OUTSOURCING IN PUBLIC SERVICES. IMPACTS ON WORKING CONDITIONS AND EMPLOYMENT RELATIONS IN A THREE-COUNTRY TWO-SECTOR COMPARISON

Over the past three decades, public administrations have been subject to a far-reaching restructuring towards outsourcing in a wide range of tasks and services. Under the pressure of increasing public debt, stricter spending constraints, shifting consumer preferences and the demand for higher value for money in an era of austerity, these organisations have differentiated the provision of services, opening the traditional public production and delivery to competition. The picture that emerged following these processes is strikingly various and patchy: public administrations across Europe, indeed, have adopted a wide set of market-type mechanisms, including public-private partnership, voucher system and contracting out (OECD 2011). The restructuring process of public services provision towards outsourcing represents a tile within a broader mosaic of public administration reform, an ‘unending wave of reforms’ (Pollitt 2002) that has expanded progressively since the 1980s across all European governments under the label of New Public Management (NPM) (Hood 1991), suggesting uniformity and communality. This doctrine aimed to remove any difference between the public and the private sector as a way of increasing the efficiency and effectiveness of public services: thus governments imported in their public bureaucracies business-like tools and values, alongside with market-type mechanisms from the private sector. Outsourcing stems precisely from NPM-inspired reform stream, as a market-type mechanism for saving government public funds (Savas 2000): opening service provision to market competition might achieve a cost reduction, since private providers in a competitive regime are expected to realize economies of scale and to raise effort or productivity with a given input/workforce-combination. Unquestionably, outsourcing has promoted a model of competition, but that is often largely based on the reduction of labour costs and not on the improvement of quality and innovation: empirical evidence increasingly emerged, arguing that cost savings may simply correspond either to reduced employment or to a fall in employment terms and conditions (Flecker and Hermann 2009). This process, leading to complex changes in the organisation of work and employment conditions has been subject to growing scrutiny mainly across private sector firms (Flecker et al. 2005, Marchington et al. 2005, Flecker 2009, Perraudin et al. 2009). It has been assumed that external restructuring of companies, involving the dispersion of activities across organisational boundaries, has led to a degradation of working terms and conditions (Doellgast and Greer 2007, Flecker and Meil 2010), since it may trigger competition with a cheaper labour-supply, shifting work from highly unionized and better sheltered organisations to more vulnerable companies, subjects to market fluctuations, where trade union power is low or inexistent. The vertical disintegration presents substantial challenge to employment relation structure as well (Doellgast and Greer 2007), weakening the bargaining power of union while the dependency relations between companies along the value chain can be expected to translate into increased disparities and instability in terms of employment and working conditions (Flecker 2009). Thus, drawing on varying approaches in the literature, the research aims to discuss the impacts of outsourcing on working conditions and employment relations structure in the public sector at a double comparative level: across countries and between public administration sub-sectors within each country. This multi-level comparative research design, indeed, enables to address the second main research question, that is whether implications following outsourcing process display convergent or divergent internal trajectories on the one side between different sectors within national frameworks and on the other side across different countries; and finally to identify which factors do intervene in explaining these patterns. The underlying theoretical hypothesis is that national institutional arrangements and industrial relations regimes featuring each country may intervene in mediating the implications over labour and employment relations structures following outsourcing. Likewise, different legislative pressures, economic constraints affecting the sectors under scrutiny and sector-specific characteristics may lead to divergent implications between sub-sectors. Hence I explore these issues through a case-study analysis of public services outsourcing across three countries ˗ Italy, England and Denmark as they each answer to a different industrial relations model ˗ and two sectors: health care sector and local government. Findings are based on an in-depth qualitative analysis carried out across the six case studies through 75 semi-structured interviews (25 conducted in Italy, 24 in England and 26 in Denmark): all the interviews were recorded, literally transcribed and content-analysed using the software tool ATLAS.ti and complemented by a documental analysis based on a wide range of secondary sources – such as academic literature, legislation, annual reports, internal PowerPoint presentations, collective agreements, practitioners’ reports, related surveys, employers’ associations and unions internal documents and newspaper articles. Empirical evidence shows an overall picture dominated by growing fragmentation of employment conditions (Flecker 2010) and a deterioration of work. Employment has generally become more insecure (Huws and Podro 2012) and flexible, in terms of both working hours and workplace flexibility. Greater demands are placed on work tasks, including increasing workload due to understaffing, work intensification, higher speed in the work and the use of piecework (Flecker and Hermann 2009, Hasle et al. 2014). Moreover, public administrations have deliberately exploited private sector regulations in order to escape expensive widely encompassing public-sector collective agreements under the pretext of raising competition: outsourcing was to a large extent driven by the search for lower wage rate paid by external contractors (Flecker and Herman 2011, Grimshaw, Rubery and Marino 2012). Despite these convergent tendencies, implications for labour and industrial relations display clear national distinctiveness, mediated by the industrial relations model adopted in each country: thus evidence regarding Italian and Danish cases is less unambiguously negative since a system of employment relations with high collective bargaining coverage and strong union membership works as a buffer in protecting job terms and conditions during contracting out process (Petersen et al. 2011, Jaehrling 2014). Conversely, a regime which puts emphasis mainly on market adjustments and self-regulation, reducing in this way the role of employment regulation and organized labour institutions might pave the way to detrimental consequences for labour, since workforce is let free to compete in a market regime featured by weakness of employment relations structure and devoid of strong job protection as in England. Divergent trajectories emerge between sectors as well: municipalities are more likely to outsource services with detrimental consequences for labour, compared to health care sector, because of the inherent pressure exercised by growing budget cut, legislative constraints to reduce public employment size, austerity measures and raising number of services to provide.