Business-related Service Providers: Fewer Prospects on the Job Market for Unskilled Workers

The continued economic downturn among business-related service providers is having an increasingly negative impact on their labour demands. While the effects of this are being felt by workers at all qualification levels, workers without any formal qualifications are being hit the hardest.

These are the findings of an economic survey carried out amongst business-related service providers by the Mannheim Centre for European Economic Research (ZEW) in collaboration with the Verband der Vereine Creditreform, Neuss, in September 2001. The survey is carried out on a quarterly basis among approximately 1,000 businesses in the following sectors: tax advisers and certified public accountants, business consultants, architects, technical planners, vehicle rental companies, machine rental companies, cargo handling and logistics firms, software providers, advertising agencies and waste management firms.

In the third quarter of 2000, considerably more business-related service providers claimed that the number of their staff without formal qualifications had increased over the previous twelve months. In the current quarter, namely the third quarter of 2001, however, considerably more companies in this sector report dismissing more workers with this level of qualification than they hired. The demand for workers with vocational or professional qualifications has also declined. However, there are still more workers with these qualifications being hired than being made redundant.

Workers with university degrees in the fields of science and technology or social science had the best chance of being hired in 2001. But even these workers are now experiencing worse job prospects compared to previous years.

Workers with a university degree in science and technology are of most value to software providers. Demand for these highly skilled workers has increased substantially in this sector over recent years. Meanwhile, the demand for staff with no formal qualifications has dropped considerably. This serves as an indication that the consolidation phase of the "new economy" is having a particularly negative impact on newcomers from other sectors, who up until the year 2000 still had fairly good employment prospects in this sector.

One factor contributing to this consolidation among software providers is the increasing number of foreign competitors in domestic markets. Indeed, all other branches of business-related service providers witnessed an increase in the number of foreign competitors in domestic markets in 2001 compared to previous years. However, companies in this sector on their part are also finding a foothold in foreign markets with the help of exports.

Furthermore, business-related service providers are improving their competitive edge by innovating their products and processes. Companies consider process innovations, i.e. the internal implementation of new or substantially improved technologies for the provision of services, to be more important than product innovations, i.e. new or substantially improved services. Due to competitive pressure, firms are forced to make their internal processes as efficient as possible.

The significance of process innovations has grown considerably since 1999. While around 60 per cent of total turnover from business-related service providers in 1999 was attributable to companies engaged in process innovation, in 2001, this figure stands at almost 85 per cent. Product innovations also have a larger role to play in 2001 than in 1999. In 2001, companies engaged in product innovation were responsible for around 60 per cent of total turnover in the business-related service provider sector. In 1999, this figure stood at just under 50 per cent.

Contact

Prof. Dr. Alexandra Spitz-Oener, Phone: (+49) 0621/1235-293, E-mail: spitz@zew.de