Temporary agency work (Zeitarbeit in German, haken roudou in Japanese) has been on the rise in many countries and this particularly true for Germany and Japan since the early 1990s (see figures A-18 and A-19). Often this form of employment is seen as an instrument to enhance external flexibility in rigidly regulated labour markets which is supported by surveys of employers, who cite the numerical flexibility of temp agency workers and the opportunity to cut labour costs as main advantages. In contrast to the Netherlands, where temp agency work has been expanded with the consent and active participation of unions and is now considered an acceptable form of employment (Shire and Van Jaarsveld 2008), temp agency work has always been more controversial in Germany and Japan. In both countries temp agency work has been publicly discussed as inhibiting a regulatory trade-off between flexibility and protection, with unions in particular being wary of “crowding out” of regular jobs and pressure on wage levels. Employers and many scholars, on the other hand, have emphasised the benefits with regard to temporal and numerical flexibility and the possibility of unemployed workers to gain work experience through placements. The following section briefly reviews the process of de-regulation of temp agency work and recent attempts at re-regulation after the global financial crisis. It will look in particular at how German and Japanese governments have tried to resolve situations of regulatory trade-offs.
The accidental de-regulation of temporary agency work in Germany
In Germany the earliest regulation of temp agency work stems from court decisions, the BVerfG and the highest labour court. The decisions established several principles of regulation, e.g. the Synchronisationsverbot (meaning employees’ contract with temp agencies must be independent of assignment) as well as temporal limitations on assignments of workers (Wiedereinstellungsverbot). The latter was intended to mitigate the risk of crowding-out of standard employees (for the early
regulatory framework see Bode, Brose and Voswinkel 1994: 76-91; Vitols 2008: 133- 154). Successive reforms of temporary agency work were usually attached to larger legislative reform “packages” but never addressed in separate acts and did not meet much public interest. In retrospect, it appears that the quiet politics of expansion of temp agency work was at least partially a deliberate decision to keep the salience of the issue low.
This is visible in the first major deregulation in 1997 which has to be seen in the context of rising unemployment in that year. The reform was implemented more or less parallel to a minor reform of employment protection and of fixed-term employment (see section 5.2.) and reflected the intention of the government to deregulate the labour market independently of vested interests. It implemented only minor changes, however, e.g. by relaxing the provisions of the Synchronisationsverbot for initial contracts and extending the maximum duration of assignments to 12 months. The reform was clearly not aiming at a major flexibilisation of the labour market but was seen as facilitating employment for experts and smaller groups of employees seeking to gain work experience. The second major reform, the Job-AQTIV act, was also implemented without the explicit endorsement of the social partners, even though it was connected to a legislative package which stemmed from the corporatist institution BfA. The main part of the act concerned targeted spending on training and placement programmes and thus policies to improve employment prospects on the short-term. Temp agency work constituted only a minor part of the act and was inserted into legislation at the very last minute. This part concerncing the AÜG, however, did not reflect a consensus reached at the BfA but rather was the intiative of the cabinet which hoped to improve unemployment numbers by facilitating this form of employment. proposal (for this section see Vitols 2008: 178- 183).
As the social partners effectively blocked any decision on temp agency work inside the BfA while the SPD was increasingly desperate in implementing reforms that could boost employment by increasing flexibility, the government eventually added the AÜG reform to the JOB-AQTIV act on its own. That salience management shaped the decision-making process is visible in the fact that change was implemented in an unusual ad-hoc manner without consulting the respective bodies
inside the governing parties.80
The pattern to mediate the demands for flexibility and protection is also evident in the so called Hartz reform process which started roughly 7 months after the reform of the Job-AQTIV act was implemented. Although the Hartz commission itself was heavily influenced by the Benchmarking Deutschland Gruppe and its recommendations on liberalising temp agency work in the Netherlands
It is also confirmed by the bill’s contents which represented a clear compromise between the position of the unions and employers. On the one hand, it expanded the maximum period of assignments from 12 to 24 months on the other it required that temp agency workers would enjoy the same working conditions and the same pay as a regular worker at the host firm with a similar job, after 12 months (see table C-4 for details). After the successful implementation of the bill neither unions nor employers objected to the act.
81
80 "Dieses Gesetzgebungsverfahren war ein sehr mühsamer Prozess. Bekanntlich gab es keinen
Regierungsentwurf, weil die Widerstände innerhalb des Regierungsapparates offensichtlich so groß waren, dass der Entwurf über die Fraktionen eingebracht wurde - und nicht als Regierungsentwurf. Dieses Verfahren hätte womöglich vermieden werden können, wenn die Regierungszentrale oder andere Mechanismen eine stärker steuernde Rolle übernommen hätten, um sie dann allerdings sieben Wochen nach Inkrafttreten des Job-AQTIV-Gesetzes umso intensiver zu übernehmen und den 'Hartz-Prozess' in Gang zu setzen." See the comment by Schimanke, a former secretary of state in the article by Schmid about the Hartz reform process, Schmid (2003), p. 89.
temp agency work again played only a secondary role in the negotiations. The initial focus of the commission was on reforming the system of public job placement but internally the members formulated their goal as looking at everything that could help to reduce unemployment. The resulting far-reaching reform of the AÜG can thus be seen more as a by-product of the commissions’ efforts rather than a central concern. With regard to temp agency employment the main contribution of the commission was to facilitate deals: “Dabei kam es zu Kompromisslösungen, die nachträglich auch als implizite Tauschgeschäfte interpretiert werden können. Ver.di (…) musste die (…) die Deregulierung des Zeitarbeitsektors akzeptieren, behielt dafür aber (…) den Tarifvorbehalt.“ (Schmid 2003: 78). This was then implemented in 2002 (“Hartz I”). As a result, all temporal limitations on assignments were lifted as well as on industries. Also the Synchronisationsverbot was dropped which meant that contractual limitations were now only subject to the provisions in the TzBfG. Most importantly, it contained an equal treatment clause, which however was “balanced”
81 For example Fleckenstein finds that all experts involved in the process stressed the learning aspect of reform
trajectories of other countries: “hierbei wurde explizit das Volumen der Zeitarbeit eben in Großbritannien und den Niederlanden als Benchmark genannt, an der man sich orientieren müsse.“ Fleckenstein (2004), p. 661.
by the possibility to deviate from the clause through collective agreements which had to be negotiated within the temp agency sector.
This latter regulation can be interpreted as a compromise between efforts to increase employment flexibility on the one side and the protection of workers on the other. Delegating the actual regulatory responsibility to the level of industrial relations enabled the government to avoid taking sides in the form of universal legal provisions. Also, the reform promised to limit the political risks of further regulation of temp agency workers as it was now a responsibility of the social partners. Last but not least, the AÜG can be seen as an encouragement of meso and micro regulation which stands in contrast to the concept that in free markets, it is the duty of the state as regulator of the market environment to ensure minimum standards are ensured. The deregulation of temporary agency work in Japan
In Japan before the first act was introduced to regulate temp agency work, “labour dispatching” (this English term is commonly used by Japanese scholars to describe temp agency work) was operating in a legal grey zone and was considered either as illegal or at least legally dubious since no regulation existed that effectively regulated the of working conditions of “dispatched” workers. Despite this unstable legal background, however, temporary agency work had been on the increase for several years before the first Worker Dispatching Law (WDL)82
82 The full name of the law reads: “Act for Securing the Proper Operation of Worker Dispatching Undertakings
and Improved Working Conditions for Dispatched Workers” See annex C for details and full Japanese name. Japanese scholars writing in English generally refer to temporary agency work as worker dispatching, with dispatch being a direct translation of haken (派遣). The term haken has traditionally been used to describe various kinds of labour dispatching, including secondments to subsidiaries and sometimes even teinen and shukkou. In recent years, however, haken has become more or less a synonym for temporary agency work. To ensure consistency with regard to terminology in both cases, temp agency work will be used instead of “worker dispatching”.
was adopted in 1985 (see table C-5). Firms valued in particular to possibility to cut personnel costs by relying on temporary external labour (for de facto temporary work prior to 1985 see in particular Imai 2004). According to Araki (1994) temporary agency work was mainly used by female employees and elderly workers, both of which tended to be disadvantaged due to the small size of the Japanese external labour market. For them temp agency work increased the supply of jobs. Trade unions, however, were nonetheless worried about the fact that no legal mechanism existed which could ensure the “adequate” treatment of such workers and that would ensure regular jobs would not be affected negatively.
Imai (2004) demonstrates that the MoL had initially high hopes that the 1985 regulation through the WDL and the reliance on traditional employment practices would be sufficient to allocate excess labour and to avoid unemployment. Many of the reforms and regulatory changes that followed were implemented without using regular laws but rather through Ministerial ordinances (abbreviated shourei 省令) which did not even require the direct involvement of the cabinet.
To understand the role of non-legislative regulation and blame avoidance for the process, however, one has to look at the way the reforms where devised and implemented. In Japan until the mid-1990s the direct influence of the government was limited to setting a specific goal (such as the reduction of working hours in the late 1980s) or to communicate the outline of desired changed to the Ministry. Actual bills would often be discussed and formulated on the level of the shingikai which granted all participating stakeholders a veto right (Miura 2001b). Reforms implemented in this era therefore are usually compromises between conflicting interests. However, administrative reforms in 2001 and growing pressure to further enhance labour market flexibility led to a major disruption of the system by strengthening central decision-making bodies, in particular the cabinet. However, this change did not mean that politicians directly devised policies, but rather they relied on independent commissions which consisted mostly of “public interest” experts (koueki 公益). The commission’s proposals were usually adopted by the cabinet with only minor modifications and then directly introduced into the legislative process. This provided the background of the two larger reforms in 1999 and 2003 which constitute cases of major deregulation.
The 1999 reform deregulated temp agency work by adding new occupations for which temp agency work was allowed by replacing the positive list which explicitly allow temp agency work only specified occupations by a negative list, which explicitly stated the occupations for which temp agency remained illegal. Although unions were no longer directly involved in the process, their opinions were nonetheless still expressed in the shingikai. This was changed by Koizumi’s cabinet- controlled policy-making process for the 2003 reform. This time the government relied entirely on members in the council on economic and fiscal policy . With regard to changes, the 2003 reform abolished almost all restrictions that had remained in the 1999 reform in terms of occupational limitations and temporal restrictions. In
terms of policy-making the reform marked the most drastic departure from traditional policy-making practices in Japanese post-war history.
Deregulating temp agency work - comparison
In comparison it becomes clear, that the deregulation of temp agency work required a considerable amount of institutional innovation in decision-making processes in both countries. Reforms in most other flexibility-related areas were not impacted in a similar fashion (see next sections). The fact that commissions were instrumental for initiating major reforms supports the interpretation that blame avoidance remained a crucial motive for government action. Also, in both countries governments have been under pressure from two sides, with unions demanding more rigid regulation and business more leeway in the usage of temp agency work. In fact, policy-makers hoped to achieve a fair balance between conflicting objectives by delegating regulatory authority to industrial relations and corporate consultation.
5.3.1 The regulation of temp agency work in comparative perspective
Few other policy areas have been as contentious as the deregulation and re- regulation of temp agency work. With the possible exception of employment protection, the regulation of temp agency work most clearly embodies the regulatory dilemma for governments between flexibility enhancement and employment security and social protection.83
In terms of political salience, it can be said that temp agency work has always been controversial among the social partners and political parties in the national policy-making process in both countries. At the same time it did not receive much attention from the wider electorate until about 2008 (chapter seven).
However, the reliance on expert committees and non- political bodies suggests that even here governments have tried to manage salience by delegating substantial parts of policy formulation. In retrospect, the example of temp agency work suggests that political authority over labour market regulation has actually not increased in the course of the 1990s and 2000s. Rather, the externalisation of responsibility for reform has been the prerequisite for making them politically feasible.
83 Evidence in economic research is mixed with regard to actual effects of employment protection, see for