Reforming public service employment relations: past, present and future prospects

In most countries public sector employment relations have traditionally been regulated by special rules and institutions, separate and distinct from those governing private sector employment relations. The reasons for this distinctiveness are rooted, according to many scholars, in the unique role of the state as employer and as service provider, and in a number of structural factors which on average give public employees and trade unions a stronger bargaining power than private sector employees and unions. Since the mid-late 1980s public service employment relations have undergone in many countries a continuous process of transformation, often within a context of public administration reform inspired by the New Public Management approach. The traditional distinctiveness of public service employment relations, with separate institutions and practices from the private sector, has been challenged, although to varying degrees and with different effects across countries. Based on the new institutional economics (transaction costs theory and agency theory), NPM aimed at removing any difference between the private and public sector as the only way to improve efficiency and effectiveness of public service. Changing the traditional patterns of public sector employment relations and HRM practices was an essential part of this program. The promise was a fundamental transformation, with a double process of convergence: between different countries and between public and private sectors within each country. However, after more than two decades of NPM inspired reforms, these processes of convergence did not occur, if not to a limited extent. In many cases, the naïve adoption into the public sector of private sector institutions and practices brought about unintended and even perverse effects, rather than improved quality and lower costs. The fundamental transformation which NPM promised did not materialize, quite defferently from what occurred in private sector employment relations approximately in the same period. However, in many advanced countries, but also in some emerging economies, the 2008 crisis altered the picture in a crucial feature. Namely, it challenged the traditional configuration of public sector employment relations as sheltered from international market pressures and supranational actors, operating in a relatively closed environment mostly shaped by the regulatory power of the state and other domestic actors. The key effect of this greater role of external and international forces is to strengthen governments in their relations with unions and employees, possibly altering the traditional balance of powers in public sector employment relations like globalization and the intensified competition did four in management’s favour in the private sector in recent decades. These changes in the traditional environment of public sector employment relations do not appear to be just transitory, but seem likely to last over time, at least in the medium term. Whether they will be strong enough to bring about the fundamental transformation of public sector employment relations that NPM promised but failed to deliver, remains to be seen. Much will depend on the evolution of the crisis itself, and on the responses to the crisis by international authorities and national governments.