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The impact of the privatization of public sector enterprises on labour relations and conditions of work and employment in the air and land (rail) transport sector
Dr. Susana Corradetti
Discussion Paper No. 2
Geneva, 1999
Discussion papers are preliminary documents circulated
to stimulate discussion and critical comment
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INTERNATIONAL LABOUR OFFICE | GENEVA |
The present paper is derived from a broader study of this topic which is being prepared by the author in collaboration with Dr. Ricardo Foglia and Dr. Carlos Alfonso Tomada.
Geneva, July 1999.
1. Brief review of the situation before privatization
The legislative changes which opened the way to the privatization of state enterprises took place at a time of high levels of foreign debt, domestic inflation, investments mostly concentrated in the financial sector and falling exports. They followed a political decision -- agreed upon with the opposition immediately before the handover of power -- to send a clear signal to the markets and the international financial institutions regarding the right course to take in the interests of good governance. This decision was supported by large sections of the population which, encouraged by media campaigns, felt that the efficiency of the public services would greatly improve if they were transferred to the private sector. In addition, the umbrella trade union organization adopted a position of broad support for the new authorities.
This was the background to the economic emergency and reform laws that were enacted and which defined the guidelines and models for transforming the State and changing state policy as a service provider. This far-reaching process was initiated partly in response to immediate economic demands; it was marked by a certain haste and, especially in the transport sector, by the lack of any clear policy or goals for the enterprises being privatized. One might say, then, that the requirements and conditions for transferring ownership were determined by the laws and regulations as they evolved.
The Government's stated objectives in pursuing privatization included the following:
2. Legal instruments effecting the change
of management of state enterprises
In addition to the general principles it sets out, the State Reform Act (Ley de Reforma del Estado) authorizes a series of initiatives in specified state enterprises. These initiatives include the following:
Deregulation, as the name implies, means freeing certain sectors (e.g. the ports sector) from regulations both with regard to the provision of the service, charges levied, etc., and with regard to conditions of work and employment.
Privatization is the process of transferring to the private sector certain state-owned enterprises of potentially high profitability.
Concessions or licences are generally accompanied by state subsidies and used in cases where an enterprise has low profit potential or where transfer of assets is not possible (for example the land on which the railway network was built).
Decentralization means handing over responsibility for the maintenance of particular services to provincial and municipal authorities.
For the purpose of this paper, land (rail) transport can be said to have involved a range of initiatives (privatization, concessions and decentralization), while in the case of air transport only privatization was used.
3. Review of changes in conditions of work and
employment in public enterprises in the transport
sector based on an analysis of the relevant agreements
Before considering matters such as daily working hours, organization of work, contractual categories, wage and salary structure, leave, responses to technological change, management methods and forms of participation, it is necessary to consider a number of specific issues of particular relevance to the air transport sector which determine the scope for change in existing agreements:
(a) The trade union structure in the air transport sector is based on six unions which are represented ex officio; these were originally company unions but expanded as activities grew and diversified. The unions represent the following groups:
(1) administrative, cleaning, repairs, passenger handling and catering staff on the ground;
(2) aircraft maintenance ground staff and technicians -- the union which is closest to the traditional "industrial" unions;
(3) supervisory and managerial staff on the ground, including department chiefs and even junior managers (in spite of their aspiration in the past to represent management);
(4) flight engineers, who have seen their role diminish as their function has been "designed out" of modern aircraft;
(5) cabin staff, who attend to passengers during flights;
(6) pilots and co-pilots, who fly the aircraft and are the highest authority on board.
(b) transport enterprises had to take into account a somewhat unusual feature of one category of posts. Pilots, flight engineers and cabin staff were not merely covered by the general minimum conditions of employment applicable in the public sector under the Labour Contracts Act; they were also covered by provisions originally enacted for the Argentine Air Force concerning flight safety, which impose limits on operating hours and rest breaks on board aircraft and on the ground, depending on the type of aircraft. These provisions have been amended on successive occasions, and those currently in force are based on a regulating decree of 1994 which introduced greater "flexibility" into conditions of work and employment(1) and in this respect went along with the general trend towards reducing minimum legal standards. These provisions comply with the international standards established by the International Civil Aviation Organization (ICAO) and the directives issued to aircraft manufacturers, and are not open to collective bargaining.
As regards collective bargaining in these two transport sectors (rail and air), we note that while collective agreements have been concluded in the rail sector with the purchasing companies (privatization was done by line or branch line), the air companies have not concluded a collective agreement on conditions of work and employment with all the relevant sectors; they have effectively implemented changes on which the unions were not consulted and to which they have little opportunity of replying. In both cases, changes have been made with regard to conditions that had already been agreed with some or all of the relevant unions.
The changes in question affect the following areas:
(1) Daily working hours: Provisions to extend daily working hours and make them more flexible, to the detriment of previously established conditions of reduced working days and fixed shifts which gave entitlement to overtime. As was noted with regard to the flight unions, this was facilitated by the legislative changes.
(2) Organization of work: Previously, in both sectors, a limited number of specific tasks were assigned to each worker, who had to perform those tasks as a regular and permanent part of the job. Under the new collective agreements, that concept has given way to the concept of polyvalence (flexibility). This means that the allocation of tasks to a given post has become less rigid in that workers will now also have to perform other complementary or related tasks. This allocation of many different tasks seems ill-advised and is not in practice applied to the unions representing pilots, flight engineers and cabin staff, whose functions are quite specific and cannot be altered (for example by changing rosters or by sudden changes of aircraft) without affecting flight safety, particularly in the case of pilots.
(3) Contractual job categories: The changes brought about by the introduction of "polyvalence" will affect the entire system of job categories and the corresponding pay scales. Broadening posts to include tasks other than those traditionally associated with them, and combining those tasks with those normally associated with other posts, will "flatten" the pyramid of job categories (and, consequently, also the associated wages and salaries pyramid) and, by increasing daily working hours and mobility, will reduce the staff levels needed to provide services. Such reductions have been achieved in various ways such as voluntary redundancies, early retirements and layoffs which in some cases preceded the formal act of privatization.(2)
(4) Salary structure: In the public companies, the breakdown of salaries was based on occupational category, working time and length of service in the post, without any reference to company productivity. Remuneration consisted of a basic contractual salary plus supplements for such things as good attendance record and length of service. For managerial staff and flight crews, the daily expenses component was a form of indirect salary, with some items being considered as remunerative and others given in kind. With privatization, this salary structure began to change radically as new criteria and parameters were established. This meant -- especially in the rail sector -- a system of variable pay with per diem allowances and food vouchers (the latter with a reduced tax rating), while in the air transport sector preference was given to daily allowances given in kind (accommodation and meals). At the same time, as profitability criteria were introduced, there was a trend towards reducing indirect salary in the form of free services or preferential rates for employees -- benefits which were laid down in collective agreements before the time of privatization.
(5 )Leave: By contrast with the prevailing trend before privatization, leave has been reduced and broken up into shorter periods as companies have acquired greater discretionary powers to organize work and the concepts of efficiency central to privatization philosophy have taken hold.
(6) Response to technological change: Despite the obvious need for modernization which rail and air companies had pointed out, agreements devote little attention to staff training and there are some indications of increased risks in air travel.
(7) Management methods and forms of participation: An analysis of the collective agreements in the rail sector highlights certain particular aspects of union/company relations in this area. The agreements now include provisions for joint union/company proposals which stress the importance of aspects such as productivity, efficiency, quality, customer satisfaction, training, maintenance of harmonious labour relations, respect for agreed procedures for arranging working hours, fair conditions and pay, profitability, cooperation, teamwork, etc. The emphasis is on the service user (as the intended beneficiary of company and union endeavours) and on service quality, aspects which were not emphasized in the organizational culture of the public companies. The provisions in question did not allow the possibility of union participation.
In general, the enterprises have taken over areas of decision-making in which decisions were previously taken in collaboration with the unions, and the bodies established for that purpose have been effectively neutralized.(3) Something similar is evident with regard to the right to information -- a right embodied in the rail sector agreements but not actually implemented in practice. The establishment of "worker directors" entitled to 10 per cent of the shares allocated to employees under the Ownership Participation Programme (Programa de Propiedad Participada) has been no more successful in promoting staff participation in the management of privatized companies.
It seems appropriate at this point to give a brief overview of past versus present trends in labour relations in the privatized enterprises; though something of a generalization, it shows what is happening in the sector discussed here.
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Before privatization |
After privatization | |
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Personnel management |
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Union participation |
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Collective bargaining |
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4. How the trade unions have reacted to changes
in standards and practice resulting from the
privatization of airlines and railway enterprises
One of the legal instruments which determined the unions' position in the face of the privatization of the public enterprises was the regulating standard respecting the constitutional right to strike, specifically in the public services. This standard, invoking the need to protect service users, severely restricts the available means of direct action. Workers found themselves obliged to maintain minimum services as well as facing other constraints which, in the event of non-compliance, could lead to dismissal.
In the early stages of privatization, the Government assured the unions' umbrella organization that the trade union structure and social programmes of the privatized industries would be maintained. The instrument known as the Ownership Participation Programme (Programa de Propiedad Participada), already mentioned, was aimed at individual workers themselves, not at their trade unions. In the air transport sector, it was not a success owing to poor implementation and consistent losses by the companies. Only a few unions showed any interest in acting as advisers or as workers' representatives in this area.
As regards disputes, three distinct union strategies can be identified: confrontation (an option which is supported by a minority but is for the time being limited to unions in state enterprises); "hard" bargaining (characterized by critical support of the Government); and "soft" bargaining (the majority approach, adopted by unions which supported the reform programme).(4)
This meant that many unions had to adapt to their new role within the so-called "social economy" and become involved in the contracting out of services and the administration of retirement and pension funds (for example by organizing management bodies in the private social security system within Argentina's mixed system).(5)
Other factors have also contributed to the low incidence of conflicts during the privatization of the transport sector. Some of these are of a general economic nature -- the growth in unemployment, for example -- while others stem from the decline in union membership and staff cuts. The trade unions have also had to adapt to the transition from a single state employer to several private employers with different management cultures and basic aims which are more specific than during the period of state ownership and which are achieved by means of relatively soft adjustments in terms of staff cuts, pay cuts, etc.
More recently, the unions have been trying to extend areas and scope for participation. A new difficulty is that of getting the employers to renegotiate collective agreements which were concluded in the early stages of privatization to their own advantage, in an effort to reinforce support for privatization.
Principal variables considered for the purpose of describing
changes in labour relations in the public enterprises
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Situation in the public enterprises |
Stated objectives of privatization |
Results (in terms of labour relations
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* These features were evident particularly during the period immediately before privatization.
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1. By increasing "flexi" hours, reducing compensation for accidents at work from 30 to 20 times the monthly salary, etc.
2. The proviso in the previous item concerning the flight unions still stands. However, with regard to the cabin staff, their role has been reduced as a greater volume of work has been assigned to the flight stewards and greater use has been made of non-continuous contracts which allow the hiring of seasonal staff who do not form part of the company's permanent establishment.
3. A particular example was the 1991 agreement covering the flight engineers which provides for restructuring of these posts.
4. The Rail Union endorsed this strategy, while some unions in the air transport sector initially adopted a harder line but had to give ground in the face of inflexible management attitudes.
5. In the rail sector, for example, redundant workers have set up cooperatives to repair rolling stock.