The various forms of PPI tend to result in changes to working conditions and practices. The way this is done and the extent to which workers are involved in shaping new arrangements vary among employers, just as they do in the private sector more generally.
As with other aspects of PPI's effect on labor, there are some general trends, namely:
PPI tends to bring more focused organisations, flatter structures, and simpler labor contracts.
In general, of all the beneficiaries of a state enterprise, workers and unions offer the fiercest resistance to privatization because they fear losing jobs, pay, and influence. Telmex was no exception, inasmuch as its employees were among the best paid in Mexico and employment in the company had consistently grown faster than the size of Telmex's network since the government had taken control of the firm. The telephone workers' union (STRM) exerted a great deal of influence on the internal workings of the company, as did unions in other state enterprises. The STRM recognized that privatization could change that influence.
President Salinas seems to have become personally involved in securing the union's support for privatization, presenting workers with a carrot- and-stick offer. The carrot included a promise that no existing worker would lose his or her job as a result of privatization and that workers would receive a stake in the privatized firm....The stick consisted of a veiled threat that if the STRM did not go along with the government's policy, Telmex would be privatized anyhow, without any guarantees about the welfare of its workers....
The carrot-and-stick combination yielded three concessions from the union: first, the union agreed to support the privatization of Telmex with the safeguards promised by the government; second, it agreed to replace the STRM's 57 labor contracts with Telmex with a single contract for all unionized workers, along with a reduction in the number of job classifications from more than 500 to just 50; and third, it gave management the freedom to introduce new technology, including the freedom to redeploy workers.
Source: Ramamurti 1996, pp. 79–80.
The replacement of permanent jobs with casual or contract work is a major concern for trade unions.
In several sectors infrastructure companies have sought to establish greater flexibility (increased use of part-time work and fixed-term contracts, redeployment, and decentralization of labor relations) and other changes in working methods, employment, and industrial relations. For permanent staff, however, PPI often brings greater investment in training, as in Côte d'Ivoire's electricity concession (box 2.11) and Mexico's railways.
The impact of PPI on working hours varies. Influencing factors include labor market conditions, the legal framework, union strength, and attitudes. Attempts to increase labor productivity do not necessarily entail longer hours of work– indeed, they can involve reducing hours and intensifying work–but hours certainly have increased in some cases. For example, prior to the privatization of Entel, the Argentine telecommunications company, the government changed the work week from 35 to 40 hours. At times, however, government and the PPI partner work well together to maintain standards of worker competence and protect safety through regulation.
After Côte d'Ivoire concessioned its electricity services to a company called CIE, the major shareholders of which were the French companies SAUR and EdF, the organization was flattened hierarchically by reducing the number of grades by half, from 18 to 9, and later to 5. A "management by objectives" approach was also instituted, with workers reorganized into "cost centers," each with a defined list of tasks but with considerable autonomy about how to achieve them. Performance was closely monitored in terms of achieving targets, and bonuses of between 0.75 and 1.25 times one month's salary could be earned. In the main, bonuses were awarded (or not) to the groups as a whole, with a small additional incentive payment also available to individuals.
The geographic decentralization of distribution is an illustration of this effort to make individuals responsible within their group. CIE is divided into a number of full autonomous regional boards. They in turn are subdivided into geographical sectors, each managing about 15,000 consumers. These sectors have great freedom of initiative, so they can be regarded as profit centers. By means of computerized comparative analyses, management can detect immediately where gains in economic efficiency can be made. Through privatization, the whole internal organization of the firm has been metamorphosed.
The arrival of the concessionaire was accompanied by a transfer of technical and organizational know-how. New work procedures codifying the duties of employees at their post were introduced and helped raise the efficiency of the firm's operations. In support of this strategy, a great deal of effort was put into training further the already proficient workers.
CIE also brought back in-house the training operation that had previously been contracted out because it wanted to develop a new enterprise culture among its staff. So it set up a training division that offers two-year courses to all African electricity companies and that issues a vocational certificate in public utility management approved by the Ministry of Higher Education, plus short courses. Four years after the beginning of the concession, more than 2,000 CIE staff had been through courses there, and the company's training budget had risen to a level equivalent to four percent of its wage bill.
Source: Plane 1998.
Subcontracting is not only a mechanism for work force restructuring but also a tool for redeployment of displaced workers.
In recent years public and private sector organizations have increasingly outsourced noncore operations that can be provided more cheaply or at a higher quality by external specialists. Subcontracting can also be a redeployment mechanism. Subcontracts are one way for newly privatized infrastructure firms to reduce labor costs and change working practices and conditions while providing a transition for workers into new private sector employment and retaining some access to their specialist skills and knowledge (box 2.12).
"Telecom and Telefónica (the two companies which replaced Entel) also implemented voluntary retirement plans, which saw the departure of approximately 5,000 workers, or 10 percent of Entel's work force....Interestingly, Telecom and Telefónica rehired a considerable number of those workers as contract employees. In this way, the companies obtained skilled labor while reducing their costs, such as pension contributions, vacation time, health insurance, and other fringe benefits. This maneuver also reduced the number of unionized employees."
Source: Petrazzini 1996b, p. 135.
In Côte d'Ivoire, the rail concessionaire, SITARAIL (Société Internationale de Transports African par Rail), agreed in principle to favor companies created by retrenched former state railway workers when looking for subcontractors. In practice, track maintenance, company car fleet management, and printing of timetables and tickets have been contracted out to firms set up by employees of the former state rail company.
Other PPI companies in Africa have also subcontracted to companies set up by their own former employees. In Guinea's water PPI, for example, some 250 retrenched workers were given subcontracts through 20 small cooperatives. The subcontracted workers organized into 20 small enterprises that took over responsibility for installing new connections, maintaining canals, and landscaping. The concession company gave them training, logistical support, and initial working capital.
Sometimes, PPI leads to less rather than more subcontracting because nontransparent agreements are cancelled:
In Côte d'Ivoire....the new Compagnie ivoirienne d'électricité (CIE) contracts out much less than its predecessor, the EECI....Electrical firms, which were often set up by members of the public enterprise's staff (moonlighting), have collapsed after enjoying prosperous years when the process of privatization had not yet started (Plane 1998; see also Plane 1999).
There is little empirical evidence on the differential effects of PPI on men and women in the work force.
In recent years among other political and social trends there has been increasing commitment by governments, employers, and unions to promote workplace equality between women and men. This has taken a variety of forms in practice, such as government commitments to ending discrimination of various types and combating sexual harassment, business commitment to retaining skilled and knowledgeable workers after maternity leave, and union campaigns for equal pay for work of equal value.
There is little hard evidence of the extent to which PPI has affected women workers differently from men, but what little there is, taken together with evidence from other sectors (see box 2.13), suggests that the impact often falls harder on women than on men, particularly in transition economies where female participation in the labor force is high. Sector impacts will vary, however. In Vietnam overstaffing of state enterprises was concentrated in male-dominated sectors, such as construction, mining, and transportation (Rama 2001a).
In the case of telecommunications the ILO notes that:
changes in work organization and job specification are more likely to be detrimental to women given that they are disproportionately represented in part-time work and are therefore less visible to showcase their skills and exercise their rights. Moreover, the main jobs that have declined in number in that sector– such as those of telephone operators–were mainly done by women. Commonly, overstaffing occurs in administrative and clerical positions, rather than in the more technically skilled jobs....The same obstacles that hinder the access of women to management positions can also disadvantage them in downsizing....At the individual level, women might lack the appropriate education, training or experience to be retained during restructuring, particularly when managers are competing for fewer positions, and criteria such as seniority and "last in, first out" considerations are used. Structural and cultural factors can also be an obstacle. Women managers might not have the same professional networks and personal contacts to enable them to compete for the remaining positions. Restructuring involving flatter management structures often affects women workers more than their male counterparts, with low-level and middle-management positions being most likely to disappear (ILO 2002, pp. 124–5).
The ILO cites restructuring at the Tanzania Telecommunications Company in support of its argument, but also notes evidence of increases in the percentage of women employed in some public and private post and telecommunications enterprises, and the redeployment of women into management and customer service functions (ILO 2002). Overall there have been few empirical studies of the variable impact of PPI on women and men in these sectors.
In energy and water utilities, most of the work force tends to be male, but unions claim that job losses still affect women disproportionately because they tend to be concentrated in administrative and clerical functions. New owners are more likely to integrate such functions into their existing operations after privatization to achieve economies of scale (Belser and Rama 2001). Unions also point out that many social protections geared toward women only exist because unions fought for them, so if unions are weakened then it is likely that these protections also will be weakened.
The Equal Opportunities Commission–an official body of the government of the United Kingdom–reported in March 1995 that compulsory competitive tendering (CCT) had discriminated against women because such effects as loss of jobs, increased reliance on temporary and casual employment, and deterioration in terms and conditions of employment affected them disproportionately.
Results of a study of the impact of CCT in 39 local authorities showed that women's employment fell by 22 percent while men's employment fell by 12 percent. In building cleaning and education catering–both female-dominated work forces–male employment actually increased while female employment fell by 31 percent and 11 percent, respectively, in the cases examined.
In building cleaning hours fell by 25 percent and "pay rates have not generally increased and in some cases have declined, particularly for parttime workers" (p. 71), while employment declined by 29 percent. The most severely affected workers across the board were parttime women employees. Many of them had their weekly hours of employment reduced to below a key threshold level (16 hours) for protection of employment rights.
Source: Escott and Whitfield 1995.
