This article examines the influence of labour market factors on public authorities’ decisions to outsource public services in five countries. The dominant focus in the outsourcing literature is on a narrow range of factors: public–private gaps in pay, union membership and collective bargaining coverage. We find such differences to be variable, and develop a more encompassing perspective. This includes consideration of labour market rules that establish wage floors and employment protection (especially for outsourced workers) and the possible differentiation of legal status between public and private employees. Our case studies from local government in five countries highlight a set of country-specific interconnections between labour market factors and outsourcing. These lead to variations in both managers’ and unions’ approaches towards outsourcing and in outcomes for pay and working conditions. We call for a strengthening of the inclusiveness of industrial relations structures to combat problems of workforce fragmentation caused by outsourcing.

The article analyses the impact of European regulations of posting on different national wage systems. The article shows that the impact varied across the countries and has been filtered by the national institutions regulating the labour market. In the voluntarist wage setting systems of Germany and even Sweden, they have been a major factor bringing wages back into competition. The ability of national actors to act has been considerably curtailed by the European Court of Justice (EUJ), which has placed free competition above the basic rights of autonomous collective bargaining. Because of the divergent interests of Member States, this weakening of national actors cannot be compensated for by transnational agreements. This ‘negative integration’ brings with it a serious risk that the inclusiveness of European wage systems will be eroded by a series of cumulative effects.

■ This study analyses how national institutions, sectoral bargaining structures and union strategies affect working conditions and pay by comparing call centres in two liberalized service sectors: financial services and utilities. We find more segmentation and expansion of low wage work in Germany and more cooperation on high-involvement practices at workplace level in Denmark. However, outcomes are not uniform; we find differences between sectors in the use of subcontracting and union power at the workplace-level. Poor economic performance, segmentation-oriented employer strategies, declining bargaining coverage and weakened unions in Germany have undermined formal constraints on employers, whereas better outcomes in Denmark are due to a pronounced stability of the regulative and normative institutional framework. However, the Danish model is also being weakened from the margins.

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