Agency Workers in Israel: A Deeper Look

A new study by the Taub Center for Social Policy Studies in Israel shows that in contrast to popular belief, the rate of employment of agency workers in Israel is similar to other developed countries. 

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The study distinguishes between two types of agency workers – those from employment agencies and contract service workers – and demonstrates that while employees of employment agencies can benefit from this mode of employment, contract service workers are a weaker, more vulnerable group whose legal rights need to be improved.

Study findings:

  • The share of new immigrants among contract service workers, a particularly weak group who generally suffer from poor working conditions, declined slightly between 2000 and 2011 although at the end of this period, it still remained high (61.5%). In contrast, during the same period, the share of new immigrants among all employed persons decreased from 41% to 32.3%.
  • The proportion of contract service workers employed full-time was 53.7%, a percentage that is significantly lower than the overall rate among workers; 35% of them would want to increase their work hours but are unable to do so.
  • The share of women who are contract service agency workers has declined since the beginning of the decade, although in 2011 it was still higher than the percent of females among all employees (57.4% versus 45.4% respectively).
  • The number of contract service workers doubled from 2000 to 2011, while the number of employment agency workers, who are generally a stronger group, declined by about 50%.

In the past few weeks, the subject of agency workers has again risen to the top of the public agenda, with major complaints about this employment method and the corresponding conditions of this group of workers. A new study by Dr. Noam Gruber, which will be published in the Taub Center’s upcoming annual publication, State of the Nation Report 2015, presents important research findings that shed new light on the subject. The study negates the claim that the number of agency workers in Israel is higher than in the rest of the world, and shows that the reason for this conjecture is that the term “agency worker” has become a catch-all for temporary workers of all sorts (whether directly or indirectly employed). In Gruber’s words, “This lack of clarity, which is only made worse by the dearth of organized research findings, makes it difficult to estimate the scope of the phenomenon in Israel and compare with the rest of the world, and leads to exaggerations and inaccuracies.”

What is the rate of contract service workers in Israel? It depends on who you ask.

Around the world, it is generally accepted that there are two types of temporary workers: those hired through an employment agency who work under the supervision of the client, and workers who are outsourced (or subcontracted), a method whereby the client buys the service but does not directly supervise the workers. For example, if a company employs a programmer through an employment agency, and the company is responsible for supervising the programmer’s work, then the programmer is considered an employment agency worker. In contrast, if a company pays an outside agency for programming work and as a part of the service the programmer works in-house, while paid and supervised by the outside agency, then the programmer is considered a contract service worker. As the Taub Center research shows, in Israel both types of workers are generally referred to as “agency workers,” although there are substantial differences between the type of work and employment conditions. This is the source of the exaggerated estimates of the number of agency workers in Israel as compared to other countries, because outside of Israel, the numbers refer primarily to employment agency workers. Moreover, the employment agency law in Israel defines “service contractors” as those who provide services in the areas of security, guards and cleaning.

English figure 1

In order to make a valid comparison, using OECD data, Gruber compared the employment rate only through employment agencies in Israel and elsewhere. As can be seen in the first figure, when just employment agency workers are examined (“Israel 1” in the figure), their rate out of all employed persons is relatively low – about 0.8%. According to the study, the reason for higher, exaggerated estimates is that the number of nursing care workers are added in to the rate (“Israel 2” in the figure) as well as security and cleaning workers (“Israel 3”), even though they are classified as contract service workers and their characteristics are not similar to employment agency workers.

Characteristics of agency workers: more women and immigrants, fewer work hours

The Taub Center study shows that the distinction between employment agency workers and contract service workers conceals essential differences in the socioeconomic profile of workers. Firstly, the two groups are distinguished by the age of the workers. In general, employment agency workers are relatively young in comparison to workers overall. In 2011, the median age among all employed persons was 39, while the median age of employment agency workers was 33. The median age of contract service workers, on the other hand, was 46. Moreover, the share of students working as contract service workers in 2000-2011 (7.9%) was lower than their share among all  employed persons (9.2%), while their representation among employment agency workers was substantially higher (11.9%).

English figure 2

The research suggests that employment through employment agencies allows younger workers to gain experience in the labor market and is a pathway to long-term employment. According to data from Ciett, the international confederation of private employment agencies, 68% of employment agency workers were unemployed prior to this employment, while only 32% were unemployed after their stint as agency workers. Gruber says, “One could claim that the employment experience and the flexibility of this type of work are useful to both employer and employee, and in the more rigid labor market this type of employment fills a serious need.”

English figure 3

Another characteristic of agency workers is the relatively high rate of female employees. The figure shows that the share of women among all employed persons is on the rise (45% in 2000 and 47% in 2011). Among agency workers, the rate of women workers has actually declined since the previous decade, although it is still higher than among all employed persons, especially among contract service workers (57.4%).

The share of immigrants is also relatively high among agency workers. Between 2000 and 2011, the rate of employed persons among immigrants dropped from 41% to 32.3%. The rate of their employment in employment agencies also was in decline, although it remained higher than their overall rate of employment: 42.8% in 2011. Among contract service workers, the rate of new immigrants is particularly high and its decline is much more modest; in 2000, the rate was 65.4%, and in 2011, it fell to 61.4% – a rate that is double their representation among all employed persons.

English figure 4

The Taub Center study also highlights that an additional characteristic of agency workers is that they generally work in part-time positions. The findings show that a large number of them would like to work more hours, but were unable to find additional work. This rate is 35.2% among employment agency workers, 25% among contract service workers and 21.4% of non-agency workers.

Policy recommendations: encourage employment agency employment, and require transparency from contract services

In light of the Taub Center findings, Gruber says, “The two groups of agency workers in Israel – employment agency workers and contract service workers – have substantially different characteristics and require different policy steps. Employment agency workers are, in general, a younger group made up of a relatively high proportion of students. Relative to contract service workers, they are closer to the general employed population in terms of education level, the rates of women and immigrants, and their number of work hours. In the past few years, following legislation that limited employment through employment agencies to 9 months, there has been a significant drop in their numbers: from 57,000 in 2000, to 23,000 in 2011. This is an important employment channel that provides flexibility in manpower management for employers, and allows young people to accrue experience in the labor market and to earn a living while they are pursuing their studies. In light of this, lengthening the permitted employment period through an employment agency should be considered to allow these workers, particularly students, employment continuity and the chance to gain more work experience.”

“In contrast,” adds Gruber, “when referring to contract service workers, the situation is very different. Unlike employment agency workers, their numbers have risen over the years: from about 75,000 in 2000 to about 124,000 in 2011. This is generally an older and weaker group of workers, who in most cases do not have the ability to unionize and stand up for their rights.” In order to protect their legal rights, Gruber suggests requiring transparency: “Every service contractor will be required to submit both to the worker and to the client a monthly report that shows all payments to the worker alongside the payments made by the client. The client will share the responsibility  for legally paying the agency workers (and cannot use the service contractor as a buffer against claims of employment law violations), and all parties will understand the agent’s fees and will be able to evaluate whether it is worthwhile or whether it is preferable to employ the worker directly.”

English figure 5

The Taub Center study also warns against taking populist steps that are likely to cause more harm to the workers: “If a law requiring public agencies to hire contract service workers as permanent employees is implemented, it is reasonable to assume that many of these workers will end up unemployed, as their employment will not pay off for the employer.”

In addition to these steps, Gruber recommends the following:

‒      Improve legislation in the area of agency workers, and have systematic data collection: currently there are differences in the treatment of non-profit workers and the various employment agency workers, according to their area of work. The law should be amended such that the classification of “service contractor” includes everyone who gives service through an agency in any area – and not just in the areas of guarding, security and cleaning work. Likewise, in order to improve the available information, the Taub Center study recommends widening the classification for agency workers in the Central Bureau of Statistics’ surveys.

‒      Improve flexibility in the labor market: in many cases, especially in the public sector, direct employment would be preferable  to employment through a contractor both for the employer and the employee, and the biggest obstacle is the requirement to offer a tenured position to employees. The situation is created where permanent employees are unionized while temporary workers have few rights. Gruber notes that “if we wish to lessen the harm to weaker employees, employment terms in the labor market must be made more flexible, especially in the public sector, and the rights of agency workers must be enforced, particularly those of the contract service workers.”

The Taub Center for Social Policy Studies in Israel is an independent, non-partisan institution for socioeconomic research based in Jerusalem. The Center provides decision makers, as well as the public in general, with a big picture perspective on economic and social areas. The Center’s interdisciplinary Policy Programs – comprising leading academic and policy making experts – as well as the Center’s professional staff conduct research and provide policy recommendations in the key socioeconomic issues confronting the State.

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