Privatization of Public Services

Impacts for Employment, Working Conditions, and Service Quality in Europe

Christoph Hermann, Jörg Flecker

• Publisher: Routledge
• Year: 2013
• eBook ISBN: 9781136316180
• Edition: 1
• Topic: Economics
• Subtopic: Business General
• Index: Economics

Public services throughout Europe have undergone dramatic restructuring processes in recent years in connection with liberalization and privatization. While evaluations of the successes of public services have focused on prices and efficiency, much less attention has been paid to the impacts of liberalization and privatization on employment, labor relations, and working conditions. This book addresses this gap by illustrating the ways in which liberalization has contributed to increasing private and foreign ownership of public services, the decentralization of labor relations has amplified pressure on wages, and decreasing employment numbers and increasing workloads have improved productivity partly at the cost of service quality.

Examining diverse public-service sectors including network industries, public transportation, and hospitals, and using international case studies, Privatization of Public Services covers a wide range of aspects of service provision, with particular emphasis on companies and workers. The result is a unique picture of the changes created by the liberalization processes in Europe.

1	Introduction
	Christoph Hermann and Jörg Flecker

With the 2007–2009 financial crisis and the following austerity programmes, privatisation and marketisation of public services are again on the top of the political agenda. In the past liberalisation and privatisation have already profoundly changed the provision of public services in Europe. Since the mid-1990s and in some member states even before, public monopolies have been abandoned in favour of markets and competition. Market mechanisms were introduced into services such as healthcare, which previously depended on detailed and comprehensive planning. In some countries even public hospitals have been privatised. While politicians often portray the changes as a win-win situation, because they supposedly lower costs and improve public service quality, the evidence far from supports this assertion. On the contrary, jobs cuts and deteriorating employment and working conditions may lower the service quality. This is only one of the reasons why the focus should be much more on the public service workers, who are under threat to be the main loser of these processes.

This is one of the major outcomes of a three-year research project funded by the European Commission under its Sixth Framework Programme. The objective of the project was to investigate the impact of the liberalisation and privatisation of public services on employment, productivity and service quality (Privatisation of Public Service and the Impact on Quality, Employment and Productivity, or PIQUE).¹ The assumption was that first-class public services, as promised by the European Commission and by the member states, depend on decent jobs and working conditions. An earlier study carried out by FORBA-Working Life Research Centre in Vienna and funded by the Austrian Chamber of Labour had shown that liberalisation and privatisation had a strong and mostly negative effect on employment.² The unexpected strong response to this earlier study proved that there is an urgent need for further and more systematic research. The main results of this research, perhaps the first of its kind, are presented in this book.

For most parts, the book covers six countries—Austria, Belgium, Germany, Poland, Sweden and the United Kingdom—and four public service sectors—electricity, postal services, local public transport and hospitals. Occasionally the analysis is complemented by findings from other countries and sectors. The findings are derived from a number of different research packages, focusing on different but related topics and applying different research methods, including literature reviews, company case studies (based on qualitative interviews), secondary analysis of data and the conducting of a representative survey.

A series of twenty-three case studies in the investigated sectors was at the core of the research (see Table 1.1). It was conducted to analyse the impact of liberalisation and privatisation at the company level and to better understand the consequences for work, employment and service quality. The main research questions were: What strategies do companies adopt in view of liberalisation? What restructuring processes are triggered by changes in market regulation and ownership? How is employment and how are working conditions changing, and what are the impacts on service quality? The case studies are based on a total of about 185 qualitative interviews conducted with managers, work council and trade union representatives and workers. In addition to interviews the case study material included academic literature, press coverage of the companies, company documents and company Internet presentations. In order to guarantee the anonymity of the persons and institutions involved in the research, the case studies were given fake company names. The research material was used in within-case analysis and interpretation which resulted in case study reports internal to the projects. These reports were then subject to a cross-case analysis the outcome of which was presented in the projects’ case study report and fed in the chapters of this volume that are dedicated to the individual sectors (Chapters 3–7).

Table 1.1 Overview of Case Study Sample

Electricity	Six case studies	Three in Belgium, one each in Austria, Poland and the United Kingdom; one municipal provider which is still 100% publicly owned, the other majoritarian foreign and private owned as part of European energy multinationals
Postal Services	Seven case studies	Four former monopolists (Austria, Belgium, Germany, Poland, Sweden) and three new competitors (Austria, Germany, Sweden)
Local Public Transport	Four case studies	Two municipal transport companies (Germany, Sweden) and two privatised bus companies (Poland, United Kingdom)
Hospitals	Five case studies	One public hospital (United Kingdom), two private not-for-profi t hospitals (Belgium, Austria) and two privatised hospitals (Germany, Sweden)

To assess the impact of liberalisation and privatisation on consumers, a representative user survey was carried out in Austria, Belgium, Germany, Poland, Sweden and the UK in 2007–2008. The survey explored users’ satisfaction with the effects of liberalisation and privatisation and their support for these policies. The sample population included all private persons aged between eighteen and seventy-nine living in a private household in one of the included countries; in each country at least one thousand respondents were interviewed based on random sampling.

In addition to the series of case studies and the survey, expert interviews were carried out in the investigated sectors and with industrial relations actors. Secondary analysis of datasets was mainly conducted on developments of employment in public services since the start of liberalisation policies. The research was carried out between 2006 and 2009 and the outcome has been discussed with administrators, policymakers, trade unionists and other scholars familiar with the topic in a series of workshops and conferences between 2008 and 2010, among other locations at the European Parliament in Brussels. While our conclusions have not remained uncontested, we are proud that our findings have sparked a vivid discussion in Brussels and in a number of member states and that parts of the European Commission now acknowledge that liberalisation of public services can have a negative impact on employment, especially in the postal service sector. Trade unionists at the European and national levels have used the findings to demand social regulation, limiting the worst effects of liberalisation and privatisation and creating a level playing field for competing companies. We also hope that this book gives trade unionists an argument in their ongoing struggles against the public service cuts proposed as part of the austerity programmes.

The book starts with a chapter clarifying the main terminology and summarising the processes of liberalisation, privatisation and marketisation in the six countries and four sectors under investigation. The chapter furthermore presents the outcomes in terms of competition and private ownership in the liberalised and privatised sectors. As liberalisation and marketisation were linked to far-reaching and sophisticated re-regulation, rather than simple deregulation, the first chapter also describes dominant trends in regulatory processes and their implications.

The following part of the book consists of five chapters presenting the findings from a series of company case studies. The company case studies were an essential part of the overall research following from the assumption that the strategies adopted by public service providers in liberalised markets have a major effect on the employment and working conditions. The chapters show that this is actually the case. After a brief note on methodology, the findings are presented for each of the sectors covered in the book (electricity, postal services, local public transport, hospitals), followed by a cross-sector comparison and summary. The individual chapters present changes in terms of company strategies, size and forms of employment, working conditions and industrial relations. At several occasions related effects on service quality are also discussed.

The following chapter adds information from secondary analysis of employment data. For most parts the sector data confirm the developments revealed in the case studies. In all the public services sectors and in all the countries under investigation the competitive pressure and privatisation has led to cost-cutting through either reduction of employment or increased flexibility. The largest job losses occurred in the electricity sector and in postal services while hospitals and local public transport showed job gains at least in some countries. Non-standard forms of employment, including economically dependent self-employed, temporary or part-time workers, increase the companies’ flexibility and lower costs. Thus our evidence not only contradicts the assumption of job creation through liberalisation; it also suggests partly negative qualitative employment changes.

The next chapter analyses the impact of liberalisation, privatisation and marketisation in the collective bargaining systems. In some countries the changes have profoundly altered the established industrial relations systems and eroded existing collective bargaining arrangements. In some cases the national bargaining systems proved more stable and compatible with liberalisation and privatisation and in turn have significantly affected the outcomes, especially in terms of employment and working conditions. The chapter starts with a description of the traditional public service labour-relations systems, followed by a characterisation of the new regimes emerging in the liberalised sectors. It then points to sector-specific developments and challenges. It ends with a brief discussion of some successful trade union counter-strategies.

The topic of trade union responses is further elaborated in the following chapter. Given the mostly negative effects of liberalisation, privatisation and marketisation on employment and working conditions, most trade unions have strongly opposed the changes. However, the tactics and strategies have changed over time. The chapter summarises and analyses the main strategies and their implications. While the initial responses were mainly strikes and concessions bargaining, campaigning and coalition building have become increasingly important. The chapter also describes more recent campaigns for a re-nationalisation or re-municipalisation of public services.

The company case studies revealed a number of consequences for service quality. These findings were complemented by a users’ survey carried out in the six countries covered in the book (Austria, Belgium, Germany, Poland, Sweden and the UK). The survey pursued two main objectives: to find out if service users support liberalisation and privatisation and how they assess the changes. In a next step the data were analysed with respect to various factors which have an impact on the outcomes. The results are presented with respect to consumer satisfaction and support for liberalisation and privatisation. However, the chapter also discusses the findings in the light of the “happy citizen-consumer by regulated market solutions” approach which stands at the heart of the European Commission’s liberalisation and marketisation policy.

The various findings presented in this book are the result of a collaborative research effort. While a number of project members have authored individual chapters, there are a number of additional researchers who at various stages and in various forms made invaluable contributions to the project. Among them are Monica Andersson-Bäck, Laura Coppin, Kathrin Drews, Jesper Hamark, Ines Hofbauer, Steve Jefferys, Yilmaz Kilicaslan, Thomas Lindner, Ulrike Papouschek, Anna Paraskevopoulou, Justine Sys, Ali Cevat Tasiran, Thomas Vael and Steven Van Roosbroek. We are extremely grateful for their effort.

The project would not have been possible without the help of our project assistant, Christine Wagner, and without the support and encouragement of our project officer at the European Commission, Dominik Sobczak. We are deeply indebted to them.

We are also grateful to all the people who allowed us to interview them for the company case studies and the users’ survey which formed an important part of the project as well as those who established contacts with interviewees and provided useful background information on different sectors and industries, as well as the survey institutes who carried out the telephone survey—not to forget all those who participated in our workshops and conferences and commented on our findings.

NOTES

1.

Project contract number: CIT5–2006–028478. Partner include: FORBA-Working Life Research Centre, Vienna, Austria (coordinator); Working Lives Research Institute (WLRI) at London Metropolitan University, UK; Higher Institute for Labour Studies (HIVA) and Public Management Institute of the Catholic University of Leuven, Belgium; Institute of Sociology, Warsaw University, Poland; In...

Table of contents

• Cover Page
• Title Page
• Copyright Page
• Contents
• List of Tables
• List of Figures
• 1 Introduction
• 2 The Process of Liberalisation, Privatisation and Marketisation
• 3 Concentration and Disintegration: Company Responses in the Electricity Sector and Consequences for Employment
• 4 Between Former Monopolists and New Competitors: Fragmentation and Deterioration of Employment Conditions in Postal Services
• 5 Outsourcing, Competitive Tendering and Changing Working Conditions in Local Public Transport
• 6 Hospitals under Growing Pressure from Marketisation and Privatisation
• 7 Company Responses to Liberalisation and Privatisation and Consequences for Employment and Working Conditions
• 8 Privatisation and the Impact on Employment
• 9 Privatisation and the Impact on Labour Relations
• 10 The Struggle for Public Services
• 11 The Citizen-User Perspective: Results from a Cross-Country Survey
• 12 Conclusion: Impacts of Public Service Liberalisation and Privatisation
• Contributors
• Index