New Forms of Employment and Working Time in the Service Economy

Background and Objectives

The subject of research in NESY was the change in the organisation of work and working-time in the service sector. The entire complex of employment relationships is undergoing fundamental changes; particular emphasis in the project was laid on new forms of employment and working-time.

The project covered 10 EU countries: Belgium, Denmark, Finland, France, Germany, Italy, the Netherlands, Portugal, Sweden and the United Kingdom. It combined quantitative and qualitative research methods as well as micro and macro approaches. The qualitative - and bigger - part of the project included case studies which should help to identify basic industry and activity-specific reasons for the change in forms of employment and working time in selected service industries and activities as well as in various country clusters. It spanned a broad range of areas and consisted of around fifty case studies, involving five service segments and different country clusters. The focus of this work was on the customer interface in the following areas:

• information technology (IT) services as an example of the "blurring boundaries" between dependent employment relationships and self-employment, including very long working hours of "knowledge workers";
• the retail trade as an industry with largely adopted standardised working practices which is particularly exposed to the pressures of working time flexibility;
• the health care segments (hospitals) as an example for the impacts of structural reforms in public services due to budget restrictions on employment and working practices;
• the home-care business for the elderly as an example for a fast-growing service industry being fundamentally restructured by the developing competition between public and private care providers;
• the banking trade in order to explore the impact of structural changes in international financial markets under the conditions of different national regulations on working conditions and working-time organisation in local branches and call centres.

The quantitative part included the evaluation of European Labour Force Survey data relating to the change in employment and working time in the service sector, also portraying the background of different routes taken by EU countries on their way into the service society.

NESY case studies:

• IT services: country reports on Finland (Anttila/Nätti), Denmark (Csonka/Boll), Great Britain (Smith), the Netherlands (Plantenga/Remery) and Germany (Voss-Dahm). In each country IT companies were visited that have their core-business in the field of systems development, analysis and software services. The case studies included small as well as large IT firms. In four countries we had access to the same global company. The summary report was compiled by Janneke Plantenga and Chantal Remery, who also coordinated the research.
• Retail trade: country reports on Finland (Anttila/Nätti), Sweden (Anxo/Nyman), Denmark (Boll), Germany (Haipeter), France (Jany-Catrice/Pernod-Lemattre) and Portugal (Castro/Figueiredo/González). Two case studies were carried out for each country, one in a hypermarket/self-service supermarket and one in a clothing store; these included two European clothing chains. Steffen Lehndorff coordinated the research and compiled the summary report together with Florence Jany-Catrice.
• Banking: country reports on Germany and France by Thomas Haipeter and Martine Pernod-Lemattre, who also compiled the joint summary report. Two banks, each with one branch and a direct bank, were examined in each country.
• Hospitals: country reports on Sweden (Anxo/Nyman), Great Britain (Rubery/Smith/Caroll), the Netherlands (Plantenga/Remery), Belgium (Plasman/Lumen), France (Piovesan) and Italy (Villa/Zeni). The research teams in each country conducted surveys in two public hospitals and more specifically in two departments: Gynaecology & Obstetrics and Orthopaedics. The population surveyed was that of medical care staff other than doctors, i.e. nurses, nursing assistants and midwives. The summary report was compiled by Christophe Baret, who also coordinated the research.
• Home care for the elderly: country reports on Finland (Anttila/Nätti), Sweden (Anxo/Nyman), Denmark (Csonka/Boll), Great Britain (Fagan/Nixon), the Netherlands (Plantenga/van Everdingen/Remery) and Italy (Degasperi/Villa). Two local organisations providing home care for the elderly were surveyed in each case. Dominique Anxo coordinated the research and compiled the summary report together with Colette Fagan.

Findings

Service landscapes and service labour markets

By the year 2010, the EU has set itself the target of raising employment rates in the Member States from 62.1% (1999) to 70% for men, and from 52.6% (1999) to 60% for women. This ambitious goal is unlikely to be attained unless we see an expansion of employment in the service sector. European countries with rates of 70% or over all have a greater proportion of people working in the service sector than those currently below the 70% mark.

The employment rate is generally measured in per capita terms, but we increasingly find that 'volume of work' - i.e. the number of hours worked - needs to be brought into the equation. This is because of the growing trend towards part-time work, especially in the service sector, as well as the widening divergence between countries as regards working-time arrangements.

• Services are by nature heterogeneous. Otherwise identical employment-rate and volume-of-work statistics may conceal quite different underlying structures. In order to uncover these and to distinguish the distribution of volume of work across different service sectors, we have divided services into five sub-groups. It is the area of community and social services that provides the highest volume of work in all the countries considered. In some (Sweden, Denmark, eastern Germany and Belgium), more than half of all service-sector jobs are in this segment. There are nonetheless sizeable differences between EU countries. The range (in absolute terms of per capita volume of work for people of working age) is at its highest in the case of community and social services (4.64 hours); and at its lowest in respect of consumer-oriented services (1.5 hours) - although the latter group is smaller than the three others.
• The most noticeable side-effect of having more and more women in employment is an increase in the demand for social and community services. Tasks previously performed (unpaid) within the home are now purchased in the form of externally delivered services (outsourcing). There is a 0.7781 correlation between social and community services, on the one hand, and the full-time equivalent female employment rate (i.e. with part-time work factored out) on the other. This explains 60.5% of the observed variation across Europe for this area of activity.
• Many authors recommend wider income differentials as a means of combating the 'cost disease' in many services, arguing that this would create demand from higher earners for the services offered by those earning less. If income differentials do indeed act as prime movers in the expansion of services, then there must logically be a positive correlation between the level of services offered and income differentials in the various EU countries. Yet no evidence of any such correlation is available. There is in fact a negative correlation between volume of work in the service sector as a whole and unequal distribution of income. This is particularly noticeable with social and community services (correlation -0.677). In other words, labour-intensive social and community services tend to figure prominently where incomes are highly convergent.
• Here we can observe a virtuous circle in operation, with increasing numbers of women in work boosting supply of services. A professionalised labour force is better for employment than a cheap one; solidarity-based financing can conquer the cost disease. When it comes to social and community services, European best practice would suggest the following mix: expanding social security provision via social insurance; funding services from general taxation; and introducing special levies. A clear connection likewise emerges between the volume of social and community services and expenditure on social security. The role of the welfare state as an agent of service-sector expansion has tended to be underestimated. It is by no means certain that cutting back on the role of the state and the public sector is going to deliver the desired results in terms of employment.
• As quality-based competition and customer services in industry become increasingly important, there is an ever greater demand for production-oriented services. Production is becoming more R&D intensive, customers increasingly require advice, and firms themselves have to purchase more advisory services ranging from design through to corporate consultancy in the event of company reorganisation. If this thesis is correct, a positive correlation may be expected between production-oriented services and the transition to quality production. This transition was measured here by the number of patent applications per million persons of working age and by per capita R&D expenditure. There is indeed a positive connection between patent applications and R&D expenditure on the one hand and the volume of labour engaged in production-oriented services on the other.

Regarding the contribution of services to employment growth the individual sectors that are contributing most in the service business encompass both high- and low-value services. These fast-growing service areas are providing services to business enterprises, to the community and to individuals, thus reflecting the heterogeneity in the colourful cosmos of service activities. Within these different activities, the role of 'non-standard' work and gender varies: In service activities such as the retail trade, we find female part-timers filling most of the newly created jobs; in health and social services, female atypical workers still predominate in many of the new jobs. However, in business services and the computer area, atypical workers are generally in the minority, with men playing a more important role. Where there are atypical workers in these higher-value services, they are more likely to have full-time temporary contracts. This polarised job growth reflects the dualistic nature of employment in the services sector which is characterised by highly professional activities combined with low-skilled routine tasks.

Moreover, the data provide evidence on the service areas with the highest number of formerly unemployed new entrants to the labour market at the end of the 1990s as compared to those service areas with the highest net increase in employment in the second half of the decade. Retail trade is among the leaders as far as short-term job creation is concerned. Turning to medium-term net growth in job numbers, however, IT services head the list. A key explanation for this lies in above-average staff turnover in the retail sector. There is also a hidden message coming across: IT services, along with services at the business interface, are still characterised by a predominance of permanent employment, whereas in the other top-ranking sectors part-time work plays a highly significant part. The high proportion of women working in these sectors is another factor favouring part-time employment.

Nevertheless, the equation 'services = women's work = part-time work' is incorrect. Rather, employment and working-time structures are shaped by two linked characteristics. The first is the weight that individual service industries, particularly social services, have in the economy as a whole. The second is the prevailing model of female labour market participation in a given society.

It is particularly important to note that not only part-time work (the most important 'non-standard' working arrangement), but also 'standard', i.e. permanent full-time forms of employment, contribute significantly to rising job numbers and a dynamic labour market in the service sector.

Qualitative changes in service-sector work

The studies carried out in five service industries reveal the multilayered qualitative changes, differentiated by country and industry, in the organisation and structure of service-sector work that are concealed behind the quantitative increase in service-sector employment. They also reveal that these changes cannot adequately be characterised as changes in the forms of employment and working time. Rather, in some at least of the industries investigated, what is happening behind the façade of employment forms that, on the face of it, remain largely unchanged is a thoroughgoing change in work organisation. The whole complex of employment relationships is going through a period of upheaval; new employment and working time forms are one aspect of this upheaval, the core of which lies in changes in work organisation. For this reason, the qualitative studies carried out in the course of the NESY project, which were originally to have focused on new employment and working time forms, were extended in the early days of the project to encompass changes in work organisation and working and employment conditions in the service sector. In investigating working and employment conditions, particular emphasis was placed on working time.

• The fundamental change in work organisation observed in all the service industries we investigated finds concrete expression in the increasing exposure of individual workers in their daily work to the competition and restrictions of the market. This change affects not only the service sector but manufacturing industry as well. One precondition for the market orientation of work is the 'marketisation' of organisations through the creation of internal markets. Internal markets are increasingly being used in the public sector in a similar way to that seen in the private sector. However, the development of internal markets does not mean that workers are directly exposed to the competition and restrictions of the market. The demands of the market must always be interpreted by organisations and translated into strategies that then find expression in products. What confronts workers directly are the numerical indicators used by management to lay down the maximum costs, productivity levels or profits to be achieved by the decentralised units within an organisation. Thus despite the great diversity of work in the service sector, the essence of market orientation is that it always confronts workers with the economic environment in which they operate. The organisation's economic problems, in the form of the indicators formulated by senior management, become problems for each individual employee.
• One of the most striking phenomena to be observed across the service sector as a whole is the restructuring of skill requirements. An increase in skill requirements is found everywhere; in some service activities, it is a basic trend affecting the vast majority of employees, while in others it affects only segments of the workforce. And yet, even with professionalisation, basic service activities are still being reproduced to some extent. This contradictory evolution of skill requirements is the precondition for the emergence of two fundamentally different trends in the evolution of work organisation in services, one towards 'service-sector Taylorism' and the other towards self-organisation.
• 'Service-sector Taylorism' is based on the extensive standardisation and deskilling of non-complex service activities. It also entails the fragmentation of the total volume of work into many small employment and working time units. Some traditional service-sector labour markets, such as that in the retail trade, for example, are being gradually restructured as a result. In areas with high skill requirements, on the other hand, the contrary trend takes the form of self-organisation, with employees operating largely autonomously in the market. The boundaries between dependent employment and self-employment become blurred as a result. This phenomenon is currently particularly evident in the IT services industry, but is also becoming widespread in other service activities (whether in the service sector proper or in manufacturing) and may well be a harbinger of future developments beyond the boundaries of individual industries and sectors.
• The creation of standardised jobs on a large scale can be observed in various service industries, but it is in the large-scale retail trade that it is most evident as a widespread trend. In those areas where this process is particularly advanced, forms of time management have been put in place that are strongly reminiscent of Taylorist mass production. The separation of planning and execution, the high degree of standardisation and the division of tasks into their smallest constituent elements are similar to the organisation of work in industrial mass production. Unlike in classic Taylorism, however, the content of work in non-complex and standardised service jobs, the specific nature of the customer interface requires 'basic communication work' instead of 'basic physical labour'. Employees must be present as personalities, as individuals, even though in many cases their communicative and emotional contribution is prescribed by tightly defined standards. This specific characteristic of what we denote by the term 'service-sector Taylorism' has encouraged retail companies, where possible, to look for workers who bring social and communicative competences to their work as a sort of free 'bonus qualification'. Technical and professional standards, if they existed at all, are losing ground in favour of behavioural and sales training that encourages the development of 'soft skills' that can be deployed in a variety of situations.
• The diametric opposite of service-sector Taylorism is the trend towards the self-organisation of service-sector work by dependent employees themselves. This phenomenon is also encountered in various parts of the service sector. However, although it may yet not be very widespread in banking or in social services, it can already be regarded as characteristic of IT services, an industry with above-average skill requirements. The key feature of this form of work organisation is the extensive autonomy that employees enjoy. The boundaries between dependent employment and self-employment begin to blur. Old-fashioned 'command and control' is being replaced by indirect controls in the form of cost targets and deadlines. On the basis of competitive conditions in the market and the target operating results, numerical indicators are drawn up in order to provide the hard economic framework within which autonomy at work is exercised. The more independently employees work, the more important it is for firms to put in place these indirect control measures.
• The trend towards self-organisation identified here is seldom encountered in its pure form. In many service industries, there is a greater likelihood of finding conflicting organisational forms, as well as discrepancies in the organisation of work between skill requirements and devolved responsibility, on the one hand, and employees' competences, on the other ('contradictory work requirements'). The contradictions inherent in certain forms of work organisation can lead to a curious juxtaposition of self-organisation and hierarchical control structures. It is safe to assume that, in many areas of the service sector, any attempts to introduce self-organisation will have to take place for some considerable time to come in an environment that is scarcely conducive to such innovations. However, work requirements remain contradictory even if the discrepancy between individual room for manoeuvre and hierarchical control no longer prevails but the entire work environment is conducive to self-organisation. This becomes apparent when the management of flexibility requirements in services is incorporated into the analysis.
• Our findings call into question the picture suggested by the traditional model of the 'flexible firm'. External flexibility is by no means confined any longer to numerical flexibility. It is apposite, therefore, that the most recent Business and Consumer Survey in the EU (European Commission 2000: 42) should find that 'there has been much overlap between internal and functional flexibility, and external and numerical flexibility'. However, certain reservations have to be expressed about the conclusion inferred from this finding, namely that companies in which external flexibility is particularly highly developed, as it is in many British firms for example, are giving priority to increasing their own internal functional flexibility, while 'in the more protected European setting, the shift has been towards greater use of numerical flexibility and external functional adjustments'. The qualitative studies conducted in the course of the NESY project lead to a different conclusion: it is precisely because of the increasing overlapping of different flexibility instruments that greater pressure is being put on skilled members of the core workforce to make the decisive contribution to internal quantitative flexibility as well (the unspoken implication being: 'What you can do, others can do as well'). The 'outside world' from which an organisation derives its external flexibility is also increasingly made up of organisations (and not primarily of casual workers or individual freelancers). However, these organisations have no flexibility reserves other than their own internal ones. In short, external flexibility intensifies the total pressure for flexibilisation within service organisations. Thus the ultimately decisive question for all service organisations is how to increase their internal flexibility.
• The two basic trends in the evolution of work organisation - service-sector Taylorism vs. self-organisation - have their counterparts in two very different flexibility paradigms. The essential difference between the paradigms of market-oriented work and working time that are effective in practice lies in whether management responsibilities are devolved to employees and, in conjunction with that, whether the increased temporal flexibility is derived primarily from the passive or the active cooperation of employees. When tasks are broken down into small units and standardised, as they are in service-sector Taylorism, workers can, in theory, be replaced at any time at short notice and manning levels can be varied greatly in accordance with need. In this form of work organisation, temporal flexibility is based essentially on the availability of workers at the times at which they are require by the organisation. For this reason, we use the term 'passive flexibility' to characterise this variant. On the other hand, when firms are unable or unwilling to dispense with their employees' individual knowledge, abilities and experience, then they tend to rely more heavily on the self-organisation of work and working time by those employees. This variant is denoted by the term 'active flexibility'.
• When the scheduling of working time is left to employees themselves, as is characteristic of active flexibility, those employees are confronted directly with the economic environment in which they operate. There is no supervisor to tell them when they have to turn up for work; rather they see for themselves when they are needed (by means of electronic personnel assignment planning tools, for example). If there are not enough people to fill the work schedules, they have to find a solution themselves, in consultation with their colleagues. However, this can lead to greater dissatisfaction than under the old system of passive flexibility. They become caught in a contradiction: their responsibility is being increased, but the resources made available to them are insufficient for them to fulfil their responsibilities properly. From here, it is but one step to self-managed work intensification.

If the results of these quantitative and qualitative analyses are looked at in context, certain salient features emerge.Connections are often made between the tertiarisation of the economy, on the one hand, and the flexibilisation of the labour market and the erosion of standard employment relationships, on the other. Clearly, this is far too simplistic a view and can easily lead to dubious policy recommendations. As the studies outlined here reveal, the expansion of service-sector employment is associated with changes in labour markets that are both multi-layered and differentiated by country and industry. In some areas, there is a broad trend towards the standardisation, devaluation and reorganisation of non-complex service activities that is associated with the fragmentation of employment and working times. This trend is denoted by the term service-sector Taylorism. In some labour markets, such as that in the retail trade, this trend is leading to radical change and restructuring. In other areas, in contrast, the trend is towards the development and expansion of professional labour markets (home care services for the elderly). It is in service activities with high skill requirements that this countertrend to service-sector Taylorism is particularly pronounced. Despite strong employment growth, employment forms remain outwardly unchanged; however, the substance of employment relationships is changing fundamentally, with dependent employees organising their work themselves and operating 'autonomously' in the market. The boundaries between dependent employment and self-employment are beginning to blur. The developments outlined here by reference to IT services are indicative of future changes not only in many service activities but also in the core areas of manufacturing work.

Considerable influence can - and in future must - be exerted over these multifaceted processes. It is possible to create frameworks to contain change, along the lines of the systems we have to regulate product and labour markets. Our empirical research has thrown up enough teaching material, ranging from evidence of the importance of vocational training (banking) to the need to reform healthcare delivery (hospitals). Another important issue, which arises across the whole services spectrum, is how societies are to manage the increasing numbers of women coming on to the labour market. Alongside higher skills levels, this is undoubtedly the most significant transformation EU labour markets have witnessed. Our studies have demonstrated the huge impact of national models and institutions; how they respond to the ground-swell of change dictates how labour markets, working conditions and employment structures will evolve.

Politics will determine - much more than people realise - the seriousness and stability of employment in female-dominated sectors.This especially applies to community and social services. The expansion of social and training infrastructures is essential if we truly care about the future state of employment and services. What is require is a European commitment to best practice, injecting dynamism into the service sector thanks - even if not exclusively - to a virtuous circle of employment growth, skills en-hancement and quality-of-life improvements. And countries must ask themselves how much value they really attach to the achievement of such objectives. Currently there is a mismatch between the lip-service officially paid to social-service provision and the actual resources made available; our empirical research has highlighted the problems with working conditions and wages currently on offer. The danger is that we will slide into a vicious circle of unsatisfactory working conditions, continuing labour shortages and poor service quality. Our decisions with regard to community and social services will largely determine whether we enter the service society along the 'high road' or the 'low road'.

Conclusions and policy implications

The fundamental organisational change in service activities has very different impacts on the conditions of work; however, an intensification of work and an increase in the speed of work can be identified as a common basic tendency. In service organisation with strongly developed autonomy in work organisation, this may go along with working-time extensions organised and managed by the employees themselves. For the time being, this refers especially to highly qualified employees.

These findings suggest that the organisation of many service activities in EU countries is societally not sustainable.The most obvious symptom of this predicament is the phenomenon observed in a number of countries, namely that employees, mainly due to psychical burdens in the wake of massive workloads, cannot remain gainfully employed until they reach the statutory pension age. It is not only the immediately concerned persons who suffer from this status quo, but also entire societies and national economies who are thus deprived of valuable human productive power.

Another characteristic of the lacking societal sustainability in the organisation of service work is the constraints and restrictions imposed on the use and support of female labour supply. While corporate work organisation often uses female labour supply insufficiently (holding back of preparedness to work and thus of work capacity on the part of workers and thus resistance to contribute to labour supply due to heavy work loads, low remuneration and low social prestige of many typically "female" service activities), the societal organisation of service work is often responsible for the fact that female labour supply is only insufficiently fostered.

Labour shortages in times of unemployment - we have come upon this paradox in some quite diverse service areas. Many factors are at work, but two constants keep reappearing: working conditions which discourage labour supply; and inadequate and short-termist attitudes to training. There is a temptation to speak of a demandled scarcity of labour supply. We would enter a strong plea for serious public debate on this issue, so as to pave the way for sustainable solutions. Our empirical studies point to differences in policy approaches around the EU, as well as different policy options on the part of companies and organisations. Ultimately, the one clear message ringing out is that policy matters.

Apart from the obvious necessity to undertake increased efforts in the areas of training and further training, a key role in this respect plays the development of social services which contribute significantly to creating a broad and continuous supply of qualified female workers and to offering large numbers of demanding jobs. However, these chances offered by social service activities can ultimately only be used if corporate work organisation keeps pace with the societal significance of this activity. This means that, both at corporate and at societal level, forms of organising service work have to be found which take into account not only the increasing qualification of women, but also the greater demands made on work contents and the conditions of work going along with such development. Consistent models for a socially sustainable organisation of service work both at a societal and at a corporate level are require .The development of consistent models for service work organisation in European societies will require public discussion and debate. Two highly controversial issues will be on the agenda in this respect.

First, it would be important to conduct an open debate on the so-called "service paradox": The more person-related services are enlisted, the more likely will there be the possibility that - depending on the type of service and its societal organisation - people will be forced to work at times when other people do not work. Moreover, as many activities in manufacturing industries, too, are getting more and more service-oriented, societal time structures may be expected to become increasingly desynchronised. On the individuals' level, a great deal of efforts to manage the increasingly unpredictable working-time patterns and to coordinate times of work and reproduction, including leisure, within households and the respective social environments may be require . However, the question is if only the immediately affected individuals are encumbered with the task of mastering of these problems and the costs related to it. If high-quality services are desired, there is no way to service at any time at zero cost. If there is a broad social consensus that the service offer be expanded in terms of time, then it must be clear that this will also require new flexibility compromises, the cost of which will be reflected in the service costs. Regulations both at state level and at the level of collective labour market agreements can be of great help in this respect.

Second, what may be the most controversial issue: What is the worth of good services in a society? Nowadays, this fundamental question is becoming a pressing problem especially as regards the area of social services. So far, the organisation of social services has been increasingly becoming input-oriented, i.e. it has been "hooked" on reducing the costs of labour-intensive service activities. Output orientation, on the contrary, focuses on the quality require for service accomplishment in the interest of consumers or of society; it looks for the most promising and efficient means of service creation under given conditions and for ways of attracting demand for the products it intends to offer (or, in the case of the state: of supporting demand in the wake of democratic decisions). This does of course not mean that input criteria are becoming irrelevant, however, accents are shifted noticeably. Also, and especially if public suppliers of social services compete with private or "third sector" organisations, the state has a wealth of options as to the accomplishment of such shifts in accent. Among the tools serving this goal are both the indicators and standards of service quality, of quality assurance and of service personnel qualification. However, to this end, the development of reliable and consistent models guiding the organisation of service work is indispensable.

Research team