Setting the Scene: Outsourcing in Public Services
Over the last three decades, virtually all public administrations in advanced economies, although to a different extent, have been subject to far-reaching restructuring towards outsourcing of a wide range of tasks and services (Ascher 1987; Hodge 1996; OECD 2005). European governments, at the start , approached outsourcing in public services under the pressure of increasing public debts (Bordogna and Winchester 2001), raising awareness of the inefficiency of traditional public administrations, which tended to become âoverloadedâ (Ascher 1987; Pollitt and Bouckaert 2011), and faith in the New Public Management narrative (NPM hereinafter) as a dominant paradigm for reforming public services (Hood 1991; Osborne and Gaebler 1992; Savas 1987). More recently, in particular during the last decade, the focus of political agenda on outsourcing has become central, largely as a response to the detrimental consequences of the 2008â2009 economic crisis (Bach and Bordogna 2013; Lodge and Hood 2012). Diminished resources in the aftermath of the sovereign debt crisis, together with stricter spending constraints, put European governments under even more severe and sustained strain (Bach and Bordogna 2016; Glassner 2010; OECD 2011; Streeck 2014; Vaughan-Whitehead 2013), leading to a situation of permanent austerity . As a policy response to such common pressures, public administrations across Europe have differentiated the provision of services, opening up the traditional direct production and delivery systems to competition through the adoption of a wide set of market-type mechanisms, including publicâprivate partnerships, voucher systems, liberalisation and privatisation policies , and outsourcing of public services (Blöndal 2005; Domberger 1998; OECD 1993).
The introduction of market discipline in the provision of public services represents one piece within the broader jigsaw puzzle of public administration reformâan âunending wave of reformsâ (Pollitt 2002) that has expanded progressively since the 1980s across all European governments under the label of NPM (Hood 1991, 1995), suggesting uniformity and commonality. The suggestion of this doctrine was to remove differences between the public and private sectors in a drive to increase efficiency and effectiveness; thus, governments should have imported into their public administrations business-like values and tools as well as market-type mechanisms from the private sector (OECD 1993). Outsourcing is an instrument taken from this NPM-inspired toolboxâa market-based strategy for reducing public expenditure (Savas 1987) through the shifting of service provision across public sector boundaries and into the domain of private organisations (Walsh 1995). The expectation was that opening up service provision to market discipline would lead to cost reductions, since private providers in a competitive regime can realise economies of scale, raise effort and/or productivity with a given input/workforce-combination and enhance organisational and numerical flexibility by focusing diminished financial and personnel resources on key functions that supported the organisationâs core mission (Blom-Hansen 2003; Domberger et al. 1986; Domberger and Henser 1993; Jensen and Stonecash 2005).
Despite initial enthusiasm, however, the appeal of outsourcing has increasingly been tarnished by a range of drawbacks, as only became apparent over time. Budgetary savings turned out to be lower than expected and/or declined over the long term (Bel et al. 2010): they were found to be illusory when factoring in transaction costs (Prager 1994); alternatively, they were achieved only at the expense of the quality of service (Quiggin 2002) or, importantly, the quality of work for their employees. While outsourcing has unquestionably promoted competition, gains have often been achieved through the reduction in labour costs; indeed, a consolidated literature has shown that savings often simply reflect either reduced employment levels (Alonso et al. 2015; Fernandez et al. 2007) or a deterioration in the terms and conditions of employment (Flecker and Meil 2010; Hermann and Flecker 2012).
Despite these concerns, public administrations in search of budgetary reductions in an era of multiple austerities (Lodge and Hood 2012) have increasingly resorted to outsourcing in public services , aiming to exploit the competitive advantages of market competition and the less stringent regulation of employment in the private sector (Dorigatti and Mori 2016; Jaehrling and MĂ©haut 2013). This has blurred and overlapped the boundaries between public and private sector working conditions and triggered labour inequalities and fragmentation (Drahokoupil 2015; Marchington et al. 2004). Public service employment relations, indeed, had long remained sheltered from market pressures , ensuring relatively uniform working conditions and job security. Their configuration has primarily responded to a political rather than an economic process, in that they are regulated by institutions operating independently of the private sector and with distinct rules (Bach 1999), reflecting the unique role played by the state authority asâsimultaneouslyâeconomic regulator, legislator, employer and provider of public services (Beaumont 1992). Outsourcing upset this configuration, not only by putting traditionally protected employment relations and working conditions under major strain, but also by challenging their distinctive regulation of labour and opening a traditionally insulated decisional arena to new regulatory actors and different governance logics (Mori 2017). Hence, public service reform towards outsourcing has put public service employment relations institutions and actors under pressure. From an NPM posture, those identifying public sector convergence towards private sector labour governance within each country (and possibly between public sectors across countries) (Hermann 2014; Greer and Doellgast 2017) assume the pervasiveness of a common neoliberal trajectory in European employment relations. This trajectory would imply a uniform slide towards a liberalisation pattern which adversely affects the distributive outcomes associated with industrial relations structures and institutions, including trade unionsâ disempowerment; fragmentation and weakening of the structures for collective representation; decline in union density ; and a jobs shift from highly unionised public organisations towards private contractors where industrial relations institutions are weaker (Hermann and Flecker 2012; Jaehrling and MĂ©haut 2013).
This book takes up the challenge to investigate and question the influential interpretation of the impact of marketisation processes on public service working conditions and employment relations in Europe. The interplay between the austerity agenda in the aftermath of the financial crisis and the swelling of outsourcing practices in public services, potentially an extreme trigger for convergence, provides a privileged test case across EU countries.
After this introductory section, the chapter procee...