Employment Service Providers - methodological background

What are employment service providers?

Employment service providers ensure that there is coordination between the skills supply (workforce) and demand (jobs). They are often called labour market intermediaries. Employment service providers offer a wide range of measures and services to jobseekers and companies and play an important role in the generation and management of labour market information.

Types of employment service providers

Depending on their legal status, employment service providers can take the form of public bodies (i.e. public employment services (PES)) or private entities (i.e. private employment agencies, private providers of guidance and counselling services, temporary work agencies). Over recent years, civil society organisations have assumed more responsibilities for managing the transition of vulnerable or specific groups of people into work by providing employment-related services such as guidance, coaching, sheltered employment, etc. The centres for career guidance and orientation established in schools and universities also play a role in matching (future) graduates to available jobs or providing information on labour market conditions and opportunities for continuous development of skills.

A quick guide to what employment service providers offer

The main clients of employment service providers are:

• Individuals:  people looking for a job (the unemployed, workers about to lose their jobs, future or recent graduates (young people), those returning to employment after a period of inactivity (e.g. parental leave), recent immigrants, etc.;
• Companies: enterprises with vacancies to fill, organisations wishing to take up publicly subsidised training or employment opportunities, etc.

The main types of services and support activities for individuals can be categorised under three main headings:

1. Services: typically supporting individuals with job-search-related activities and offering guidance on job prospects or (re)training opportunities;
2. Measures: aimed at activating the unemployed and other target groups, or preventive measures to mitigate the risks of unemployment;
3. Supports: financial assistance to compensate for loss of wages or salary or to facilitate early retirement.

To companies, employment service providers typically offer support in recruitment processes through the referral or placement of jobseekers and advice on how to manage staff restructuring processes (e.g. preventive measures to avoid laying off workers).

Typology of employment service providers by matching activities

Notes: (**) Most important activity; (*) frequently or sometimes undertaken; ( ) rarely or never undertaken; (a) Guidance and counselling centres in schools and universities.

Labour market information and the role of employment service providers

In the context of matching supply to demand, a fundamental function of employment service providers (in particular public providers) relates to gathering, processing and disseminating labour market information.

Key types of data and information employment service providers manage or use:

• Vacancy monitoring;
• Jobseekers registers (organised by key demographics – age, gender, residence, etc. – and including education and skills profiles, work experience and any other information useful in the process of matching applicants to jobs and active labour market measures);
• The effects of jobseekers’ participation in active labour market measures (e.g. placement rates) and overall transition rates from (registered) unemployment to employment;
• Education enrolment and graduation patterns, including inflow of graduates into the labour market;
• Macro-data such as overall population trends, economic activities, and survey-based data such as that taken from the Labour Force Survey;
• Micro-level data on household income and status in employment, etc.

A number of limitations prevent access to relevant data or the full use of potential sources:

• Employment service providers have limited outreach in terms of vacancy monitoring, which in many cases relies on companies’ willingness to report vacancies to public employment services;
• The level of relevant and up-to-date statistical data is challenging in many transition and developing countries;
• Tracer studies and studies on graduates’ transition from school to work are less common in some countries or not sufficiently consolidated in methodology or frequency;
• Inter-institutional data sharing may be limited to a certain extent by fragmented cooperation and strict privacy rules related to data management;
• Analytical capacity is insufficient in many public employment services, in particular in countries with a high incidence of unemployment and limited public resources.

Key modalities to gather information on vacancies

Administrative approach: Employers report job openings/vacancies to public employment services (or private agencies). In some countries, employers are required to notify the public employment services of vacant positions (‘statutory notifications’). Many countries are moving towards online reporting of vacancies.

Employers’ surveys: A research instrument periodically administered via face-to-face, phone or online modalities.

Exploration of other data sources: Many employment service providers around the world try to diversify the modalities of vacancy monitoring by combining the various data sources of administrative/reported vacancies, surveys and online job postings. The latter modality has increased in importance; numerous online vacancy platforms are available and provide an alternative to the traditional tool of intermediated matching between jobseekers and vacancies. 

Most relevant demand-side data:

• Inflow of vacancies;
• Successful and unsuccessful referrals;
• Employment rates by occupation;
• Duration of unfilled vacancies;
• Placements by qualification of labour market entrants with and without previous work experience;
• Frequency of notification of vacancies by economic sector or region;
• Employment rates following participation in active labour market measures.

Core data on supply side:

• Overall profile of working-age population, disaggregated by levels of education, gender, age groups and residence/region and by major groups – active (employed and unemployed) and inactive. Typical source: Labour Force Survey and, to some extent, administrative sources (employment and unemployment registers, tax or social protection registers, etc.);
• Education and training data (enrolment and graduation by education levels and programmes in initial education, participants in continuous education and training by fields, etc.).

Skills anticipation and matching and the role of employment service providers

The concept of skills anticipation includes a wide array of quantitative and qualitative approaches and research instruments aimed at short-, medium- and long-term identification of economic, employment and skills trends. Such instruments include econometric forecasting models, surveys among employers, and skills needs assessment or audits, incorporating foresights, focus groups, sector analysis, etc.

Key ingredients of skills anticipation systems that support the collection, analysis and dissemination of information about future demand and supply include:

• information on demand by sector;
• data on emerging and declining occupations;
• forecasts of the number of entrants to the labour market per qualification level and type.

Public employment services play an important role in the short- to medium-term identification of labour market and skills trends through the monitoring of vacancies and jobseekers profiles. This implies that often forecasting based on PES data can be used to paint a rather short-term picture of predicted trends in skills and occupations (e.g. identifying the skills shortages and most in-demand skills for the next one or two years). By combining with other data sources and more sophisticated analysis, PES can provide longer-term outlooks of labour market and skills developments.

Skills matching describes approaches and actions aimed at increasing the employability of the workforce, reducing skill shortages and bringing jobseekers together with enterprises that need to fill vacancies. It is enacted through various mechanisms, instruments and policies to improve the coordination of skills supply and demand in a country, its regions or sectors. It can take the form of demand-oriented education and training, placement and referral systems, or initiatives to build up the employability levels among jobless individuals.

How matching works at the individual level

In a nutshell, public employment services perform a number of key functions that help both the anticipation and matching between supply (skills) and demand (jobs).

What are the challenges for PES that transition and developing countries face in relation to skills anticipation and matching?

• Insufficiently developed functioning of labour market observation beyond monitoring vacancies and the inflow of jobseekers;
• Discontinued cooperation with other key institutions such as Statistical Offices, ministries and agencies in charge of education or economy policies and other relevant institutions and organisations, including social partners;
• Underdeveloped processing and dissemination of labour market and skills information, adapted to various types of audience (jobseekers, students and graduates, companies, etc.), including the limited outreach of career guidance and counselling services;
• Limited resources for activation services and measures impede the full adjustment of skills supply (e.g. jobseekers) to changing demand.

What are the success factors for effective anticipation and matching?

• Improve the level of information in PES on company requirements and the skills of current and potential jobseekers to support matching;
• Ensure that such information is disseminated regularly to frontline staff and counsellors/advisors and reaches jobseekers, helping them to make more informed choices and improving the quality of matches;
• Set up information-sharing systems that are fit for various clients and their interests (often information is shared in very specialised formats with terminology that is inaccessible to the general public)
• Devise tools and instruments for labour market intelligence (LMI) brokerage that help:
  • individual jobseekers to access labour market information so that they can assess their own skills against those required in the labour market and take appropriate action;
  • education and training providers to adjust their courses to meet demand and direct the interests of students towards fields of study where particular qualifications are in demand;
  • policy-makers to take note of labour market trends, emerging shortages and other types of labour market imbalances and devise efficient policy responses.