which equates to less than 100 Euro per month. One in five of these poor devils has to get by on less than 50 Euro, a portion of which is sent on to families in rural western provinces. The Swiss UBS Bank estimates that more than 40% of the income of rural households comes from funds transferred by itinerant workers. In any case, they do not represent "an army of reserves" for the turbulent market of qualified workers.

Whilst the population in Germany and in other European industrial states is declining, records show China’s population to be continuously increasing. Yet the yawning gap between the supply of increasingly high-value jobs in the mega-metropolises and the skilled workers suitable to do them continues to widen.

There are currently almost 1.3 billion people living in China. Approximately one third of these are aged in their twenties and thirties. Most of these young people live in the large cities and have attained a level of education that would allow them access to study at university. An estimated 11% have already graduated from university. Every year, around 5 million graduates flood the labour market. By way of comparison: this figure is around one million in the USA. Every year, China releases 600,000 graduates compared with some 70,000 in America. The figures are deceiving, because they give rise to the supposition that China has a huge reservoir of highly motivated, dynamic and well-educated applicants available, which can be drawn on to fill every job vacancy.

However, things look different in reality. The "battle for talent" dominates the labour market. As the former German Federal Minister of Economics and Labour, Wolfgang Clement, recently learned at a talk given to international human resource managers at the European Chamber of Commerce in Shanghai, foreign corporations, as well as banks, industrial conglomerates and billionaire investors from Taiwan, Hong Kong and Macau offer virtually any price for an English-speaking employee with technical and/or management experience. The wooing in the Middle Kingdom is 20% higher than the global average. "The labour market is bursting at the seams." Such was the opinion of Clement, who was appearing in Shanghai as Head of the "Adecco Institute", an international think-tank based in London that was set up by Adecco S.A. in Zürich, the world market leader in human resource management and temporary work.

Gaining control of the Chinese labour market and its social explosion is currently the greatest challenge facing the government. Resettlement in urban regions alone cannot provide a sustainable solution. On the contrary, new bottlenecks and imbalances are emerging. If around 60% of the population were still living in the country in 2005, according to UN estimates in 2003 only 30% are settled there. Although the restructuring of agricultural production is having a positive effect on high-value products. All the same, it’s a slow process.

Overall, the Chinese labour market is facing dramatic challenges, which is bound to have serious consequences for economic development. The current annual influx of around 5 million people in search of work – a legacy from the former state-directed economy – is contrasted by an almost constant number of older workers clinging to their jobs, as they have insufficient or no pension provision. The guarantees of a job for life that previously existed are now being withdrawn by more and more companies, with extremely precarious consequences for those concerned and naturally also for the State. Amongst the broad influx of people seeking work, far too few of those potentially starting work are backed by qualifications. Career development in line with the German model does not exist. Barely four per cent of the workforce has a university degree. However that is precisely the target group that companies need to ensure China's technical and economic progress. They can take their pick of the best jobs and negotiate the highest salaries. Their competitors are at best privileged fellow countrymen, who return to their native country after studying at American or European universities, because they can earn more there than in Silicon Valley or in a European corporation.

According to a study conducted by the Chinese Academy of Personnel Science, there is currently a shortfall of some 12 million skilled workers in manufacturing. Meanwhile the service sector is seeking 3.3 million legal experts, finance experts and interpreters. By 2010 there will be a shortage of pilots, aircraft mechanics, engineers and even nurses. China currently only has 100 court clerks; in the next five years, 5000 will be required. It is conceivable for workers made redundant in recent years in Germany and sometimes stuck in employment corporations, such as VW, Deutsche Telekom or Deutsche Post, to apply for jobs in Shanghai or Beijing.

But as we have already said, the pool of "elite" talent is much too small for companies to exhaust anything like their full growth potential. Without setting a new course in training and education, no relief is in sight. The United Nations predicts that the Chinese labour force, that is those people aged between 15 and 64, will increase to one billion by 2015. After that, the impact of the one-child policy will be felt, with the potential continually shrinking to around 870 million by the middle of this century. Even taking account of technical progress and the reduced amount of work in the manufacture of goods and services associated with this, the Chinese age issue will become fully apparent in the next 15 to 20 years - with serious consequences for the social system. A UBS study states that: “As a result, increasingly fewer workers will be available to support a rising proportion of elderly people in the population, thus putting pressure on growth and competitiveness in the coming years”. A sheer economic and social explosion.

The Chinese have recognised the weakness that could seriously jeopardise their chances of flying high, economically speaking. For this reason, a new comprehensive employment law is being introduced at the beginning of next year in China. With an openness and transparency hitherto unknown, the Chinese government has opened up the discussion process, as the experts are saying, in order to openly discuss this prime project for reform. 200,000 proposals for changes and improvements came via the Internet alone.

In intensive discussions with senior Chinese employment service officials, experts from the renowned University of Beijing and the influential Academy of Social Sciences, all of whom are playing a major part in the design of the new employment law, the London Adecco Institute delegation led by Clement was given a first look at the new laws. They include a massive improvement in workers’ rights with regard to salary, working hours, holiday and dismissal. For the first time, rules for temporary work, which have been very successful in Germany and Europe, are also included, and are noticeably geared towards German standards. For a market leader such as Adecco, this is naturally a reason to buy in early to Chinese employment agencies that are still in their infancy. Even antidiscrimination regulations, doubtless guided by US models, will become effective in a country in which employers have only recently had to be sentenced on account of slave labour.

First reactions from international corporate circles came by return of post: anxieties, penalties and regulations could restrict the previously largely free administrative dealings with employees and reduce the attraction of the Chinese labour market as a bonanza for global corporations with low costs and inflated profits on account of the comparatively low wages. Furthermore, foreign companies are also concerned that their Chinese competitors could more easily evade the new regulations and thus generate further cost advantages.

However, Wolfgang Clement at the Chamber meeting held at the Shanghai "Radisson Hotel" referred to statements made by his Chinese partners. They have assured him that the new employment laws are focusing more intently on national companies than on foreign investors: "this should encourage optimism that things will also be dealt with fairly in China in future". Incidentally, the same maxim applies in China, as in Europe, for companies and employees: "the best security is achieved through qualifications and training". It is possible that a global cooperation will be agreed between its London Institute and Britain's Warwick University on one side and the Chinese Academy for Social Sciences on the other, in order to develop well-targeted models for career development and especially for the transition from school to work.

Klaus Wirtgen, freelance journalist and advisor to the Adecco Institute (London)

Picture Credit: PICTURE-ALLIANCE/DPA/DPAWEB/JÜRGEN EFFNER

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Youth unemployment in Europe i.e. for people aged 15 to 24, is still very high despite years of economic growth. Over 15% of young people in the EU-27 are unemployed, 2.5 times worse than for the overall labor force.

One reason for this dismal picture is the gulf between young people’s “employability” skills plus their weak understanding of the workplace, and firms’ real needs. Schools and universities do not produce enough appropriately skilled youngsters with the right attitudes. Of course the situation varies dramatically by country and region, but for Europe as a whole, the truth hurts.

People often say that youth unemployment is not a new issue so why bother raising it? Well, let me share three simple reasons why we must take notice.

First, demographic trends in Europe are revolutionary. Indeed, we need to keep defining “Europe” in an ever wider way just to delay the bad news! ILO projections for Europe (that means down to Serbia, across to Russia and the Ukraine, and up to Iceland) plus the 27 member states of the EU, etc. indicate that Europe’s working population will peak in two years (in 2009) and by 2020 will fall to the levels of 1983. Our economies have advanced and grown rather a lot since then, and so have employment needs, making this all the more worrying.

But the real news lies within that overall trend. Europe’s labor force of people under 35 has been in continuous decline for over 20 years already - it peaked when the under 35s accounted for almost half the workforce. In the next 13 years there will be 20 million less young workers in Europe – with the trend accelerating as time goes by, so pretty soon every year we will find 2 million less workers under 35, and they will be just one third of our labor force by 2020.

Almost literally as you read this column, a historic change is taking place. For the first time in European history, there are more workers aged 40+ than younger workers. From this point on, our older workforce will be a fast growing majority. While immigration is an absolute necessity, often a lucky blessing, and a partial solution, it is never going to be a panacea for Europe’s demographic time bomb.

Second, we should talk about “diversity”. This is a wonderful thing, and has been a big factor in helping the UK and Holland, for example, come to terms with globalization as well as they have. Yet we should be concerned that the school-to-work transition is proving even harder for second generation migrants (i.e. children of migrants born in Europe, or who came here very young) than it already is for the general youth population in our countries. This seems true from Scandinavia to France. Second generation migrants can often “double outsiders” to the labor market and they make up an increasing proportion of our school children, so we simply cannot ignore it the problem or their plight.

Third, Europe’s jobs of the future will require increasing levels of skills. The December 2006 Leitch report commissioned by the UK government projects a 50% rise in the share of highly skilled professions in the British workforce by 2020, and abilities once seen as distinctive (e.g. IT literacy) will be mere “hygiene factors” for most jobs. Demand will also grow very fast for jobs in tourism, care-giving (to older people and children), security, packaging and delivery, personal services, and so on, but these jobs will also demand increasing technical, numeric or inter-personal abilities. Unskilled youths in Europe in the future will find more workplace doors closed to them than ever before.

My purpose here is not just to raise concerns, but also to encourage all of us to get involved in the debate about solutions. Above all, we must find ways to raise the quality and relevance of the skills imparted to youngsters in European schools and universities, and better mechanisms to bridge the divide between the school yard and the work place. Let me share some ideas, none of which are rocket science.

Let’s give our youngsters significant real contact with employers and jobs at least 3 years before they leave school, early enough for them to understand things and make choices. We should introduce much more relevant curricula at schools. Our economies are nearly 70% services-based, but this is not reflected in the subjects and focus of schools; entrepreneurship is almost taboo, and what about practical skills? Why not bring back vocational training for those who want to leave school but not go to university. Why is it considered an embarrassment in many countries? The Danish official target is, I believe, that 50% of youth go to university and 45% into vocational education. That sounds right to me. Properly designed and delivered vocational training can give youngsters the high quality, practical skills that employers crave.

At university, the young must make better use of their time. Let’s encourage them to finish quicker (taking your degree at 26, 27, 28 years in Southern Europe, Germany, Scandinavia is too long, and inefficient) and pick more “work-friendly” subjects. The UK last year introduced modest tuition fees – this nearly cost Tony Blair his job at the time but he was absolutely right. British university applications are now up 5%, even for poorer students, and youngsters are keener to take degrees in finance, engineering, marketing, chemistry, social work, tourism, even mathematics, all of which will give them better chances to find work and (often) better pay over their lifetimes. Being too soft with students has helped neither them nor Europe’s economy.

One thing is certain – doing nothing and changing nothing is no longer an option!

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In a recent high-level Brussels meeting we discussed demographic change in EU member states, particularly with respect to the ever more apparent shortage of qualified personnel. One of the participants dared to predict – in a semi-serious, semi-humorous fashion – and in this case it was one of the best-versed EU Commissioners: he said that HR solutions companies with well-trained, flexible employees will be the “oil sheikhs of the future”. That implies that work, rather than capital or raw materials, will become the greatest factor of production and catalyst of future progress and growth worldwide.

Not too long ago, in November 2003, the former Dutch premier Wim Kok campaigned for “Jobs, jobs, jobs” in Europe in a task force set up by the EU Council. He explained that only an enormous increase in jobs would give Europe the opportunity to catch up with the United States and other major regions of the world.

Is this an indication of a great change of paradigms, a transition from mass unemployment to global competition in the field of human resources? In truth, both statements are typical of the build-up of tension in our globalized economy. If we take a closer look, Wim Kok and the Commissioner have reached the same conclusions: the rapid changes in the population pyramids of our countries require a radical shift in thinking. No national economy can tolerate myriads of insufficiently trained and qualified young people, and, at the same time, the loss of countless productive citizens sent off prematurely to early retirement by government decree.

My fear is that we will fail if we rely solely upon governments to come up with solutions to these problems, particularly as quite a few of the undesirable trends originate in political decisions rather than business decisions. What is urgently required is business activity, and in this field temporary staffing businesses have a key role to play.

Their skill in job placements, and in making available flexible and mobile workers tailored to companies’ requirements, is certainly not inferior to that of state employment offices or agencies. By their very nature, they are closer to business than even the most motivated state employee can be. And this is what is required when it comes to jobs.

What I want to stress is that the temporary staffing industry is faced with a major challenge. It too will have to change to adapt to the changing requirements of the global labour markets; which is why we have recently founded the London-based Adecco Institute on behalf of the world’s number one provider of employment opportunities. It will use the international experience of the company, and work from within a network of renowned public and private research institutes, to find the best political and entrepreneurial solutions for the labour markets of the future.

For the first time, we have issued our Demographic Fitness Index (DFX) for eight European economies. With that index we intend regularly to check whether, and to what extent, European companies of all sizes are prepared for demographic change.

To put it bluntly, so far the results are nothing to write home about. At best, just twenty percent of the companies in the survey deal with the topics of health and knowledge management, career management or lifelong learning, as well as age structure, in a serious manner. With our index, we want to provide stimuli that could give our companies a competitive edge. We want to tempt them through regular benchmarking and showcasing of best practice.

We are making a similar attempt with our White Paper that has just been presented on the occasion of the European Business Summit in Brussels. It is dedicated to the apparently difficult transition between school and working life.

I think it is a scandal that, in Europe, the unemployment rate of young people is still twice as high as the overall unemployment rate – which is already too high anyway. Governments and the economy, schools, universities and companies, have to overcome the often hermetical sealing between these spheres that still exist in most of our countries.

They have to establish different, more productive links, and start to build very concrete bridges from the school world into the world of employment.

One tool to bridge this gap is public-private partnership - the cooperation of public institutions and private business in the fields of education and training, the transition between school and working life, and job placement. Public-private partnerships can serve as an important enabler and facilitator in coping with the changes caused by globalisation and demographic change in our countries. It is these new partnerships that will become crucial in the present and future world of employment.

Contributing to building those bridges is worth all our efforts.

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