Outsourcing of public services in Europe and segmentation effects: The influence of labour market factors

Abstract

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 impact of public services outsourcing on work and employment conditions in different national regimes

“…Third, national systems vary according to the extent of the public-private sector gap in industrial relations institutions and contractual arrangements, as well as the institutional intersection between the two sectors (Grimshaw et al, 2015). Outsourcing opens up public sector boundaries to private sector regulatory mechanisms: the more pronounced the differences between the two, the less institutions and actors in the two segments of the labour market will cooperate to set terms and conditions of employment in outsourced services.…”

“…Country-specific models evolve along path-dependent trajectories in response to common neoliberal pressures triggered by NPM-inspired reforms, the austerity agenda and marketization of public services (Grimshaw et al, 2015).…”

Work, employment and engagement conditions in a female‐dominated public service occupation after restructuring/outsourcing

“…One of the CRC owners defied the national agreement on redundancy arrangements almost immediately when they announced a non-negotiated 'severance' package. While the protective arrangements in place might in theory mitigate erosion of conditions, and hence reduce conflict and allay employee concerns (Grimshaw et al, 2015), such benign outcomes did not transpire in the probation case. For the CRCs, previous outsourcing cases herald fragmentation of working conditions and reduced pay transparency with implications for gender equality (e.g.…”

“…Given that our case occupation is female dominated, it is worth noting that female pay and conditions in the public sector are relatively favourable, having benefited from high levels of unionisation and collective bargaining (Moore and Tailby, 2015) and progressive gender equality policies (Conley and Page, 2010;Grimshaw et al, 2015;Rubery, 2015). Further, even with the many managerialist policies now impinging on professional workers under the 'modernisation' agenda (Worrall et al, 2010), and employment cuts and pay freezes under 'austerity measures' (Bach, 2016), public services stand out for providing relatively high-quality jobs for women especially for the highly qualified (Rubery, 2013;.…”

Public, private or hybrid? Providing care services under austerity: the case of Italy

“…In the sphere of public services provision, two different literature streams dealt with the determinants of outsourcing decisions that we refer to the dichotomous strategic choice between "make" (self-producing through internal transactions) and "buy" (via market transactions) (Coase, 1937). A first stream of literature explored the interconnections between labour market and industrial relations institutions, and public authorities' decisions to outsource (Grimshaw et al, 2015). Drawing on labour market segmentation theory, several contributions focused on the differentials existing between public and private sectors and on public authorities' willingness to exploit them in order to reduce costs and/or increase flexibility as a key explanatory variable of organisational restructuring (Flecker, 2009;Rubery, 2007).…”