roberto pedersini · privatisation and industrial relations 5 since the early 1980s, privatisation...

Roberto Pedersini

PRIVATISATIONAND

INDUSTRIAL RELATIONS

DSS PAPERS SOC 2-00

INDEX

The extent of privatisation ..............................................................pag. 6

The impact on industrial relations ....................................................... 14

Employment levels ................................................................................. 15

Employment status ................................................................................. 21

Wages, labour costs and productivity .................................................. 22

Trade union membership ...................................................................... 24

The industrial relations system ............................................................. 26

Industrial conflict ................................................................................... 31

The social partners’ position ................................................................. 32

Commentary ........................................................................................... 33

Privatisation and industrial relations 5

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

Questo articolo è stato scritto per L'EIRO (European Industrial Relations Observatory,http://www.eiro.eurofound.ie/) ed è disponibile, insieme ai 15 contributi nazionali che sono stati utilizzatiper la sua preparazione, all'indirizzo internet http://www.eiro.eurofound.ie/1999/12/study/index.html.

6 Privatisation and 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.


Table 1. Main privatisation and liberalisation developments in EU andNorway

Country Developments

Austria

Partial or complete sale of companies in the competitive sectors(banking, oil and gas, salt and tobacco monopolies etc). Minoritystakes sold in telecommunications. Railways, post and electricityare undergoing restructuring.

Belgium

Companies in competitive sectors have been privatised (bankingand insurance, ferries). Public utilities have been transformed into"autonomous public enterprises" (telecommunications, post,railways).

Denmark

Some firms operating in competitive sectors have been privatisedin banking and transport (bus services)."Corporatisation" (ie takingthe form of a company but remaining in public ownership) of somelarge-scale public services (Copenhagen airport, post, stateshipping lines). Full privatisation of the telecom companyTeleDanmark. Contracting-out of local-level welfare services isincreasing.

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 verycommon when reorganising welfare services at local level.

France

Privatisation of companies operating in competitive sectors isalmost complete. Public utilities are excluded from fullprivatisation, with only partial sales having taken place at FranceTelecom and Air France. At local level, contracting-out isextensive, particularly in the water industry. In welfare services, noprivatisation has taken place - there is only a tendency to contractout 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 transportand refuse collection. Liberalisation in some public utilities(energy and post), with instances of partial privatisation(telecommunications).

Greece Some privatisation in competitive sectors. Privatisation of publicutilities under debate.


Ireland

Privatisation is under discussion for state-owned banks, the semi-state airline Aer Lingus, the airport management company and thestate forestry board. Telecom Eireann has been privatised, whilethe Electricity Supply Board is facing liberalisation.

Italy

Privatisation has involved a large part of state ownership incompetitive sectors (banks, insurance and the subsidiaries of the Iriand Eni groups), many public utilities, both at national and locallevel, and - to a much smaller extent - welfare services, notably atthe 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 andtelecommunications, regional transport companies, a few energycompanies).

Norway

Partial privatisation has taken place in some sectors (grain andpharmaceutical supply). Partial privatisation of the state-owned oilcompany and in telecommunications is under debate. Liberalisationand 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 publicutilities (eg telecommunications). There are some forms ofprivatisation in welfare services - for instance, some hospitals areunder private management.

Spain

Privatisation has substantially reduced state ownership andinvolved both competitive sectors (iron and steel, textiles,chemicals etc) and public services (electricity, transport,telecommunications). Privatisation processes are now beingextended to welfare services.

Sweden"Corporatisation" of state-owned enterprises. Some form ofprivatisation is under discussion only for railways andtelecommunications.

UnitedKingdom

Extensive privatisation has affected firms in the competitivesectors and in public utilities, where it has been coupled withliberalisation. At local level, legislation requires competitivetendering for a wide range of ancillary services (cleaning, cateringetc).

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.


Table 2. Total amount raised by privatisation in the 1990s in EU andNorway (1990-8) (USD million)

Country 1990-5 1996 1997 1998* TotalAustria 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: Privatisation trends, in Financial Market Trends no. 72, OECD,

February 1999, pp. 129-145.

http://www.oecd.org/daf/corporate-affairs/privatisation/trends/99-trends.pdf

http://www.oecd.org/daf/corporate-affairs/privatisation/trends/99-trends.pdf


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.


Table 3. Privatisation indicators

CountryCountry share of total EU

plus Norwayprivatisation receipts 1990-8 (%)

Total privatisationreceipts 1990-1998as % 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.

http://www.oecd.org/std/gdp.htm

http://www.oecd.org/std/gdp.htm


Broadly speaking, the various countries can be divided into three

groups:

1. 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;

2. 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

3. 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.


Table 4. Management of redundancies accompanyingprivatisation/liberalisation in the telecommunications sector

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 socialplan was agreed between the works council and management inJune 1999 and has been implemented since the beginning ofAugust 1999. Employees turning 56 before the end of 2000 mayopt for pre-retirement, whereby they are granted leave by thecompany and continue to receive at least 75% of their last take-home pay until they turn 60 and are eligible for a regularpension. The scheme is aimed at 1,049 employees andestimated to cost about ATS 1.5 billion. In 1998, 1,711employees chose pre-retirement in a similar way, while 141 leftfor other reasons.

Belgium

At Belgacom, 6,289 employees have been offered earlyretirement and 6,600 members of staff offered an individualretraining programme with a view to relocation to anotherfunction within the company.

Denmark

In January 1997, TeleDanmark announced that 2,500employees would be made redundant while at the same time500 new employees with specific skills would be recruited.TeleDanmark management was criticised by employees andtrade unions for failing to retrain and redeploy existingemployees. Following an industrial conflict, managementagreed to cooperate with the unions on how to deal with theredundancy issue. By 1999, 2,500 employees - primarily olderworkers and technicians with outdated skills - had left thecompany, while 1,000 new employees had been recruited.Today TeleDanmark has around 17,000 employees.


Finland

At Post and Telecommunications of Finland the major reasonfor a fall in employment from 10,000 at the beginning of the1990s to 9,000 in 1999 has been technological change whichhas reduced the need for low-skill positions and increased theneed for more qualified workers (especially in the new servicejobs). Over 1994-6, early retirement and development moneywere offered to redundant staff. Furthermore, the companyoffers training and job opportunities to redeploy redundantworkers.

France

Before and after the partial privatisation of France Telecom,unions negotiated agreements to cushion the blow of plannedredundancies, including an innovative "partial early retirement"scheme. State intervention has been decisive in reducing thecost 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 bynearly 60,000 to 170,000 by the end of 2000. The companynegotiated collective agreements with its three trade unions,Deutsche Postgewerkschaft (DPG), Deutscher Postverband(DPV KOM) and Christliche Gewerkschaft Post, in which itrenounced dismissals until the end of 2000, while the unionsaccepted demands for increased mobility and flexibility ofemployees. In order to reach the workforce reduction goal,relatively generous compensation for leavers and favourableearly retirement schemes were offered and widely accepted. Bymid-1999, company employment had fallen to 174,000employees.

Greece

The OTE workforce is expected to be cut during privatisationfrom 26,000 in 1996 to 16,000 by 2000. In 1995, the partiesagreed on a system of voluntary resignation, under which 4,000workers have already left.

Ireland

The decline in employment that has occurred in TelecomEireann over the past few years - from approximately 13,000 in1994 to about 10,500 in 1998 - has been particularlynoteworthy. These reductions are likely to continue over thenext three years or so, as another 2,500 employees are expectedto leave. Recent changes in employment levels have been thesubject of negotiation, with the "Telecom partnershipagreement" signed by unions and management in 1997providing for 2,500 voluntary redundancies.


Italy

At Telecom Italia Spa, total employment decreased by around20% over the five years from 1994 to 1999, by means ofeconomic incentives to resign or retire. Such incentives wereagreed by social partners on a temporary basis and should havelasted only until 1997; however, the company has continuedgranting them unilaterally since that date.

Norway

In 1993, Telenor set up a unit called Telenor New Opportunities(Telenor Nye Muligheter) to help employees facingredundancy. 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, hasimplemented a number of programmes to accommodateredundancies: a) subsidised early retirement; b) mutually agreedtermination of employment contract; c) outplacement(transferring workers to suppliers by offering incentives inexchange); and d) transferring workers to companies withwhich Telecom Portugal has close ties, such as Marconi anTVCabo.

Spain

Telefónica has reduced its workforce mainly throughredundancy procedures and agreements, using early retirementand voluntary redundancy in three different stages - two agreedbetween the company and the trade unions and one imposed bythe company. The process has affected more than 15,000workers of different categories and levels.


UnitedKingdom

At British Telecom, where employment fell from 238,384 atprivatisation in 1984 to 156,000 a decade later, job lossesaffected all grades, but were particularly severe in areas affectedby technological innovation (eg telephone exchange operators)and among middle managers affected by "delayering" toproduce flatter organisational structures. "Headcount reduction"facilitated by generous redundancy payments (an average ofGBP 35,000 per person in 1992-3) was the major supportingmechanism. BT provided outplacement facilities, retrainingcosts up to GBP 1,000 and offers of temporary work throughrecruitment agencies. Formal union consultation was normal;however, in BT the central issue was the level of payment andthe 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 (ESOPs) 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 · privatisation and industrial relations 5 since the early 1980s, privatisation...

Documents