Marginal employment not very popular: the economic upswing in the business-related services sector slightly slowed down in the fourth quarter of 1997. On the whole, the economic situation is still evaluated positively, even though the economic engine shifted down a gear at the end of 1997. 610-DM jobs – increased to 620 DM since the beginning of 1998 – as a possibility to adapt to cyclical and seasonal fluctuations play a rather subordinate role in business-related services. As a general rule, however, it can be said that the more a business is subject to fluctuations in demand, the greater is the significance of employment which is free of social insurance contributions for that business.

This is the result of a representative survey carried out by the Centre for European Economic Research (ZEW) in Mannheim, in collaboration with the "Verband der Vereine Creditreform" in Neuss, in December 1997. The economic sector of business-related services encompasses tax advisors and certified public accountants, business consultants, architects, technical consultants and planners, vehicle renting, machine renting, cargo handling and logistic firms, software providers, advertising agencies and waste management firms.

Further Upswing in Sight

According to the business-related firms surveyed by ZEW and CREDITREFORM, only the personnel and demand situation has improved this time, whereas the estimates concerning sales, prices and earnings display no improvement. Yet there can be no talk of an economic downturn in the business-related services sector since the sales expectations are highly positive for the coming quarter. The firms surveyed by the ZEW and CREDITREFORM furthermore expect the situation of earnings, demand and personnel to improve in spring. The price development continues to be eyed with scepticism.

Such bright prospects for the beginning of next year give rise to the assumption that the economic situation for business-related services firms will continue to improve. According to the forecasts by the German Council of Economic Experts and various economic research institutes, the economic upward trend will spread to further sectors of the overall economy. As a result, the business-related services sector will experience a further upswing.

Problem Children: Technical Consultants and Architects

The estimates concerning their own economic situation vary considerably between the individual branches of the business-related services sector. In this regard, technical consultants and planners, as well as architects turn out to be problem children. In addition to the still ailing construction industry, their situation is further aggravated by the fact that more and more “pseudo-privatised” state-owned companies perform planning services for cities and municipalities.

By contrast, business consultants and software providers are the beneficiaries of the economic trend. They continue to benefit not only from the strong demand for information and communication technologies, but also from the turn of the century and the changeover to the euro. The economic situation for East German business services providers is not yet as good as for their West German competitors. Even so, the earnings estimates show improvements in the last quarter of 1997. Estimates concerning earnings, price, personnel and demand remain seasonally adjusted and constant, compared to the same quarter in the previous year and the previous quarter.

Adjustment to Demand Fluctuations

The strong linkages between business-related services and the manufacturing sector cause a heightened susceptibility of this economic sector towards seasonal and cyclical fluctuations. Those branches of the business-related services sector influenced by the consumer goods industry and construction industry are particularly affected by demand fluctuations. In each case, around half of the advertising agencies, architects, technical planners, vehicle rental companies and cargo handling firms claim to be subject to demand fluctuations.

Labour is the most important input factor in the production of services. Therefore it is not surprising that business-related services providers especially use extra hours and short-time work, respectively, in order to compensate for seasonal fluctuations. Employee development so as to create higher flexibility within the company is important to a similar extent. One third of the business-related services providers make use of new technologies, freelance workers and subcontracts with third parties. Employment circumstances which fall below the social security threshold are of minor significance when it comes to short-term adaptability to fluctuations. One possible reason for this is that business-related services providers mainly hire highly qualified staff which is unwilling to accept 610-DM jobs. This presumption is reinforced by the fact that it is exactly those highly qualified services providers like architects, technical planners and consultants, as well as software providers, which hardly ever use minor employment in order to compensate for seasonal fluctuations.

However, there are considerable differences between the individual branches. The stronger a business is affected by seasonal fluctuations, the more frequent is its use of minor employment. One third of the advertising agencies, vehicle rental companies and cargo handling firms, respectively, state that they employ marginal workers to a high or very high degree.  The corresponding figures for the remaining branches are 17 per cent according to their own statements. With an average of 6.7 and 5.3 marginal workers per 100 employees, respectively, car-rental companies and advertising agencies display an above-average number of jobs which fallbelow the social security threshold. According to the ZEW/CREDITREFORM-survey, an average of 3.5 per cent of employees of the whole business-related services sector is marginally employed. The Institute for Employment Research in Nuremberg estimates that in 1996, there were around 3.8 m. people with a 610-DM job in companies on a nationwide level. This accounts for approximately 11 per cent of the total labour force. However, the actual amount of marginal employees in Germany remains unclear. Other estimates, like those of the German Institute for Economic Research in Berlin or the Institut für Sozialforschung und Gesellschaftspolitik (Institute for Social Research and Social Policy) in Cologne indicate much higher figures of marginal employment in companies and households. The figures according to the Federal Statistical Office are considerably lower. Nevertheless, the amount of jobs below the social security threshold in the business-related services sector lies below the national average, according to all estimates.

However, marginal employment constitutes an important instrument when it comes to maintaining short-time flexibility for the branches of the business-related services sector which are particularly susceptible to cyclical and seasonal fluctuation.

Contact

Prof. Dr. Ulrich Kaiser, Phone: +49 (0)621/1235-134, E-mail: kaiser@zew.de

 

The economic survey of the ZEW and CREDITREFORM has been carried out quarterly since the second quarter of 1994. A selected, representative cross-section of 4200 companies is surveyed quarterly by the ZEW and CREDITREFORM since the second quarter of 1994. The random sample is frequently refreshed by startup companies. The results of the survey are published in the ZEW Services Sector Report. In addition, we provide this report on the internet as a special service as of 26 January 1998.

Date

23.01.1998

Categories

Contact

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Phone: +49 0621 1235-133

sabine.elbert@zew.de