The Impact of Privatisation on Labour John Nellis Center for Global Development USA OECD/Republic of...
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Transcript of The Impact of Privatisation on Labour John Nellis Center for Global Development USA OECD/Republic of...
The Impact of Privatisation The Impact of Privatisation on Labouron Labour
John NellisJohn NellisCenter for Global DevelopmentCenter for Global Development
USAUSAOECD/Republic of TurkeyOECD/Republic of Turkey
Conference on “Privatisation, Employment Conference on “Privatisation, Employment & Employees”& Employees”
Istanbul, October 2002Istanbul, October 2002
Privatisation…..
• Improves operating & financial performance
• Positive macroeconomic impact • Signals markets of extent & credibility
of reform But:• Complex, contentious, highly politicized
action Why?
The privatisation dilemmaThe privatisation dilemma
• Direct benefits to fewDirect benefits to few• Mass benefits diffused, medium termMass benefits diffused, medium term• Direct costs concentrated, short termDirect costs concentrated, short term• Winners dispersed, silent & Winners dispersed, silent &
unorganizedunorganized• Losers visible, vocal, intense & well-Losers visible, vocal, intense & well-
organizedorganized• Politics focus on latterPolitics focus on latter
0%
10%
20%
30%
40%
50%
60%
70%
Argentina Bolivia Mexico
percent who disagree or disagree strongly that privatization has been beneficial
1998
2000
Sri Lanka:Sri Lanka:Attitudes Towards Attitudes Towards
Privatization (2000):Privatization (2000):
Sri Lanka:Sri Lanka:Attitudes Towards Attitudes Towards
Privatization (2000):Privatization (2000):
0 20 40 60 80 100
Standard of Living
Poverty Level
Cost of Living
Economic Stability
Social Life
Improved
Worsened
IN RUSSIA, 2/3 IN RUSSIA, 2/3 INTERVIEWED SAID THEY INTERVIEWED SAID THEY LOST MORE THAN GAINED LOST MORE THAN GAINED FROM PRIVATIZATION FROM PRIVATIZATION
2001; 1600 respondents; only 5 % said opposite2001; 1600 respondents; only 5 % said opposite
Labour’s view of privatisation
• Hurts workers, benefits local elite & foreigners
• Imposed by IFIs• SOEs could be profitable (prices, mngt.)• Few jobs outside public sector• Pay & terms much worse• Severance payments wasted • Money better spent on reviving SOEs
PROPOSITION #1PROPOSITION #1
SOE reform, prior to or instead SOE reform, prior to or instead of privatisation, likely reduces of privatisation, likely reduces jobs jobs
Examples:Examples:
• Argentina RR: from 92K to 18.6K before privatisation
• Brazil RR: from 160K to 42K before privatisation
• Korea Tobacco: from 12.3K to 8.6K
• Sydney Water Corp.: from 12.7K to 6.7K
Implication:Implication:
SOEs overstaffed; any serious SOEs overstaffed; any serious reform, not just privatisation, reform, not just privatisation, likely to decrease employee #slikely to decrease employee #s
Overstaffing: Sri Lanka-1992Overstaffing: Sri Lanka-1992Company %
Electricity Board 51
Railways 48
Sugar Corp. 86
Petroleum 40
Cement 1 46
Cement 2 63
Shipping 43
Average 53 %
PROPOSITION # 2PROPOSITION # 2
Privatisation often followed by Privatisation often followed by additional----over & above pre-additional----over & above pre-sale layoffs----reductions of sale layoffs----reductions of workforceworkforce
Examples:Examples:
In 27 empirical studies (ILO):In 27 empirical studies (ILO):
– 14: 14: post-sale job losses post-sale job losses
(averaging 27%)(averaging 27%)
– 2: 2: significant increasessignificant increases
– 11: 11: little or no changelittle or no change
More examplesMore examples
Additional 17 cases:Additional 17 cases:
– Losses post-sale in seven, average Losses post-sale in seven, average 44.6%44.6%
– Gains post-sale in four, average Gains post-sale in four, average 23%23%
– No numbers or no change in rest
PROPOSITION # 3PROPOSITION # 3
Layoffs highest in areas of declining demand, world oversupply & where technology shifts increase competition without boosting core business
ExamplesExamples
• RailwaysRailways
• Mines, especially coal mines Mines, especially coal mines
• Steel Steel
Conversely, large unsatisfied Conversely, large unsatisfied demand can lead to job gains demand can lead to job gains
in post-sale period; e.g., in post-sale period; e.g., telecommunicationstelecommunications
Impact can be Impact can be hugehuge…...…...
Brazil RRBrazil RR: 42,000 at start of priv. : 42,000 at start of priv. process to 24,000 at moment of sale, process to 24,000 at moment of sale, to 9,700 24 months after sale------94 to 9,700 24 months after sale------94 % decrease from pre-sale peak of % decrease from pre-sale peak of 160 K160 K
PROPOSITION # 4PROPOSITION # 4
Employment losses significantly Employment losses significantly greater than gainsgreater than gains
(some exceptions: Chile, Nepal, Cote (some exceptions: Chile, Nepal, Cote d’Ivoire)d’Ivoire)
Job
loss
es(p
rior
res
truc
turi
ng)
Gai
n in
em
ploy
men
t
APre-privatisation
Bprivatisation
CRecovery
D
Time
Em
plo
ymen
t
Privatisation: Simple AnalyticsPrivatisation: Simple Analytics
ARGENTINA:ARGENTINA:
•LABOR FELL BY 150k IN 7 LABOR FELL BY 150k IN 7 PRIVATIZED UTILTIESPRIVATIZED UTILTIES
•150k = 3.6% LABOR in BA150k = 3.6% LABOR in BA•150k = .03%150k = .03% TOTAL LABOR TOTAL LABOR
FORCE FORCE but…. but….
•GENERAL UNEMPLOY GENERAL UNEMPLOY ^ ^ 6% — 1990 TO 14.3% — 19976% — 1990 TO 14.3% — 1997
MEXICO:MEXICO:
• General decrease in # of workersGeneral decrease in # of workers
• Reductions still small in #Reductions still small in #
• Reductions small relative to overall Reductions small relative to overall workforce (SOEs = 2% of workers)workforce (SOEs = 2% of workers)
• 55% of dismissed found formal 55% of dismissed found formal sector jobs within 1 yr.sector jobs within 1 yr.
BOLIVIA:BOLIVIA:
• Reduction in employment “associated Reduction in employment “associated with” capitalizationwith” capitalization
• Again, absolute numbers small &Again, absolute numbers small &
• Small in relation to workforce sizeSmall in relation to workforce size
• Conclusion: capitalization does Conclusion: capitalization does notnot account for substantial general rise in account for substantial general rise in unemployment starting in 1998unemployment starting in 1998
PROPOSITION # 5PROPOSITION # 5
Transition economies a special Transition economies a special case of enormous job losses case of enormous job losses before & after privatisationbefore & after privatisation
ExamplesExamples
• DDR: 3.5 mn workers in 8 K DDR: 3.5 mn workers in 8 K companies in 7/1990companies in 7/1990
• Down to 1.5 mn by 1995-96Down to 1.5 mn by 1995-96
PROPOSITION # 6PROPOSITION # 6
Severance payments & other Severance payments & other enticements to leave (early enticements to leave (early retirement, share ownership) retirement, share ownership) tend to be more generous than tend to be more generous than law requireslaw requires
Expensive severance packagesExpensive severance packages
• Argentina RR workers----average Argentina RR workers----average payout $12,000 U.S.payout $12,000 U.S.
• Sri Lanka---from 17 to 53 Sri Lanka---from 17 to 53 months months salary (last for 40 yr.. old with 20 salary (last for 40 yr.. old with 20 yrs. service)yrs. service)
PROPOSITION # 7PROPOSITION # 7
Workers in privatized firms: Workers in privatized firms: Generous terms & salaries, position Generous terms & salaries, position guarantees, guarantees of fringe guarantees, guarantees of fringe benefits----benefits----but,but, longer hours, longer hours, decreased job security & union decreased job security & union powerpower
PROPOSITION # 8PROPOSITION # 8
Mid-management #s down Mid-management #s down sharply post-sale; % loss higher sharply post-sale; % loss higher than for blue collar workersthan for blue collar workers
EXAMPLESEXAMPLES
• Mexico, Pakistan, several transition Mexico, Pakistan, several transition economies, Sri Lanka, Nepal & sub-economies, Sri Lanka, Nepal & sub-Saharan AfricaSaharan Africa
• Decreases due to higher costs & Decreases due to higher costs & politicized nature of past managerial politicized nature of past managerial appointments?appointments?
PROPOSITION # 9PROPOSITION # 9
Approached openly & in advance of Approached openly & in advance of transaction, by authorities willing to transaction, by authorities willing to bargain, workers will participate bargain, workers will participate constructively in the process--- & constructively in the process--- & even large reductions can be even large reductions can be achieved peacefullyachieved peacefully
PROPOSITION # 10PROPOSITION # 10
Overstaffing and worker Overstaffing and worker opposition need not be an opposition need not be an absolute obstacle to a sound absolute obstacle to a sound transactiontransaction
Brazil RRBrazil RRBrazil RRBrazil RR
• 1995, 42,000 workers• Govt./WB program reduces to 23,712• 2/3 by voluntary retirement• Pension supplements & severance (av.
Cash value $8,000)• Training & placement program not used
much• 1998 survey, only 10% still unemployed• 53% earning < RR; 27% >; 20% same
• 1995, 42,000 workers• Govt./WB program reduces to 23,712• 2/3 by voluntary retirement• Pension supplements & severance (av.
Cash value $8,000)• Training & placement program not used
much• 1998 survey, only 10% still unemployed• 53% earning < RR; 27% >; 20% same