Privatisation and industrial relations
Privatisation of formerly public sector organisations and services, and liberalisation of former monopoly markets, have been general trends across western Europe over the 1990s. This comparative study looks at the impact of such policies on industrial relations, examining areas such as employment levels and status, pay and conditions, bargaining arrangements, employer and employee representation, and industrial relations systems in general.
Since the early 1980s, privatisation and liberalisation have characterised economic policy throughout western Europe, representing a notable change in comparison with the long period after the Second World War, which had seen pervasive and increasing public intervention in the economy. This change in public policy has affected not only public ownership and state-owned companies in manufacturing and competitive sectors, but has also extended to services, public utilities (with telecommunications as a major example) and even welfare provision.
The impact of privatisation and liberalisation on industrial relations is potentially substantial, since public sector industrial relations are to some extent separate from private sector ones and generally have particular features (for instance, the public sector often has higher levels of trade union membership and involvement), though the degree of separateness and the specific features vary depending on each national context. Such specific features of public sector industrial relations are particularly evident in non-competitive areas, where the public sector has frequently been in a monopoly position (as in public utilities) or where public supply has been strongly prevalent (as in the case of welfare services). Given this situation, we might expect privatisation to have had important effects on: representation (notably on public sector employers' organisations and trade unions), membership rates and representativeness; and on the specific industrial relations models in the sectors and companies involved in privatisation and liberalisation processes. This comparative study - based on contributions from the national centres of the European Industrial Relations Observatory (EIRO) - aims to investigate the main elements of such changes, looking at privatisation and liberalisation generally and highlighting the specific example of the telecommunications sector.
The extent of privatisation
After the pioneering experience of UK and a few other countries (like France) in the 1980s, privatisation and liberalisation have progressively become a distinctive feature of European Union policy during the 1990s. The two main reasons behind this move towards deregulation and the reduction of direct public intervention in the economy have been: on one side, the adoption of a series of EU "liberalisation" Directives (on telecommunications, railways, air transport, energy and postal services) aimed at opening up domestic markets to competition; and, on the other, the progress of Economic and Monetary Union, which, through the pressure exerted by the Maastricht Treaty's convergence criteria, has encouraged governments to sell state assets and stakes in industrial companies. As a consequence, privatisation and liberalisation have occurred throughout Europe. Table 1 sets out the main privatisation and liberalisation developments to date in the EU Member States and Norway.
| Country | Developments |
|---|---|
| Austria | Partial or complete sale of companies in the competitive sectors (banking, oil and gas, salt and tobacco monopolies etc). Minority stakes sold in telecommunications. Railways, post and electricity are undergoing restructuring. |
| Belgium | Companies in competitive sectors have been privatised (banking and insurance, ferries). Public utilities have been transformed into "autonomous public enterprises" (telecommunications, post, railways). |
| Denmark | Some firms operating in competitive sectors have been privatised in banking and transport (bus services)."Corporatisation" (ie taking the form of a company but remaining in public ownership) of some large-scale public services (Copenhagen airport, post, state shipping lines). Full privatisation of the telecom company TeleDanmark. Contracting-out of local-level welfare services is increasing. |
| Finland | "Corporatisation" of some activities (railways, post, air traffic, banking). Privatisation in competitive sectors and in some utilities (power generation, road transport in Helsinki and - partially - telecommunications and air traffic). Contracting-out is very common when reorganising welfare services at local level. |
| France | Privatisation of companies operating in competitive sectors is almost complete. Public utilities are excluded from full privatisation, with only partial sales having taken place at France Telecom and Air France. At local level, contracting-out is extensive, particularly in the water industry. In welfare services, no privatisation has taken place - there is only a tendency to contract out auxiliary activities (catering, cleaning etc). |
| Germany | Privatisation of firms in competitive sectors (automobiles, chemicals) and of eastern German former state-owned enterprises. Some privatisation has taken place at regional level, as in transport and refuse collection. Liberalisation in some public utilities (energy and post), with instances of partial privatisation (telecommunications). |
| Greece | Some privatisation in competitive sectors. Privatisation of public utilities under debate. |
| Ireland | Privatisation is under discussion for state-owned banks, the semi-state airline Aer Lingus, the airport management company and the state forestry board. Telecom Eireann has been privatised, while the Electricity Supply Board is facing liberalisation. |
| Italy | Privatisation has involved a large part of state ownership in competitive sectors (banks, insurance and the subsidiaries of the Iri and Eni groups), many public utilities, both at national and local level, and - to a much smaller extent - welfare services, notably at the local level and through outsourcing. |
| Luxembourg | Some changes in the legal status of some state-owned firms (railways, banks). |
| Netherlands | Privatisation has taken place both in competitive sectors (banking, chemicals, steel etc) and public utilities (post and telecommunications, regional transport companies, a few energy companies). |
| Norway | Partial privatisation has taken place in some sectors (grain and pharmaceutical supply). Partial privatisation of the state-owned oil company and in telecommunications is under debate. Liberalisation and increased competition have been introduced in public utilities, such as telecommunications, post, railways and power supply, while state bodies have been turned into autonomous companies. |
| Portugal | Privatisation has involved both competitive sectors and public utilities (eg telecommunications). There are some forms of privatisation in welfare services - for instance, some hospitals are under private management. |
| Spain | Privatisation has substantially reduced state ownership and involved both competitive sectors (iron and steel, textiles, chemicals etc) and public services (electricity, transport, telecommunications). Privatisation processes are now being extended to welfare services. |
| Sweden | "Corporatisation" of state-owned enterprises. Some form of privatisation is under discussion only for railways and telecommunications. |
| United Kingdom | Extensive privatisation has affected firms in the competitive sectors and in public utilities, where it has been coupled with liberalisation. At local level, legislation requires competitive tendering for a wide range of ancillary services (cleaning, catering etc). |
Source: EIRO.
Europe is now at the forefront of privatisation. European sales of public assets accounted in 1998 for more than 50% of all privatisation receipts around the world - see table 2 below.
| Country | 1990-5 | 1996 | 1997 | 1998* | Total |
|---|---|---|---|---|---|
| Austria | 2,006 | 1,251 | 2,020 | 2,935 | 8,212 |
| Belgium | 4,186 | 1,222 | 1,562 | 1,467 | 8,437 |
| Denmark | 1,005 | 366 | 45 | 4,502 | 5,918 |
| Finland | 1,758 | 911 | 835 | 1,999 | 5,503 |
| France | 21,775 | 5,099 | 8,189 | 13,467 | 48,530 |
| Germany | 1,000 | 13,228 | 1,125 | 364 | 15,717 |
| Greece | 152 | 558 | 1,395 | 3,892 | 5,997 |
| Ireland | 1,016 | 293 | - | - | 1,309 |
| Italy | 15,870 | 6,265 | 27,719 | 13,619 | 63,473 |
| Luxembourg | - | - | - | - | - |
| Netherlands | 9,434 | 1,239 | 831 | 335 | 11,839 |
| Norway | 712 | 660 | 35 | 28 | 1,435 |
| Portugal | 8,773 | 3,011 | 4,968 | 4,271 | 21,023 |
| Spain | 8,614 | 2,679 | 12,522 | 11,618 | 35,433 |
| Sweden | 3,795 | 785 | 1,055 | 172 | 5,807 |
| United Kingdom | 51,890 | 7,610 | 4,544 | - | 64,044 |
| Total | 131,986 | 45,177 | 66,845 | 58,669 | 302,677 |
| World | 332,143 | 97,258 | 153,782 | 114,542 | 697,725 |
| EU and Norway as % of world | 39.74 | 46.45 | 43.47 | 51.22 | 43.38 |
* Provisional.
Source: , in Financial Market Trends no. 72, OECD, February 1999, pp. 129-145.
However, privatisation has not been implemented to the same extent in all European countries - as table 3 below shows. Rather, each country has defined a particular set of more or less explicit guidelines for the process and has developed a distinctive approach. Below, we examine the key quantitative differences between the countries, because the scope and depth of privatisation is likely to influence its impact on industrial relations. However, it is not within the scope of this report to investigate two other factors which might be highly relevant for the impact of privatisation policies: the importance of privatisation and liberalisation policies for national economies depends on the existing level of public intervention before they are implemented; and the date when the privatisation process started may be significant, if the effects increase with time, and differences might be expected between early privatisers and late-comers.
| Country | Country share of total EU plus Norway privatisation receipts 1990-8 (%) | Total privatisation receipts 1990-1998 as % of 1998 GDP |
|---|---|---|
| United Kingdom | 21.16 | 4.72 |
| Italy | 20.97 | 5.41 |
| France | 16.03 | 3.38 |
| Spain | 11.71 | 6.40 |
| Portugal | 6.95 | 19.85 |
| Germany | 5.19* | 0.74* |
| Netherlands | 3.91 | 3.14 |
| Belgium | 2.79 | 3.37 |
| Austria | 2.71 | 3.87 |
| Greece | 1.98 | 4.98 |
| Denmark | 1.96 | 3.38 |
| Sweden | 1.92 | 2.56 |
| Finland | 1.82 | 4.41 |
| Norway | 0.47 | 0.98 |
| Ireland | 0.43 | 1.57 |
| Luxembourg | - | - |
* Up to 1997, trade sales are not included.
Source: own calculations based on"Privatisation trends", in Financial Market Trends no. 72, OECD, February 1999, pp. 129-145, and Gross Domestic Product, OECD, August 1999.
Broadly speaking, the various countries can be divided into three groups:
- countries which may be characterised as having been in the forefront of privatisation in the 1990s. This group includes the UK, the pioneer of the "privatisation era", together with those other countries which have seemingly implemented privatisation on a relatively large scale, raising considerable financial resources through the sale of state assets, calculated either as a share of total European privatisation or as a percentage of domestic GDP (see table 3). They are Italy, France, Spain and Portugal;
- at the opposite end of the scale, those countries where privatisation has been of lesser importance - Luxembourg (where hardly any straightforward privatisation has taken place), Ireland, Norway and Sweden; and
- countries where the sale of state assets has been of some importance, mainly for the domestic market - Finland, Denmark, Greece, Austria, Belgium, the Netherlands and Germany.
This distinction provides a rough initial indication of the differences between the countries in this very complex area. However, it has several limitations. For example, such a typology based on "quantitative" factors does not catch some important "qualitative" features - for example: France has so far tended to exclude public utilities from privatisation; Germany has taken a cautious approach to privatisation, even if its contribution to overall European privatisation is far from marginal; while Portugal is particularly remarkable for its privatisation efforts when these are compared with the size of the domestic market.
As mentioned above, privatisation has affected competitive sectors, public utilities and welfare services, but to differing extents. It can be said that the "retreat" of the state from competitive sectors has been general, while the level of privatisation and liberalisation in public utilities has been very notable, though implemented to differing degrees in each country. In welfare services (such as health and social services), changes are taking place mainly as a consequence of the spread of outsourcing and competitive tendering procedures. In this study of the industrial relations effects of privatisation, attention will focus particularly on public utilities (and notably on the example of telecommunications), where privatisation is generally linked to the creation of new "sectoral" markets and systems of industrial relations (which is not usually the cases in competitive sectors). Moreover, it is easier to find common definitions of what "privatisation" is among public utilities, as well as examples which are to a greater extent comparable between countries.
The impact on industrial relations
Distinctive features of public sector industrial relations include the following:
- public ownership often entails greater attention to good industrial relations and consensus, which may lead to a more collaborative climate between management and trade unions;
- protection and guarantees for workers are usually more pronounced in state-owned enterprises, not least in terms of the security of the employment relationship. In some countries, much of this protection may be attached to the particular status of "public employee"; and
- there may be specific public sector trade unions and the industrial relations system may have certain peculiar characteristics - for example, as far as the degree of centralisation is concerned.
The move towards private ownership calls all these features into question and may well lead to fundamental changes in them. Below we examine evidence of change in these areas across Europe, as well as looking at changes in matters such as employment levels and wages, labour costs and productivity.
Employment levels
Privatisation is likely to have an effect on sectoral employment levels essentially because of the combined effect of: company restructuring and the frequent accompanying workforce reductions, which are often connected to the involvement of private investors; and employment creation, which is provided by new entrants when denationalisation is coupled with the liberalisation and opening-up of domestic markets (as in the case of public utilities and services).
The telecommunications sector illustrates these two contradictory tendencies. The net effect on employment of privatisation varies between countries and both increases and decreases in total sectoral employment can be found, depending on the post-liberalisation structure of the industry and on the components of the sector which are taken into account. It should be noted, though, that "quantity of employment" is only a part of the story, with the other being "quality" (such as wage levels and working conditions).
In Austria, the telecommunications sector, after the deregulation which came into effect on 1 January 1998 and partial privatisation, offers a prime example of job growth through liberalisation. Employment has soared by about 6,000 to around 42,000, and growth by a further 2,000 is foreseen for the year 2000. In Germany, parallel to a reduction in employment at Deutsche Telekom of about 50,000, new jobs have been created in the competing companies entering the telecommunications market. According to Reg TP, the sectoral regulatory authority, total employment in competitor companies amounted to 40,600 in 1998 and is expected to reach 53,100 in 1999, when for the first time employment reductions at Deutsche Telekom will have been more than offset by employment increases in competing companies.
The controversy which may arise from a direct link between privatisation and redundancies is well illustrated by the case of Belgacom in Belgium. Here, while there was no sale as such, the transformation of the company into a so-called "autonomous public enterprise" took place at the expense of jobs, though this loss of employment should also be seen in the context of a global workforce reduction and reorganisation which began much earlier. Following its transformation into an autonomous public enterprise and in order to cope with increased competition due to liberalisation, Belgacom launched a slimming-down operation: 6,289 people were offered early retirement and 6,600 members of staff were offered an individual retraining programme with a view to relocation in another position within the company.
As far as the individual telecommunications companies involved in privatisation (and liberalisation) are concerned, it can be said that a decrease in employment has usually taken place, and often quite a large one. However, as table 4 shows, it is notable that job losses have generally been addressed in a consensual way, often without collective redundancies: workforce reduction has resulted from staff turnover and through the use of incentives for individual resignation or retirement. This does not mean that there have been no confrontations over employment reductions, but that the parties have generally been able to find an agreement, even in the most controversial situations, as illustrated by the TeleDanmark case.
| Country | Management of redundancies |
|---|---|
| Austria | Telekom Austria employed 16,800 people at the end of 1998. The number is to be reduced by about 10% by 2003. A social plan was agreed between the works council and management in June 1999 and has been implemented since the beginning of August 1999. Employees turning 56 before the end of 2000 may opt for pre-retirement, whereby they are granted leave by the company and continue to receive at least 75% of their last take-home pay until they turn 60 and are eligible for a regular pension. The scheme is aimed at 1,049 employees and estimated to cost about ATS 1.5 billion. In 1998, 1,711 employees chose pre-retirement in a similar way, while 141 left for other reasons. |
| Belgium | At Belgacom, 6,289 employees have been offered early retirement and 6,600 members of staff offered an individual retraining programme with a view to relocation to another function within the company. |
| Denmark | In January 1997, TeleDanmark announced that 2,500 employees would be made redundant while at the same time 500 new employees with specific skills would be recruited. TeleDanmark management was criticised by employees and trade unions for failing to retrain and redeploy existing employees. Following an industrial conflict, management agreed to cooperate with the unions on how to deal with the redundancy issue. By 1999, 2,500 employees - primarily older workers and technicians with outdated skills - had left the company, while 1,000 new employees had been recruited. Today TeleDanmark has around 17,000 employees. |
| Finland | At Post and Telecommunications of Finland the major reason for a fall in employment from 10,000 at the beginning of the 1990s to 9,000 in 1999 has been technological change which has reduced the need for low-skill positions and increased the need for more qualified workers (especially in the new service jobs). Over 1994-6, early retirement and development money were offered to redundant staff. Furthermore, the company offers training and job opportunities to redeploy redundant workers. |
| France | Before and after the partial privatisation of France Telecom, unions negotiated agreements to cushion the blow of planned redundancies, including an innovative "partial early retirement" scheme. State intervention has been decisive in reducing the cost of these measures for the company. |
| Germany | At the beginning of 1995 (ie at the time of privatisation) Deutsche Telekom announced its goal of reducing staff by nearly 60,000 to 170,000 by the end of 2000. The company negotiated collective agreements with its three trade unions, Deutsche Postgewerkschaft (DPG), Deutscher Postverband (DPV KOM) and Christliche Gewerkschaft Post, in which it renounced dismissals until the end of 2000, while the unions accepted demands for increased mobility and flexibility of employees. In order to reach the workforce reduction goal, relatively generous compensation for leavers and favourable early retirement schemes were offered and widely accepted. By mid-1999, company employment had fallen to 174,000 employees. |
| Greece | The OTE workforce is expected to be cut during privatisation from 26,000 in 1996 to 16,000 by 2000. In 1995, the parties agreed on a system of voluntary resignation, under which 4,000 workers have already left. |
| Ireland | The decline in employment that has occurred in Telecom Eireann over the past few years - from approximately 13,000 in 1994 to about 10,500 in 1998 - has been particularly noteworthy. These reductions are likely to continue over the next three years or so, as another 2,500 employees are expected to leave. Recent changes in employment levels have been the subject of negotiation, with the "Telecom partnership agreement" signed by unions and management in 1997 providing for 2,500 voluntary redundancies. |
| Italy | At Telecom Italia Spa, total employment decreased by around 20% over the five years from 1994 to 1999, by means of economic incentives to resign or retire. Such incentives were agreed by social partners on a temporary basis and should have lasted only until 1997; however, the company has continued granting them unilaterally since that date. |
| Norway | In 1993, Telenor set up a unit called Telenor New Opportunities (Telenor Nye Muligheter) to help employees facing redundancy. When the unit was closed at the beginning of 1997, almost 5,000 persons had passed through the system. Of these, some 2,000 were reassigned to jobs within the Telenor group. Another 2,000 left Telenor, and 460 retired. |
| Portugal | Telecom Portugal began cutting back its workforce in 1992. The company, which employed 23,000 in 1995, has implemented a number of programmes to accommodate redundancies: a) subsidised early retirement; b) mutually agreed termination of employment contract; c) outplacement (transferring workers to suppliers by offering incentives in exchange); and d) transferring workers to companies with which Telecom Portugal has close ties, such as Marconi an TVCabo. |
| Spain | Telefónica has reduced its workforce mainly through redundancy procedures and agreements, using early retirement and voluntary redundancy in three different stages - two agreed between the company and the trade unions and one imposed by the company. The process has affected more than 15,000 workers of different categories and levels. |
| United Kingdom | At British Telecom, where employment fell from 238,384 at privatisation in 1984 to 156,000 a decade later, job losses affected all grades, but were particularly severe in areas affected by technological innovation (eg telephone exchange operators) and among middle managers affected by "delayering" to produce flatter organisational structures. "Headcount reduction" facilitated by generous redundancy payments (an average of GBP 35,000 per person in 1992-3) was the major supporting mechanism. BT provided outplacement facilities, retraining costs up to GBP 1,000 and offers of temporary work through recruitment agencies. Formal union consultation was normal; however, in BT the central issue was the level of payment and the criteria for selection, rather than alternatives to job loss. |
Source: EIRO.
Employment status
Another important aspect of the consequences for employment of the state's "retreat" from economic intervention is the "privatisation" of the status of the workers concerned. The issue is important since specific guarantees and benefits are usually attached to the status of "public employee". Privatisation of the employment relationship applies mainly to workers in public utilities, since employees of state-owned enterprises operating in competitive sectors generally had a "private sector" employment relationship already, while welfare sector workers usually maintain "civil servant" status, even where there is some deregulation.
In France the employees of France Telecom have retained their civil service status, which legally protects them against redundancy, even after the transformation of the telecommunications operator into a limited company and its partial privatisation. In Germany, one of the many problems in privatising the posts and telecommunications sector has been the complicated transition of former public employees to the completely different employment patterns and principles of private industry. Difficult legal questions have included the statutorily defined rights - and particularly the comprehensive job security - attached to career public servants (Beamte). Such rights do not apply to public sector blue- and white-collar employees, but there has still been the problem of adapting their collectively agreed terms of employment to private sector mechanisms for the determination of pay and working conditions.
Usually, such a change in employment status is highly controversial and receives considerable attention from the social partners, with trade unions supporting the retention of acquired rights. As a result of such concerns, "privatised" workers may retain their "civil service" rights (as in Norway) or there might be a differentiation between existing employees and new recruits (as in Belgium and Denmark). In yet other cases, the limited extent of privatisation or liberalisation makes it possible to leave public employees' status essentially untouched, as has happened in Luxembourg.
Wages, labour costs and productivity
As far as wages, labour costs and productivity are concerned, the overall picture is quite complex. On the one hand, a reduction in wage levels in the strict sense is uncommon as a consequence of privatisation, though in some cases, there has been a reduction in benefits which had formerly been granted under specific regulations applying to the public sector (eg pensions, holidays and sickness payments). On the other hand, the reduction of labour costs seems to be a priority in the privatisation process across the countries concerned, and has been pursued mainly through workforce reductions and outsourcing of non-core activities. Furthermore, an increase in productivity is another important objective, with the restructuring and reorganisation plans implemented in connection with privatisation generally aiming to achieve this by making working arrangements more flexible. In some cases, technological change may also help improve productivity (telecommunications is a prime example).
In countries where sectoral bargaining is predominant, a differentiation of wages may result from a combination of privatisation and liberalisation policies, when new entrants into a market apply different collective agreements than that which covers the existing, former publicly-owned enterprise in that sector. This occurs typically in the cases of former public monopolies (such as telecommunications) where there was previously no industry-wide agreement as such, but a company-level agreement that filled this role (as the public monopoly was the only employer in the sector). Following privatisation and the end of the monopoly situation, it may be the case that people performing the same job in the sector will be subject to very different collectively agreed provisions, depending on the identity of their employer. Usually, the former monopoly offers higher pay and conditions and employment protection, which were agreed in a context of government intervention and no competition, while new entrants tend to provide a lower level of pay and conditions. Such widening "differentials" are reported from the telecommunications sector in Spain and Italy, for example, where trade unions are in both cases seeking negotiations to define a single framework for the industry.
Another way in which pay and conditions within a sector may become differentiated following privatisation is the use of outsourcing. For instance, in the Belgian banking and insurance sector - much of which was formerly publicly owned - there has been a trend towards outsourcing of support services, such as call-centres and information technology. The companies' labour costs fall in these cases since the suppliers of outsourced services are generally covered by collective agreements which are less favourable for workers than the banking sector agreement. However, this controversial development - which has caused substantial industrial action - is difficult to ascribe to privatisation more than to general sectoral restructuring.
Deutsche Telekom appears a partial exception in the general picture of labour cost reduction following privatisation. While wages for most employees have risen in line with those in the public sector (whose terms of employment remain the yardstick for company negotiations in Deutsche Telekom), at the same time the wages of some specially qualified employees and managers have been raised to the higher level found in private companies. This, together with the rapid equalisation of wages between eastern and western German locations, has meant that average labour costs per employee have risen by more than in the public sector. However, this situation is being reconsidered and currently the company and trade unions are negotiating a new pay structure which would differ from the public sector one and be more flexible and performance-related. More flexible collective agreements and pay structures are already in force at several subsidiaries of Deutsche Telekom.
Trade union membership
Trade union membership does not appear to have decreased in connection with the privatisation of specific enterprises, where it has generally remained at the relatively high levels that are typical in the public sector. There are some signs of reductions, but it is hard to distinguish between the more general trend towards a decrease in union membership that seemingly affects many countries, and a more specific "privatisation-related" effect. To the extent that there is some weak link between privatisation and falling union membership, it probably operates through workforce reduction: redundancy often hits older workers who are more likely to be unionised, while new recruits are generally young, higher skilled and less likely to become trade union members.
In certain cases, some variation in union membership rates is reported in connection with negotiations over privatisation-related reorganisation plans: this is the case at TeleDanmark, where unionisation has reportedly increased throughout the 1990s, as a consequence of the uncertainty among employees caused by plans for reorganisation and redundancies; while in Italy, an agreement reached at Banca di Roma had exactly the opposite effect - discontent among workers led to a temporary decrease in union membership.
Taking the example of telecommunications, difficulties in recruiting new union members are reported among newly founded companies. These are often much smaller in size than traditional state-owned enterprises and mainly employ people who, because of their jobs (commercial and customer-care positions are predominant) and employment relationship (part-time, fixed-term or other "atypical" contracts) may be less likely to join unions. This may be another important element in an emerging fragmentation of post-privatisation industrial relations - all the more so, considering that it adds to the abovementioned "differentials" in wage levels and employment protection, and that it may probably also apply to firms which provide outsourced services.
The industrial relations system
A number of transformations are apparently underway in industrial relations systems as a result of privatisation, and these are listed below (including some which have already been mentioned above). A distinction should be made between developments within the specific companies undergoing privatisation and changes that may be taking place in the sectors concerned or even at national level - a distinction which is particularly relevant in examining liberalised sectors such as telecommunications. The two levels of change are closely connected, of course, but it is important to examine them separately in some specific areas, because the degree and content of change may be quite different. For instance, a new sectoral agreement that covers both an existing former publicly-owned monopoly and new entrants to the market may emerge, to a certain extent, regardless of what is happening within the former monopoly.
- The legal status of the employees of privatised organisations changes, as they become employed on a private sector basis and lose their specific public sector employment relationship. This process is affecting almost every country covered by this study.
- There is a trend towards the reduction of the distance between public and private sector industrial relations, with the former adopting the principles of the latter. This development - affecting countries such as Belgium, the Netherlands and Italy - concerns mainly those parts of the public sector, such as the civil service and public administration, which are not directly affected by privatisation. In such cases, we can speak of the "privatisation" of the public sector employment relationship.
- The structure of employers' representation is transformed as privatised companies join private sector employers' associations. This may happen through direct affiliation to existing organisations (as in Denmark) or through the creation of new organisations which group privatised companies (as in the telecommunications sector in Finland). At the same time, former public sector employers' associations may join existing private sector organisations or simply dissolve (as in Italy). However, when privatisation is limited to "corporatisation" (ie the organisation remains in public ownership but takes the form of a company), new public sector employers' associations may be established - an example is Finland, where an employers' organisation for companies belonging to municipalities has been set up. In Norway, privatisation and deregulation led to the establishment in 1993 of the NAVO employers' organisation for undertakings with "public affiliation" - as an alternative to the Confederation of Norwegian Business and Industry (Næringslivets Hovedorganisasjon, NHO), which is the largest employers' organisation in the private sector. In 1999, NAVO organises approximately 120 companies, with some 38,000 employees.
- Trade union representation is affected, with some conflicts reported between public and private sector unions over the representation of workers employed in privatised companies (as in Norway and Sweden). Denmark offers an interesting example of the co-existence of two unions, linked to the mixed employment status of employees. As part of the "corporatisation" of the Danish postal service, it was agreed that no new employees with civil service status should be recruited from March 1997 onwards. Thus, while the majority of the postal workers are still civil servants and organised in the National Union of Postal Workers (Dansk Postforbund ), they are gradually being replaced by non-civil service public employees organised by the General Workers' Union (Specialarbejderforbundet i Danmark, SiD). There have also been some mergers involving trade unions organising in privatised industries, both in the same sector (as in telecommunications in the UK and Italy) and across them (as in Portugal).
- In some cases, privatisation has meant the elimination of specific forms of workers' or trade union representation which are present in the public sector. A major example is the removal of worker directors from company boards, as has happened in Ireland at Telecom Eireann. By contrast, in France, in order to avoid the loss of members elected by workers on the boards of privatised companies, 1994 legislation made this form of representation mandatory when privatisation takes place (even if the law does not guarantee it against later cancellation by a shareholders' general meeting). It should also be noted that in some cases privatisation has not resulted in a loss of representation, but an increase. In Finland, workers have gained board-level representation in the Sonera telecommunications company thanks to negotiations over privatisation. At Deutsche Telekom, the shift from coverage by public sector worker representation legislation to the private sector Works Constitution Act has broadened, in certain respects, employees' co-determination rights, establishing employee representation on the supervisory board and giving a prominent role to works councils at the establishment level.
- The greater attention to company performance, which is linked to increased competition and - where relevant - to quotation on the stock exchange, has a considerable impact on industrial relations. The introduction of performance assessment, performance-related pay and of a more "aggressive" human resources management approach may lead to a reconsideration of existing union-management relations (while the identity of the top management itself might have changed). The results may be mixed: more conflict and antagonism, but also the creation of new forms of cooperation. Overall, unilateral initiatives by management seem to be increasing in privatised organisations, which include demands for more flexible work arrangements and regulation.
- The structure of collective bargaining changes in privatised firms, but there is no common trend. In some cases, post-privatisation collective bargaining is more centralised, in others more decentralised. Apparently, the change in each case mirrors the distribution of responsibility in the company structure that results from reorganisation. If privatisation and restructuring means the merger of different companies (as at TeleDanmark) or the centralisation of management functions (as at Telecom Italia), then industrial relations may be centralised. The opposite happens in the more frequent cases where decision-making within the company itself is decentralised. A tendency towards decentralisation is reported at Deutsche Telekom and, in more general terms, in the Netherlands and Norway. Further decentralisation, or greater fragmentation of collective bargaining is entailed in the deregulation processes that have led to the subdivision of former companies in cases such as Telenor in Norway or public utilities in the UK.
- In some countries, a fragmentation of sectoral collective bargaining is emerging, as different companies operating in the same industry apply different sectoral agreements - usually where new market entrants or subcontractors apply different agreements from that followed by a former state-owned organisation. For example, this state of affairs is reported in the telecommunications industry in Germany, Italy and Spain, while in Portugal there are cases that even involve the same company or group. In Italy, trade unions and some employers are challenging this situation on grounds of "unfair competition" or "social dumping", and negotiations are due to start on the possible definition of a new encompassing industry-wide agreement for telecommunications.
- A common tendency is the spread of employee share ownership in privatised companies, with the notable exceptions of the Netherlands, where the issue has been given comparatively low priority, and Norway, with no cases reported. In only a small number of cases has employee share ownership had implications for workers' representation on privatised companies' boards and other statutory bodies. This seemingly depends on the presence of specific legislation on employee share ownership plans (ESOP s) and the level of employee ownership. An interesting example is the notable ESOP negotiated by unions at Telecom Eireann, whereby workers own 14.9% of the privatised company and will have a nominee on the board of directors. This ESOP deal is seen as something of a "model" for unions and management in other Irish semi-state companies which may be privatised in the future. By contrast, in Italy - where no ESOP legislation exists - despite the fact that a large majority of employees of privatised companies became shareholders at the moment of privatisation, employee shareholder associations have not been able to obtain any significant representation on statutory bodies. Therefore, employee ownership has steadily decreased since privatisation, as workers have sold their shares.
Although the abovementioned general tendencies can be identified, it is not possible to say that industrial relations within specific companies have necessarily changed considerably. The overall picture within individual companies is more complex, since elements of both change and continuity are present, with national reports often stating that company-level industrial relations have not been drastically affected or changed by privatisation. However, this is not true in all cases. For example, in Greece, at the OTE telecommunications company significant changes are reported both in the process and content of collective bargaining and in workers' representation: the number of elected worker representatives on the board of directors has decreased from three to two; the competencies of the works council have been reduced; the representative assembly for social control (ASKE), a tripartite committee which mainly controlled investments, has been abolished; and new staff regulations provide for increased managerial prerogative and flexibility.
Industrial conflict
The overall level of industrial conflict in the organisations affected has generally not changed as a consequence of privatisation. However, it has been common for there to be periods of intense confrontation over specific details of the restructuring processes that are usually connected with privatisation and liberalisation. This has happened, for example, in Finland, France, the Netherlands, Norway, and Portugal. In some cases, the issue of contention has been privatisation itself: the most notable examples are Greece and UK, where union campaigns and industrial action against denationalisation have been particularly strong. In Greece, conflict over privatisation is underway at present, while in the UK trade union opposition has been able to influence privatisation decisions only marginally. Lobbying has proved to be a more fruitful means of opposing privatisation - successful efforts at postponing or revoking privatisation decisions through lobbying are reported from the UK, Denmark, the Netherlands, and Norway.
The social partners' position
In general, it is possible to say that employers' associations in the countries covered by this study are in favour of privatisation. They maintain that privatisation may help eliminate "unfair" competition by state-owned enterprises, decrease state budget deficits, reduce tariffs and prices, and increase the overall competitiveness of the domestic economic system through higher efficiency. In their view, more scope for regulation by the market should be guaranteed, in order to sustain economic growth.
Trade unions today are not usually opposed to privatisation in principle. Of course, some specific unions are against it in every country and, as already mentioned, this negative attitude is particularly strong in countries like Greece and UK. However, the most common stance is apparently one of "critical pragmatism". Unions often recognise the tendency towards less state intervention in the economy and understand the reasons behind it. Therefore, they take a "pragmatic approach" and are more interested in managing the changes and protecting workers, than in opposing privatisation as such. The unions are greatly concerned by the impact on employment, workers' rights, representation and collective bargaining and they focus their attention and pressure on avoiding negative effects in these areas.
However, trade unions are also "critical" in that they tend to distinguish between privatisation in competitive sectors, which is less controversial, and privatisation that involves public utilities and welfare services. As far as public utilities are concerned, a need to maintain a certain degree of public control (and ownership) is usually claimed, in order to protect public and user interests. Union opposition is strongest when it comes to welfare services, where they claim that priority should be given to the quality and general availability of such services which, in their opinion, are better guaranteed by direct public involvement.
Commentary
In the past decade, privatisation has gained momentum in Europe and it is no longer an issue which involves only a small number of countries. Probably thanks to EU Directives, privatisation and liberalisation have become policy options that all European governments and social partners have to confront.
Privatisation is a fairly complex issue to analyse, since it covers very different situations and may group together, under the same heading, meanings and contents which are quite heterogeneous. However, as far as the impact on industrial relations of such measures is concerned, it is possible to draw some tentative conclusions.
First, there is a tendency towards a progressive reduction of the distance between public and private sector industrial relations, which is exemplified by the change in workers' status and the reconfiguration of employer and employee representation. This is a change which is taking place, to a certain extent, regardless of privatisation processes. In fact, privatisation, rather than an objective in itself, is an element of a more general move towards an increased reliance on market mechanisms for an effective regulation of the economy. However, privatisation is an important step which helps accelerate this transformation.
A second important element of the changes introduced by privatisation and liberalisation policies is the diffusion of private sector management styles in domains, such as public utilities and welfare services, where they were almost completely absent. The pressure of competition and the importance of economic performance, cost-effectiveness and profitability are part of the new context that both management and unions have to deal with. Moreover, this situation can support claims by company management for more room for manoeuvre and for unilateral action.
The combination of these two tendencies calls into question existing management-union relations in public utilities (and partially in welfare services), which were embedded in a completely different framework of high external employment regulation (by law), less rigid budget constraints and a lack of competition. At the same time, the prevalent "pragmatic approach" among trade unions is apparently "accommodating" these changes, slowly accepting them as the premises for their actions.
This is probably the reason why many accounts of developments within companies emphasise not changes, but continuities. However, much is changing in terms of industrial relations processes and outcomes: there are signs of increasing decentralisation (and sometimes fragmentation) of labour relations; employment regulation is becoming more flexible; performance-related pay is gaining importance; and working conditions are changing in accordance with the new focus on cost-effectiveness and productivity. In this situation, trade union pragmatism may be an important factor in maintaining the collaborative climate between management and unions which was typical of many public sector companies and utilities. If this can be maintained, participatory industrial relations systems might be a viable outcome. Public utilities may be particularly likely candidates for such a development, since two other elements are usually present in such organisations: residual public intervention, if only through independent regulatory agencies, which may stress the importance of a high standard of services and mitigate the pressure of cost competition; and persistently high trade union density, which may strengthen union action and demands. As the differences between public and private sector industrial relations are decreasing, the relevance of such developments may extend beyond the borders of privatised utilities.
Of course, these comments do not take into account what is happening outside privatised companies: above all, in new entrants in liberalised markets and in firms that benefit from contracting-out processes and the concentration of privatised organisations on core-business activities. In these cases, trade unions often have no "resources" to build upon in order to develop any industrial relations structure, let alone a participatory one. They might well have to start from scratch and face numerous difficulties. Therefore, a situation in which unilateral management regulation is predominant cannot be ruled out, nor can an increased "fragmentation" of industrial relations, with widening differentials between companies. However, the efforts which are being made to create new encompassing industry-wide agreements in liberalised sectors in certain countries seem to support the view that collective bargaining and collective industrial relations will play an important part in future developments. This comparative study suggests that the Europe-wide trend towards privatisation and liberalisation may be accompanied by a common "model" of reliance on "bargained" adjustments to face the new situation (Roberto Pedersini, Fondazione Regionale Pietro Seveso).