Labor Impacts of Private Participation in Infrastructure
SUMMARY
Evidence shows a diversity of labor effects resulting from PPI. Nonetheless some key trends and factors affecting outcomes in particular situations can be abstracted from the available information. The main comments that can be made are these:
- Analysis of impacts is confounded by the wide range of factors that affect the labor adjustment at the country, sector, and enterprise levels. Box 2.14 provides a generalized summary of some of those factors.
- The fact that job losses occur at the time of PPI does not necessarily mean that PPI is the direct, or only, factor causing those job losses. Significant job losses have also been recorded in infrastructure enterprises even where there is restructuring without PPI (for example, Eskom South Africa's 40 percent reduction over six years).
- Higher levels of job loss can occur in the infrastructure enterprises than in privatizations in general. Reductions in the work force of 50 percent or more have been reported.
- The greatest impact on jobs occurs in sectors where demand is declining because of competition from other modes (for example, rail worldwide and fixed line telephone services in industrialized nations); sectors where traditions of overstaffing have suffered following introduction of new technologies (such as port labor pools following containerization); and enterprises that have been shielded from the need to adjust for many years.
- Fewer job losses occur in sectors where demand is rising rapidly (such as fixed and mobile phone services in developing countries) or where there is demand for expansion of the network (for example, water and sanitation).
- Many of the analyses of job loss have been limited by their focus on the impact at the enterprise level rather than at the sector level. There is little information on the net effects on employment when taking account of growth in other modes (for example, trucking, bus, and rail operations; mobile and data telephony as well as fixed line services); the overall trend toward outsourcing of services in the sector because outsourced employment is not recorded by enterprises; and expansion of ancillary services (for example, distribution and supply chain logistics businesses at terminals of port and rail operations).
- Employment reductions drive productivity improvements in many sectors. Expansion of services, however, can also improve labor productivity when employee numbers remain stable.
- Changes in work practices and worker representation are often of as great a concern to trade unions as is job loss, particularly where this is associated with greater use of so-called atypical work practices (for example, casual employment and outsourcing).
- Although there is a general belief that women are more adversely affected by PPI-related changes than are men, there is little empirical evidence of a differential impact.
Some global agreements between trade unions and investors have been established.
Box 2.14: Key Factors Affecting the Labor Impact of PPI
- The sector concerned, and especially the nature of the market in that sector, a category that in turn has two key variables: whether and to what extent the market is expanding or contracting, and whether and to what extent the market is competitive
- The extent to which PPI is associated with changes in technology that significantly affect the sector's labor intensity
- The existing level of labor redundancy and productivity in terms of relevant international and national benchmarks
- National and local labor market conditions and social protection provisions
- The relative costs of labor and capital in the economy concerned
- The nature of the legal framework governing labor issues, and whether (and how) that is changing
- The content of existing formal agreements (for example, labor contracts and collective bargaining agreements)
- Government policy regarding employment protection and creation
- The balance of influence between interest groups in the labor relations environment
- The nature of the political relationship between the government and the relevant labor unions
- The attitudes and strategies of government, investors, and labor leaders
- The capacity and preparedness of government, investors, and labor in support of their strategies.
