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TES sector important economic health indicator

  • marimac 

The Temporary Employment Services (TES) sector has proven once again to be an important measurement of the health of the economy. Contraction and expansion of the sector is a leading indicator of the state of the labour market, with TES workers typically the first to be laid off when demand for goods and services drop and the subsequent increase in the number of TES workers, often the first sign of economic recovery. As with so many labour market changes, South Africa is closely aligned to international trends.

A key driver for organisations to utilise TES is flexible access to skilled workers during economically uncertain times. Photo by Creative Commons

A key driver for organisations to utilise TES is flexible access to skilled workers during economically uncertain times. Photo by Creative Commons

During the Great Recession of 2008, TES proved itself the ultimate market indicator with an initial cliff drop in TES workers, followed by a 30% increase in TES jobs in the June 2009 to June 2011 period, as compared to just over 1% increase in traditional ‘permanent’ jobs. And with TES numbers dropping significantly in April 2020 due to the Covid-19 pandemic, one expects a similar opportunity to track the state of global economic recovery by observing the increasing number of TES jobs in the coming months and years.

Flexibility critical to enable resilience and recovery

Research conducted by the Boston Consulting Group in 2011, reflecting on the impact of the 2008 recession, clearly illustrated that those companies who utilised TES had not only survived the economic downturn, but also thrived in the upturn as they were readily able to upscale production to meet the renewed demand for goods and services. The researchers concluded that optimum efficiencies for resilience were seen in companies with at least 30% flex within their workforce.

In South Africa, anecdotal evidence, gathered by the Confederation of Associations in the Private Sector (CAPES), from the past year points to a similar trend as companies who have optimised workforce solutions to incorporate flexibility not only were able to respond quickly to the sudden onset of Covid-19 lockdown restrictions, but also adapt to the constantly changing conditions impacting on consumer supply and demand, social distancing demands on shift sizes, and changing lockdown levels.

A key driver for organisations to utilise TES is flexible access to skilled workers during economically uncertain times. To quote labour economist Susan Houseman, TES and the flexibility it allows, “provides a labour-force shock absorber for when business goes up or down”.

TES provides relief to workers too

A McKinsey survey conducted in 2020 to assess the impact of Covid-19 by sector, indicates the differences resulting from changing consumer behaviour and regulatory restrictions. Some sectors, such as hospitality and manufacturing have been hard-hit by the restrictions in place to contain the spread of the virus, with TES numbers taking a plunge across these sectors.

Others, like IT have remained neutral, as demand for virtual platforms to replace face-to-face engagements has increased and much of the work conducted by IT professionals can be done remotely. For some, the shift to online shopping and the demand for PPE to be shipped globally as well as the higher levels of medical care required, means an increased demand for labour within the distribution and healthcare spaces.

For those TES workers laid off in sectors experiencing a downturn, the chance to be re-skilled and re-deployed into other buoyant sectors of the market creates great opportunities and is invaluable. TES providers offer the chance to their affected workers to transition far easier than for individuals who are retrenched and left alone to navigate a suppressed job market.

The Covid-19 pandemic and its knock-on impacts have exposed the limits of traditional employment models and fast-tracked the need for organisations to expand their thinking to incorporate alternative methods and diverse forms of work – and workforce management – that provide the necessary flexibility to weather the unpredictable.