Survey examines extent of relocation and outsourcing
Published: 23 November 2008
A recent study (in German) [1] by the Institute of Economic and Social Research (Wirtschafts- und Sozialwissenschaftliches Institut, WSI [2]) within the Hans Böckler Foundation (Hans Böckler Stiftung, HBS [3]) presented new findings on the extent of relocation and outsourcing [4] based on data from the 2007 WSI works council [5] survey (/Betriebsrätebefragung/). The survey was carried out between September and November 2007, and covered a representative sample of establishments with 20 or more employees and a works council.[1] http://www.boeckler.de/show_product_wsi.html?productfile=HBS-004211.xml[2] http://www.boeckler.de/8.html[3] http://www.boeckler.de/[4] www.eurofound.europa.eu/ef/observatories/eurwork/industrial-relations-dictionary/outsourcing[5] www.eurofound.europa.eu/ef/efemiredictionary/works-council-2
The 2007 works council survey conducted by the Institute of Economic and Social Research examined the incidence of relocations and outsourcing in establishments with 20 or more employees and a works council. The results show that, between 2005 and 2007, relocations were planned in almost 8% of establishments with works councils, while outsourcing took place in a further 11.5% of such establishments. The results also give an insight into other factors relating to relocation and outsourcing, such as the role of works councils and the employment impact of such measures.
A recent study (in German) by the Institute of Economic and Social Research (Wirtschafts- und Sozialwissenschaftliches Institut, WSI) within the Hans Böckler Foundation (Hans Böckler Stiftung, HBS) presented new findings on the extent of relocation and outsourcing based on data from the 2007 WSI works council survey (Betriebsrätebefragung). The survey was carried out between September and November 2007, and covered a representative sample of establishments with 20 or more employees and a works council.
Findings on relocation and outsourcing
In 16.4% of the establishments surveyed, relocation had been an issue at least once – either at the time of the survey, or since or even before 2005. In almost a quarter (23.4%) of the establishments, works councils had also been confronted with outsourcing on one occasion at least.
Between 2005 and 2007, nearly 8% of the establishments faced relocations, while in 11.5% of the establishments outsourcing took place (Table 1). Relocations were more likely to take place in manufacturing than in private services, whereas outsourcing occurred to almost the same extent in manufacturing and services.
| Economic sector | Relocation | Outsourcing |
|---|---|---|
| Whole economy | 7.7 | 11.5 |
| Manufacturing | 8.8 | 11.0 |
| Private services | 7.0 | 11.7 |
Note: Figures are based on responses from all establishments with at least 20 employees and a works council
Source: WSI works council survey, 2007
Higher incidence in larger companies
The survey also found that both relocation and outsourcing were more likely to occur in larger establishments (Table 2). For example, relocation occurred in 14.2% of the largest establishments (500 or more employees) compared with just 5.7% of the smaller companies (20–99 employees). Similarly, outsourcing took place in nearly 23% of the largest establishments compared with almost 8% of the smaller enterprises.
| Number of employees | Relocation | Outsourcing |
|---|---|---|
| 20–99 employees | 5.7 | 7.6 |
| 100–499 employees | 8.3 | 13.2 |
| 500 or more employees | 14.2 | 22.8 |
Note: Figures are based on responses from all establishments with at least 20 employees and a works council
Source: WSI works council survey, 2007
Target destination
Two thirds of the establishments for which either outsourcing or relocation were reported were legally independent companies, while the majority were German-based businesses. In terms of the target destination of either outsourcing or relocation, the findings show that it was predominantly another region in Germany, with over four fifths of relocations remaining in the country (Table 3). In a further 9.4% of cases, relocations were directed towards both Germany and another country. Only 5.6% of relocations were aimed exclusively at a foreign country.
| Germany | Foreign countries | Both | |
|---|---|---|---|
| Outsourcing | 68.7 | 19.9 | 11.5 |
| Relocation | 85.0 | 5.6 | 9.4 |
Note: Figures are based on responses from works councils in all establishments with at least 20 employees and a works council, where works councils reported either relocation or outsourcing between 2005 and 2007
Source: WSI works council survey, 2007
Reconsideration of relocation and outsourcing measures
However, not all relocations and outsourcing measures were maintained in the longer term. The survey asked works council representatives whether relocations and outsourcing had been reconsidered at a later stage and revoked. Some 13.4% of works council respondents in the establishments that relocated between 2005 and 2007 indicated that the relocations had been reconsidered at a later stage. Meanwhile, in 13.3% of cases, it was reported that outsourcing had been at least partly revoked.
Role of works councils
Attitude towards relocation and outsourcing
The WSI survey examined the attitudes of works councils towards relocation and outsourcing. Only a small minority of works councils held a positive view of the announced relocations and outsourcing (Table 4). Some 13.2% of the works councils reacted negatively to the announcement of relocations, while 38.3% claimed they had mixed feelings about the move, believing that the measure would have both positive and negative aspects. A higher proportion of works councils held a positive view of the announced outsourcing measures than they did of the relocations, at 14.2% compared with 8.3%, respectively. However, in hindsight, a majority of the works councils considered that the relocation was justified, whereas 36.2% judged the outsourcing measures positively in retrospect.
| Will the announced relocation/outsourcing measure have positive or negative effects? | In hindsight, did the relocation/outsourcing measure make sense? | ||||
|---|---|---|---|---|---|
| Positive | Negative | Both | Yes | No | |
| Relocation | 8.3 | 13.2 | 38.3 | 58.0 | 42.0 |
| Outsourcing | 14.2 | 22.8 | 24.2 | 36.2 | 63.8 |
Note: Figures are based on responses from works councils in all establishments where relocations and/or outsourcing took place after 2005
Source: WSI works council survey, 2007
Intervention of works councils
Not every relocation or outsourcing measure announced was finally put into practice. In about 20% of establishments where relocation measures had been announced, management dropped the plan in the end. Similarly, in about 17% of cases, management abandoned its plan to outsource. In over 50% of the cases where the plans to relocate were revoked, the change was attributed to the works council’s intervention. At the same time, their intervention accounted for over two thirds of the revoked plans for outsourcing.
The survey also asked what works council measures were subsequently considered as being instrumental in preventing either relocation or outsourcing (Table 5).
| Measure | Relocation | Outsourcing |
|---|---|---|
| Involvement of trade union | 69.9 | 47.4 |
| Concessions by works council | 58.9 | 45.8 |
| Protest action | 42.8 | 44.3 |
| Mediation by third parties | 41.7 | 44.0 |
| Works agreement | 39.8 | 37.6 |
Note: Figures are based on responses of work councils in all establishments where works councils were successful in preventing either relocation or outsourcing; multiple answers were possible
Source: WSI works council survey, 2007
The results show that the measures taken by the works council to prevent relocation or outsourcing most frequently involved the trade union concerned, although concessions were also made by the works councils. In a significant number of cases, protest action also helped to influence management. In most instances, it is likely that a mix of measures and initiatives played a part in convincing management to withdraw its original plans.
Impact on employment
Furthermore, the survey asked works councils whether relocations or outsourcing led to an increase or reduction in employment in the establishments affected by either measure. Although the survey cannot exactly quantify the specific employment effect of one particular measure, the overall findings show that jobs were cut in 45.5% of establishments where relocation had taken place since 2005 (Table 6). Similarly, jobs were lost in 42.7% of the establishments where outsourcing had occurred. However, in 19.1% of establishments, employment actually increased following relocation. In about a quarter of the relocation cases and nearly two fifths of outsourcing incidents, the works councils reported no employment effect.
| Employment effect | Relocation | Outsourcing |
|---|---|---|
| Job cuts | 45.5 | 42.7 |
| Job expansion | 19.1 | 10.1 |
| Both cuts and expansion | 11.3 | 8.3 |
| Neither cuts nor job expansion | 24.0 | 38.9 |
Note: Figures are based on responses from works councils based in all establishments where relocation and/or outsourcing took place between 2005 and 2007; multiple answers were possible
Source: WSI works council survey, 2007
Heiner Dribbusch, Institute of Economic and Social Research, WSI
Eurofound recommends citing this publication in the following way.
Eurofound (2008), Survey examines extent of relocation and outsourcing, article.
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