A Sucking Sound

A worrying picture of a divided work force emerges from the mass of individual cases. "What you get is polarization between good, secure jobs for insiders and precarious jobs for outsiders," says Nigel Meager of the Institute for Employment Studies in Britain. "And labor-market polarization leads to social polarization." Too often, the unskilled are trapped in low-grade temporary work, fueling the sense of resentment that showed itself in last fall's rioting in France's rundown suburbs. The downside is especially steep in countries where job stability is built into the system. French landlords, for example, may be leery of renting to tenants who don't hold the golden ticket of the job market--the CDI, or contract of undetermined duration. The latest trend is no less unsettling. Once largely confined to lower-level jobs, temp work is creeping up the corporate ladder and into middle-management and professional ranks such as information technology and engineering, according to Shilobrit. Indeed, this is among the fastest-growing segments of Manpower's business in Europe.

Doubts about the potential social costs of temp work have prompted some economists and government officials to question what has long been accepted as conventional wisdom--that there's a causal link between prosperity and easy access to temporary staff. If Spain is flourishing, says Ronald Janssen of the European Trade Union Confederation in Brussels, it's because of historically low interest rates, not because of easier employment rules. Dependence on temps may even prove an economic downer. "Temporary work does not provide stability for the worker or the household, and that has all kinds of negative effects," says Janssen, reeling off a list of drawbacks. Productivity declines (it's stagnant in Spain) because workers feel no loyalty to casual employers. Firms see no need to invest in training employees who won't be in the office next month, and consumer spending falls since workers on temporary contracts lack the confidence to splurge.

Happily, all parties can at least agree that the problem can be fixed. All that matters is finding the right balance between security and flexibility, experts say. Lately, Spanish unions, employers and free-market ideologues have taken to touting the so-called Danish model--a system of "flexicurity," which turns the regular staffer into a temporary-permanent hybrid. The Danish firm that hits hard times can dump workers with a few days' notice, but the state will step in (with generous benefits) to retrain the newly redundant and prod them back into employment as soon as possible. "Our philosophy is, if you can't be sure of a job, you can be sure of employment," says Jorn Neergaard Larsen, director of the Danish Employers Confederation. Indeed, who needs more? The rest of Europe is watching closely.

With Tracy McNicoll in Paris and Mike Elkin in Madrid

© 2006