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Tripartite Meeting on Managing the Privatization and Restructuring of Public Utilities Report for discussion at the Tripartite Meeting on Managing the Privatization and Restructuring of Public Utilities Geneva, 12-16 April 1999 International Labour Office   Geneva Copyright ® 1999 International Labour Organization (ILO)   Part 2

Cover photograph: Milton Becerra: Raspadores de monedas, 1994/97 To purchase this document, click here

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2. Privatization and restructuring:
The impact on employment and
human resource development

This chapter presents information on the nature and extent of workforce reductions in the water, electricity and gas utilities and the human resource management approaches taken. Although instances of employment growth are noted, the privatization and restructuring processes in water, electricity and gas utilities have in general resulted in a reduction of employment levels, sometimes affecting up to 50 per cent of the workforce. Employment cuts appear to be more severe under certain forms of privatization, such as the contracting out of certain parts of the industry and total privatization, or where there is a combination of privatization and restructuring. Moreover, employment increases after privatization are rare and usually follow periods of large-scale retrenchment. Therefore, this chapter will also discuss policy considerations concerning the form and pace of privatization and restructuring processes.

Various forms of privatization and restructuring of the public utilities have been widespread and far-reaching throughout the world, although comparatively little attention has been given to the impact of these processes on employment levels. Most research examines the rationale for privatization and restructuring, describes and analyses the various approaches and processes, and attempts to make some evaluation of the efficiency and profitability of privatized utilities and the impact on prices and quality of services to consumers.

The absence of reliable and transparent statistics and the difficulty of obtaining comprehensive information from private enterprises on employment figures make it difficult to objectively assess the actual number of jobs abolished or created. Information for this section of the report, therefore, mainly draws on ILO statistical data collected from member States for the water, electricity and gas sector, studies commissioned by the ILO in the framework of the 1996-97 Action programme on privatization, restructuring and economic democracy, and information provided by trade unions, companies and other sources.

2.1. Overall employment levels in the utilities sector

General ILO data on employment levels in the electricity, gas and water sector are available for about 50 countries for various years over the last decade. For comparative purposes, these data are grouped in tables 2.1 and 2.2, depending on whether countries have supplied data to the ILO under the International Standard Industrial Classification of all Economic Activities (ISIC -- Rev.2, 1968) or its revision (ISIC -- Rev.3, 1990). The data in the tables provide a global picture of the level of paid employment, the extent of employment in relation to national paid employment figures and the proportion of women in the sector. They also indicate percentage increases or decreases over the years. Privatization or restructuring in a country may have occurred after the dates for which data are available. As the data refer to the electricity, water and gas sector as a whole, privatization or restructuring in a particular industry or part of an industry are likely not to be reflected at the macro industry level. Information for the micro level can only be gleaned from specific studies and reports from companies or trade unions and is provided in the following section.

An examination of the tables shows that in the majority of countries paid employment levels have increased for the sector as a whole, ranging from very small increases of a few per cent to even doubling the number of employed in a few cases. This could be a reflection of a number of developments such as growth in infrastructure, expansion of networks, or overall increases in national employment.

Table 2.1. Paid employment in the electricity, gas and water sector*

Country	Year	Paid employment	Percentage increase or decrease	Percentage of women	Percentage of total employment
Bahrain	1987 1994	2 606 3 325	+28.0	1.40 20.0	3.0 2.9
Bulgaria	1987 1991	33 000 36 800	+11.5	-- --	0.7 1.0
China	1987 1996	1 640 000 2 720 000	+66.0	38.0 32.0	1.2 1.8
Colombia	1991 1996	39 600 36 000	-9.1	16.7 18.9	1.2 1.0
Costa Rica	1987 1996	11 370 11 830	+4.0	6.3 15.0	1.8 1.5
Croatia	1987 1993	31 470 26 780	-15.0	17.3 18.4	2.0 2.4
Egypt	1989 1995	95 900 164 800	+72.0	10.0 8.0	1.3 1.8
El Salvador	1987 1994	4 900 6 800	+27.0	-- 6.3	2.1 2.2
Fiji	1987 1993	2 140 2 600	+21.5	4.2 4.2	2.7 2.5
Ghana	1987 1991	6 700 1 700	-74.0	-- --	1.7 0.9
India	1987 1996	829 000 988 000	+19.2	2.9 3.9	-- --
Japan	1987 1996	310 000 370 000	+19.4	12.9 16.3	0.7 0.7
Jordan	1987 1993	4 550 12 280	+169.0	4.3 3.3	2.3 4.0
Kazakhstan	1987 1995	65 000 94 000	+31.0	-- --	0.9 1.8
Kenya	1987 1991	19 100 22 400	+17.0	8.9 14.3	1.5 1.5
The former Yugoslav Republic of Macedonia	1987 1996	11 000 11 000	0.0	9.0 18.0	2.0 3.5
Madagascar	1987 1991	9 460 11 530	+22.0	-- --	3.7 4.0
Malawi	1987 1995	5 500 5 700	+3.6	-- --	1.3 1.0
Mauritius	1990 1996	3 470 3 410	-2.0	4.0 4.7	1.2 1.2
Nicaragua	1987 1996	7 950 4 860	-39.0	-- --	2.6 2.2
Niger	1987 1991	2 426 4 461	+84.0	4.5 6.1	8.7 18.0
Philippines	1987 1993	52 130 67 330	+29.0	20.0 17.3	3.4 2.0
Slovakia	1987 1993	35 000 61 000	+74.0	22.9 14.6	1.4 2.9
South Africa	1987 1993	56 800 42 500	-25.0	-- --	1.1 0.9
Sri Lanka	1988 1994	13 600 7 600	-44.0	3.7 5.3	2.5 0.97
Swaziland	1987 1995	1 520 1 180	-22.0	-- 12.7	1.8 1.4
Togo	1987 1992	2 379 2 362	-0.7	-- --	3.7 3.7
Turkey	1987 1995	111 000 170 000	+53.8	2.2 2.2	3.9 3.9
United States	1987 1996	925 000 885 000	-4.0	21.5 22.0	0.9 0.7
Zimbabwe	1987 1994	8 200 8 600	+4.9	2.4 4.7	0.8 0.7
* Major Division 4 -- electricity, gas and water -- of the International Standard Industrial Classification of all Economic Activities (ISIC -- Rev.2, 1968). Data are from establishment surveys for most countries; labour force surveys for Colombia, Costa Rica, Egypt and Japan; social insurance statistics for Bahrain, Niger, Nicaragua, Togo and Turkey; and official estimates for Bulgaria and China. Source: ILO Yearbook of Labour Statistics, 1997.

Table 2.2 Paid employment in the electricity, gas and water supply*

Country	Year	Paid employment	Percentage increase or decrease	Percentage of women	Percentage of total employment
Bermuda	1987 1996	513 516	+0.6	17.3 18.0	1.4 1.5
Bolivia	1993 1996	4 910 10 210	+108.0	8.0 14.7	0.8 1.4
Canada	1987 1996	116 300 124 400	+7.0	-- --	-- --
Czech Republic	1993 1996	96 000 97 000	+1.0	29.0 28.0	2.2 2.3
Denmark	1994 1996	19 080 16 560	-13.0	18.0 19.7	0.8 0.7
Estonia	1989 1994	16 400 19 200	+17.0	34.0 32.0	2.3 3.2
Germany	1995 1996	355 000 332 000	-6.5	20.3 19.9	1.1 1.0
Greece	1993 1995	39 461 41 385	+4.9	17.0 17.3	-- 2.0
Iceland	1991 1996	1 600 1 100	-31.0	6.3 18.0	1.5 1.0
Ireland	1987 1996	53 800 63 300	+17.7	22.7 18.3	6.4 6.1
Korea, Rep. of	1992 1996	66 000 73 000	+10.6	13.6 13.7	0.6 0.6
Latvia	1995 1996	25 100 22 000	-12.4	17.0 23.0	3.0 2.7
Netherlands	1995 1996	43 000 41 000	-4.7	16.3 17.0	0.7 0.7
Panama	1992 1995	9 571 8 831	+7.7	19.9 22.0	1.9 1.5
Poland	1995 1996	264 000 269 000	+2.0	20.1 20.1	2.5 2.5
Portugal	1992 1996	32 700 30 300	-7.3	23.9 14.9	1.0 1.0
Romania	1994 1996	185 472 224 184	+20.9	23.0 23.0	2.7 3.2
Singapore	1987 1996	7 700 7 200	-6.5	18.2 18.0	0.7 0.5
Slovenia	1993 1996	12 000 13 000	+8.0	25.0 15.4	1.7 1.8
* Tabulation Category E -- electricity, gas and water supply -- of the International Standard Industrial Classification of all Economic Activities (ISIC -- Rev.3, 1990). Data from labour force surveys, except for Bermuda and Canada which are from establishment surveys. Source:ILO Yearbook of Labour Statistics, 1997.

For some countries, growth in employment in the utilities sector took place in a context of an overall increase in national employment. Examples include Bolivia, China, Egypt, ElSalvador, Greece, India, Ireland, Japan, Jordan, Kenya, Republic of Korea, Madagascar, Malawi, Philippines, Spain, Turkey and Zimbabwe. In other countries, especially in Eastern and Central Europe, employment grew in utilities but overall employment fell, such as in Bulgaria, Czech Republic, Estonia, Niger, Poland, Romania, Slovakia and Slovenia.

In another set of countries paid employment in utilities dropped in parallel to falling rates for employment generally. Examples include: Croatia, Germany, Ghana, Latvia, Nicaragua Portugal, South Africa and Sweden. Finally, in some countries paid employment fell in the utilities while national employment remained stable or increased, as in Colombia, Denmark, Iceland, Netherlands, Panama, Singapore, Sri Lanka, Swaziland, United Kingdom and the United States.

Even though the development of public utilities is fundamental to economic growth, the sector in fact provides only a small proportion of paid employment, ranging from less than 1 per cent to 3 or 4 per cent, with an average of around 2 per cent. There is quite a variation in the proportion of women employed in the sector from 1 or 2 per cent up to as much as 20 per cent or more. As most reports indicate that men are employed more frequently in infrastructure development and utility maintenance and women are mainly employed in clerical and administrative work, such variations reflect country differences in the structure of the sector, as well as cultural differences in the social and economic roles ascribed to men and women.

ILO data on unemployment over time in the electricity, gas and water sector are also available for 38 countries (see tables 2.3 and 2.4 based on ISIC -- Rev.2, 1986 and ISIC -- Rev.3, 1990). Over the last decade unemployment rates in the utilities have increased, accompanied by constant or rising national unemployment in many cases. In some 15 countries unemployment rates in water, electricity and gas remained constant or declined, often mirroring a decrease in general unemployment in these countries.

Table 2.3. Unemployment in the electricity, gas and water sector*

Country	Year	Number of unemployed	Percentage increase or decrease	Percentage of women
Australia	1989 1994	1 900 4 900	-- +61.0	16.0 8.0
Austria	1987 1993	100 500	-- +80.0	-- 20.0
Belgium	1987 1996	970 990	-- +2.0	42.0 37.0
Bolivia	1989 1992	310 228	-- -26.0	-- --
Canada	1987 1993	5 000 9 000	-- +44.0	20.0 11.0
Chile	1987 1996	1 900 1 800	-- -5.0	16.0 28.0
Colombia	1987 1996	4 000 2 100	-- -48.0	28.0 29.0
Costa Rica	1987 1993	229 541	-- +58.0	51.0 28.0
Ecuador	1990 1996	490 1 200	-- +59.0	-- 37.0
Egypt	1989 1996	1 600 600	-- -63.0	-- 0.0
El Salvador	1987 1992	500 1 300	-- +62.0	-- 17.0
Ethiopia	1987 1992	1 504 194	-- -66.0	6.0 9.0
Honduras	1990 1995	1 041 573	-- -45.0	-- --
Israel	1988 1994	300 700	-- +57.0	33.0 43.0
New Zealand	1987 1996	300 400	-- +33.0	33.0 --
Pakistan	1987 1996	1 000 1 000	-- 0.0	-- --
Peru	1989 1994	7 200 22 090	-- +67.0	-- 4.0
United States	1994 1996	43 000 38 000	-- -12.0	26.0 29.0
Venezuela	1987 1995	3 960 7 700	-- +96.0	10.0 21.0
* Major Division 4 -- electricity, gas and water -- of the International Standard Industrial Classification of all Economic Activities (ISIC -- Rev.2, 1986). Data are from labour force surveys except for Belgium, where the source is social insurance statistics. Source: ILO Yearbook of Labour Statistics, 1997.

Table 2.4. Unemployment in the electricity, gas and water supply*

Country	Year	Number of unemployed	Percentage increase or decrease	Percentage of women
Argentina	1992 1996	2 504 9 629	-- +285.0	-- 9.0
Czech Republic	1993 1996	1 200 1 800	-- +67.0	33.0 28.0
Denmark	1994 1996	694 432	-- -38.0	-- 5.5
Estonia	1992 1994	200 400	-- +100.0	50.0 25.0
Finland	1995 1996	2 000 2 000	-- 0.0	-- --
Germany	1995 1996	23 000 22 000	-- -4.0	39.0 41.0
Greece	1995 1996	3 420 865	-- -75.0	38.0 44.0
Hungary	1992 1996	7 300 5 700	-- -22.0	26.0 21.0
Ireland	1987 1996	1 000 300	-- -70.0	10.0 --
Latvia	1995 1996	1 600 300	-- -81.0	6.0 --
Panama	1991 1995	684 1 147	-- +68.0	37.0 11.0
Poland	1994 1996	19 000 16 000	-- -16.0	32.0 25.0
Portugal	1992 1996	1 230 840	-- -32.0	55.0 5.0
Romania	1994 1996	4 949 5 837	-- +18.0	11.0 24.0
Singapore	1987 1996	100 100	-- 0.0	-- --
Slovakia	1994 1995	3 100 2 700	-- -13.0	48.0 30.0
Spain	1995 1996	6 100 5 200	-- -15.0	26.0 21.0
Sweden	1995 1996	1 000 1 000	-- 0.0	-- --
United Kingdom	1994 1996	14 919 17 310	-- +16.0	28.0 19.9
* Tabulation Category E -- electricity, gas and water supply -- of the International Standard Industrial Classification of all Economic Activities (ISIC -- Rev.3, 1990). Data are from labour force surveys. Source: ILO Yearbook of Labour Statistics, 1997.

In the United Kingdom, widespread privatization and restructuring in all three industries (water, electricity and gas) are reflected in the macro figures for both paid employment and unemployment. The figures indicate a sharp decline in paid employment in the utilities sector at a time when national employment increased slightly. There was an almost 50 per cent drop in paid employment in water, electricity and gas between 1987 and 1996, while national paid employment grew by almost 3 per cent over the same period. Similarly, unemployment in the utilities sector rose by 14 per cent, from 14,919 in 1994 to 17,310 in 1996, while national unemployment declined by 15 per cent in the same period.

2.2. Privatization and restructuring as sources
of declining employment

Employment reductions have very often accompanied privatization and restructuring in water, electricity and gas services. They may precede privatization as part of a deregulation or restructuring process to make services more competitive and prepare for their sale or transfer on the open market. Further reductions often take place during and after privatization. Deregulation and restructuring can also occur some time after privatization when, for example, the structure of an industry evolves from one of many smaller private entities to one with just a few large monopolies, as in the United States.⁽¹⁾ Such a process can also entail workforce reductions.

The reasons most often cited for large-scale downsizing during privatization or restructuring is that as public entities, the utility enterprises were considerably overstaffed in the first place, thus reducing overall productivity. In addition, this situation was often combined with insufficient ongoing training to keep staff up to date with evolving technology and methods of work organization. Therefore, reducing staff levels is usually seen as imperative for lowering costs and boosting productivity, at least initially.

Employment reductions in the water industry have usually been less severe than for electricity and gas, as in many cases water remains as a public enterprise or under strong public control. For example, privatization of water in Guinea through a leasing contract awarded to a foreign private consortium in 1989 led to little change in employment levels, as can be seen in table 2.5. Similarly, in the United Kingdom, table 2.6 shows a significant overall increase in the number of employees in ten water companies, from 42,363 in 1990 to 58,413 in 1996. However, there has also been an increase in subcontracting and the use of contractors in the water industry and table 2.6 shows that the number of core employees actually declined by 17 per cent, from 41,126 to 34,174, over the same period. In some companies there have been enormous increases in the number of non-core employees.⁽²⁾

Nevertheless, there are reports of significant workforce cuts in the water industry in some countries. For example, in the Czech Republic, privatization of water supply and sewerage utilities began in 1992 and since then the number of workers in the water supply companies has fallen by 26 per cent (see table 2.7). Similarly, in Hungary there was a 46 per cent reduction in staff in one water company (see table 2.7).

Table 2.5. Workforce composition of the Guinean national water utility (DEG)

	Category	1986	1987	1988	1996
	Management	78	76	85	45
	Supervisory	55	55	45	77
	Skilled	104	105	92
	Unskilled	165	149	151	233
	Casual	110	110	133	148
	Total	512	495	506	503
Source: Company data. Reprinted from ILO: Labour and social dimensions of privatization and restructuring, Geneva, 1998, p.31.

Table 2.6. Water company employees in the United Kingdom, 1990-97

	1990	1991	1992	1993	1994	1995	1996	1997
Total core and non-core employees
Anglian	4 328	4 663	5 224	5 357	6 031	5 733	5 261	5 333
North West	7 100	7 290	8 201	8 061	8 013	7 871	10 237
Northumbrian	1 404	1 625	2 377	2 903	3 314	3 065	3 073
Severn Trent	7 298	7 524	10 416	10 519	10 783	10 628	10 037
South West	1 712	2 072	2 449	2 556	3 060	3 083	3 005
Southern	2 790	2 928	3 103	3 385	3 476	3 728	3 885
Thames	7 790	9 015	9 348	10 352	10 141	10 473	10 360
Welsh	3 711	4 133	4 696	4 998	6 600	6 565	6 768
Wessex	1 639	1 755	1 869	1 871	1 834	1 582	1 469
Yorkshire	4 591	4 789	4 902	4 740	4 786	4 640	4 318
Total	42 363	45 794	52 585	54 742	58 038	57 368	58 413	5 333
Core
Anglian	4 328	4 663	5 016	5 147	5 180	4 832	4 287	4 278
North West	7 100	7 290	5 928	5 442	5 426	6 342	4 770
Northumbrian	1 404	1 053	1 086	1 170	1 315	1 347	1 315
Severn Trent	7 105	7 054	7 456	7 445	6 964	5 531	5 930
South West	1 657	1 855	2 084	2 144	2 141	2 084	1 815
Southern	2 217	2 259	2 229	2 373	2 386	2 371	2 243
Thames	7 688	7 331	7 562	7 381	6 893	6 673	6 338
Welsh	3 397	3 455	3 547	3 481	3 102	2 972	2 744
Wessex	1 639	1 755	1 869	1 871	1 834	1 582	1 469
Yorkshire	4 591	4 789	4 902	3 948	3 864	3 651	3 263
Total	41 126	41 504	41 679	40 402	39 105	37 385	34 174	4 278
Non-core
Anglian			208	210	851	901	974	1 055
North West			2 273	2 619	2 587	2 529	5 467
Northumbrian		572	1 291	1 733	1 999	1 718	1 758
Severn Trent	193	470	2 960	3 074	3 828	4 097	4 107
South West	55	217	365	412	919	999	1 190
Southern	573	669	874	1 012	1 088	1 357	1 642
Thames	102	1 684	1 786	2 971	3 248	3 800	4 022
Welsh	314	678	1 149	1 517	3 498	3 593	4 024
Wessex
Yorkshire				792	914	989	1 055
Total	1 237	4 290	10 906	14 340	18 933	19 983	24 239	1 055
Source: Annual reports and accounts. Provided by UNISON, United Kingdom.

Large employment reductions accompanied the corporatization and restructuring of the Manila waterworks and sewerage system in the Philippines in a series of phases starting with reorganization in 1995. In 1996 there was a reduction of 2,200 employees representing a decrease of 28 per cent. Further job losses occurred in early 1998.⁽³⁾

Table 2.7. Changes in employment in CEE privatized water companies

Country	Location	Company	Multinational	No. employed before joint venture		No. employed, 1997
Czech Republic	Brno	Brno VaK	Lyonnaise des Eaux	762	(1991)	624	(1996)
	Karlsbad	Vodarny Karlovy Vary	Lyonnaise des Eaux	416	(1994)	361
	North Bohemia	Severoceske VaK	Hyder	3 550	(1990)	2 350
	South Bohemia	VaKJC	Anglian Water	1 642	(1994)	1 300
	Plzen	Vodarna Plzen	Générale des Eaux	370	(1995)	350
Hungary	Kaposvar	Eaux de Kaposvar	Lyonnaise des Eaux	120	(1994)	118
	Szeged	Szegedi Vizmu	Générale des Eaux
	Pecs	Pecsi Vizmu	Lyonnaise des Eaux	1 000	(1994)	540
Source: PSRU database and L. de Luca (ed.): Labour and social dimensions of privatization and restructuring (public utilities: water, gas, electricity), Geneva, 1998, p. 136.

Similarly, in Latin America there have been instances of significant employment reductions following the privatization of water. Privatizing water and sewerage services through the granting of concessions in Argentina in the 1990s led to a nearly 50 per cent drop in the number of employees from around 8,000 to 9,000 employees to 4,000 to 5,000.⁽⁴⁾ Privatization of water in Cartagena de Indias in Colombia resulted in a two-thirds reduction of the workforce. The former public enterprise had 1,200 employees, of whom nearly 600 accepted the voluntary retirement plan proposed by the company and financed by the Government. A further 200 subsequently retired and 400 or so were hired by the private company over time.

In the contracting out of Sydney Water in Australia it is estimated that 80 to 90 per cent of employees lost their jobs. This followed a period of substantial reorganization of Sydney Water in which the number of jobs was reduced from 12,776 to 6,774 between 1984 and 1994, a decline of 53 per cent. Similarly, in contracting out of the whole water supply system in South Australia in 1997 to the company United Water (a consortium made up mainly of Thames Water of the United Kingdom and the Générale des Eaux of France), employment was reduced by 43 per cent. This was in addition to a previous 43 per cent reduction in employment by the state government prior to privatization between 1991 and 1994.⁽⁵⁾ In Zambia, recent water sector reform has led to the formation of several water companies with local councils as major shareholders. About 5,000 affected employees have been redeployed in local councils or made redundant.⁽⁶⁾

Employment reductions following privatization and restructuring in electricity and gas utilities tend to be on a larger scale than for water. However, there are cases where this has not necessarily been the case or where attempts have been made to maintain employment levels. In the Indian State of Orissa, the State Electricity Board was restructured in 1996 into three autonomous enterprises; a transmission and distribution company, the Grid Corporation of Orissa (GRIDCO); the Orissa Hydro Power Corporation (OHPC) to operate all the state-owned hydroelectric power plants; and the Orissa Power Generation Corporation (OPGC) to construct and operate thermal power stations. The combined staff of GRIDCO and OHPC totals around 35,000 and the state government has given an undertaking that they will not be retrenched. However, the Bombay Suburban Electric Supply Corporation which was awarded a management contract in 1996 to manage about 8,000 workers from GRIDCO has indicated that it wants a free hand in the deployment of workers.⁽⁷⁾

Two state monopolies control practically all the gas and electricity production and distribution in France. Increasing autonomy and the use of private sector criteria for performance evaluation since 1984 have resulted in the loss of jobs. Between 1984 and 1997 the number of employees at EDF fell from 123,931 to 114,938, a 7 per cent reduction. Similarly, at GDF the number of employees fell from 28,769 to 24,559, a 15 per cent reduction during the same period. According to trade union sources, further restructuring planned for 1999 and 2000 will result in decentralization, the outsourcing of certain tasks and the internationalization of activities and is expected to further reduce the number of jobs in the gas and electricity sector.⁽⁸⁾ On the other hand, EDF and GDF published an eight-point plan in 1997 to increase the number of employees by recruiting more young workers. It is based on both expanding services to customers and introducing new forms of work sharing (see Chapter3).⁽⁹⁾

In Norway there has been no significant privatization in the electricity sector, but restructuring and introduction of market approaches have led to a reduction from 19,000 employees in 1991 to 17,000 in 1997, representing an 11 per cent cut.⁽¹⁰⁾ A similar reduction of 10 per cent occurred in Sweden in 1996 following electricity deregulation. The forecast for the total rationalization effect of deregulation and technological developments, however, is a 40 per cent reduction of staff within the energy sector.⁽¹¹⁾

More extensive employment cuts of over 20 per cent of the workforce have been observed in a number of countries. The electricity utility in Côte d'Ivoire was privatized in 1990 with a 15-year concession being granted and the State retaining ownership of the assets and regulatory functions. Employment levels fell gradually over a five-year period from 3,930 to 3,068, representing a 22 per cent reduction.⁽¹²⁾ Restructucturing of ESKOM, a large public enterprise involved in the generation, distribution and sale of electricity in South Africa, resulted in a 40 per cent reduction of the workforce from 65,000 to 39,000 over the last six years.⁽¹³⁾

The data for the European Union countries contained in table 2.8 provide an overview of employment reductions in selected countries. It shows that there have been job losses across the electricity and gas sectors for most countries which have been more far-reaching in electricity. Between 1990 and 1995 there was an overall decline by around 15 per cent. The United Kingdom stands out in accounting for half of the jobs lost in energy in the whole of Western Europe since 1990. Job losses, particularly in the electricity industry, have been enormous. After privatization began in 1989 there were 142,623 employees in 1990-91; by 1995-96 the figure had fallen to 96,143, a drop of 33 per cent (see table 2.9). Current job estimates indicate that job levels are down to 85,000. Most of the initial job losses took place in the generating companies and were said to be due to competitive pressures and the need to cut costs. More recently staff has been heavily reduced in the regional electricity companies as a result of pressures to cut costs following regulatory reviews. More cuts have come from a variety of outsourcing arrangements. Developments in information technology also continue to be either the direct cause or a means of facilitating job reductions as part of restructuring.⁽¹⁴⁾ There have been large job losses in the British gas industry since privatization began in 1986, when the number of employees was 91,599. By 1992 the figure had fallen to 78,300 and is currently 36,500. In Spain, where electricity and gas are privatized and water is in the process of being privatized, employment reductions have been particularly marked in the electricity sector. Between 1990 and 1996 the number of electricity employees fell from 51,899 to 44,000. In the coming years it is expected that up to 12,000 more jobs will be lost, representing more than 25 per cent of the current workforce.⁽¹⁵⁾

Similarly, corporatization of electricity in New Zealand in 1986 and reorganization of transmission and distribution led to major job losses, with the number of employees falling from 5,999 to 3,690 (a 39 per cent decline) between 1987 and 1990.⁽¹⁶⁾

The United States has long had a large proportion of private local monopoly investor-owned electricity and gas utilities. These were restructured in the 1970s and 1980s through takeovers and mergers and the unbundling of different functions leading to the creation of a few very large monopolies. This process resulted in the loss of one-quarter of the workforce in electricity and gas, including both employees and management staff.⁽¹⁷⁾ In Canada, where most of the electricity sector is still state-owned, the public enterprise, Ontario Hydro, took far-reaching measures towards corporate restructuring in 1993 to deal with the many difficulties it was facing, including downsizing the workforce by approximately 12,000 employees over the period 1992-95. Table2.10 shows employment reductions in selected United States and Canadian electricity and gas utilities from 1992 to 1995.⁽¹⁸⁾

Table 2.8. Changes in employment in electricity and gas in Europe, 1990-95

Country	Scope	1990 employees	1995 employees	Change 1990-95	% change, 1990-95
Electricity
Denmark	Industry	11 595	11 382	-213	-1.8
Germany	Industry	292 800	243 200	-49 600	-16.9
Greece	Industry	29 200	30 383	1 183	4.1
Spain	Industry	52 639	47 951	-4 688	-8.9
France	EDF	120 263	116 909	-3 354	-2.8
Ireland	ESB/Industry	12 000	10 300	1 700	-14.2
Italy	ENEL/Industry	110 562	94 561	-16 001	-14.5
Norway	Industry	19 396	19 948	552	2.8
Portugal	EdP	20 165	16 472	-3 693	-18.3
Sweden	Vattenfall	10 175	8 460	-1 715	-16.9
Sweden	Industry (excluding Vattenfall)	28 000	21 500	-6 500	-23.2
United Kingdom	All private companies (Grid+Gen+RECs)	144 219	102 197	-42 022	-29.1
Total		851 014	723 263	-127 751	-15.0
Electricity and gas
Belgium	Electrabel+Distrigaz	14 984	14 285	-699	-4.7
Belgium	Liège gas+electricity	1 440	1 501	61	4.2
Netherlands	Industry	35 800	31 000	-4 800	-13.4
Switzerland	Industry	23 565	23 753	188	0.8
Finland	Industry	5 470	4 755	-715	-13.1
Total		81 259	75 294	-5 965	7.3
Gas
Germany	Industry	36 900	35 300	-1 600	-4.3
Spain	Industry	3 070	4 831	1 761	57.4
France	Gaz de France	26 965	25 620	-1 345	-5.0
Italy	Italgas/Industry	14 000	17 000	3 000	21.4
United Kingdom	British Gas	79 200	54 754	-24 446	-30.9
Total		160 135	137 505	-22 630	-14.1
Grand total		1 092 408	936 062	-156 346	-14.3
Source: Company reports, national statistics, trade union reports, etc. Reprinted from L. de Luca, op. cit., p. 135.

Table 2.9. Electricity companies: Average number of employees
in the United Kingdom (1990-91/1995-96)

	1990-91	1991-92	1992-93	1993-94	1994-95	1995-96	% change 1990-91/ 1995-96
National Power	15 713	13 277	9 934	6 955	5 447	4 848	-69.1
Nuclear Electric	13 924	13 300	12 283	10 728	9 426	8 815	-36.7
PowerGen	8 840	7 771	5 715	4 782	4 171	4 148	-53.1
Eastern Electricity	10 001	9 877	8 415	7 003	6 403	6 113	-38.9
East Midlands Electricity	7 382	8 243	8 684	7 914	6 458	5 051	-31.6
London Electricity	6 691	6 581	6 258	5 532	4 908	4 404	-34.2
Manweb	5 483	4 623	4 533	4 604	4 582	3 303	-39.8
Midlands Electricity	7 729	7 643	7 370	6 207	5 815	5 114	-33.8
Northern Electric	5 528	5 364	4 826	4 714	4 456	3 882	-29.8
NORWEB	8 203	7 917	7 977	7 652	7 617	8 196	-0.1
SEEBOARD	6 340	6 257	6 039	5 339	4 680	4 278	-32.5
Southern Electric	8 362	8 340	7 642	7 391	7 091	6 728	-19.5
South Wales Electricity	3 767	3 632	3 166	3 350	3 218	2 979	-20.9
South Western Electricity	5 676	5 553	5 569	5 092	4 656	3 424	-39.7
Yorkshire Electricity	7 126	7 105	6 850	5 764	4 924	4 294	-39.7
NGC	6 550	6 217	5 666	5 127	4 871	4 565	-30.3
Hydro-Electric	3 484	3 480	3 494	3 552	3 584	3 435	-1.4
Scottish Nuclear	1 976	2 047	2 172	2 060	1 860	1 704	-13.8
Scottish Power	9 848	9 495	8 724	7 778	8 041	8 036	-18.4
NIE	n.a.	n.a.	3 851	3 536	3 035	2 826
Total	142 623	136 722	129 168	115 080	105 243	96 143	-32.6
Source: Centre for the Study of Regulated Industries, United Kingdom. Provided by UNISON, United Kingdom.

Table 2.10. Employment reductions in selected United States and
Canadian electricity and gas utilities, 1992-95

Company	Number of employees			Methods used
	Before	After	Reduction (in %)
AEP	2 150	1 650	23	Attrition, job elimination, optional early retirement, severance package
Columbus Southern Power	2 350	1 600	8	Attrition, job elimination, optional early retirement, severance package
Atlantic Electric	n.a.	n.a.	n.a.	Elimination of 50 management positions, reassignments, lay-offs
Baltimore Gas & Electric	9 400	n.a.	n.a.	Early retirement offered to 2,200, freeze on filling posts
Centerior Energy	8 300	7 100	14	Early retirement (1,514 accepted out of 1,900 offered)
Central & South West	8 800	7 950	10	Early retirement, reassignment offers or severance package
Central Louisiana Electric	1 100	950	14	21% reduction in supervisor and manager positions. Early retirement, voluntary severance, downgrading over two-year period
Central Maine Power	2 250	2 025	10	Especially focused on management
Cincinatti Gas & Electric	5 450	4 957	10	9 per cent offered early retirement, involuntary separation if needed
Commonwealth Edison	19 000	18 375	3	Lay-offs
Commonwealth Energy Systems	1 411	1 250	11	Lay-offs, early retirement
Duke Power	18 000	16 300	10	"Early out" incentive offer, voluntary separation programme
Entergy	18 000	12 371	32	9 per cent offered early retirement, involuntary separation if needed
Florida Power Corp.	6 700	4 900	23	Early retirement, redeployment
Florida Power & Light	16 300	14 000	14	Early/voluntary retirement, voluntary severance, lay-offs
General Public Utilities	11 800	n.a.	n.a.	800 offered voluntary early retirement
Georgia Power	12 494	12 138	3	Early retirement offered to 445
Hydro Quebec	27 000	25 500	6	Mostly attrition, over two years
Kansas Gas & Electric	5 800	5 100	12	Early retirement, voluntary severance
Kansas City Power & Light	2 583	n.a.	n.a.	35 positions left vacant annually, early retirement offers to 411
Louisville Gas & Electric	2 100	1 988	5.4	Early retirement
Iowa-Illinois Gas & Electric	4 350	3 700	15	Hiring freeze, incentive retirement programme, severance package
Nevada Power	1 816	1 651	9	Voluntary early retirement, severance package
New Brunswick Power	2 700	2 200	18.5	Lay-offs; plant shutdown, New England
New England Electric System	2 160	1 880	13	Voluntary early retirement (400 management positions); involuntary terminations, New York State
New York State Electric & Gas	4 887	4 150	15	Attrition (200 annually), closing facilities
Niagara Mohawk Power	11 896	10 350	13	Mostly attrition, few lay-offs at start; later lay-offs (650 non-management, 250 management)
Northeast Utilities	7 700	6 890	12	Lay-offs, early retirement
Oklahoma Gas & Electric	3 400	n.a.	n.a.	Early retirement
Pacific Gas & Electric	26 800	21 000	23	Early retirement, enhanced voluntary severance
PECO Energy	9 330	8 800	6	Lay-offs at nucear sites, early retirement/voluntary separation offered to all employees
Public Service of Colorado	6 400	n.a.	n.a.	Expected several hundred to accept early retirement or enhanced severance; also attrition, lay-offs
Public Service Electric & Gas	13 116	12 600	4	Early retirement, redeployment
Puget Sound Power & Light	2 600	n.a.	n.a.	Voluntary separation, especially targeted at managers
Rochester Gas & Electric	2 631	n.a.	n.a.	Early retirement offered to 150
Texas Utilities	15 200	10 640	30	Early retirement offered to 3,700 and severance package to all others (4,560 accepted), some involuntary job cuts
United Illuminating	730	655	10	Cut 75 management positions, early retirement offered to 145
Virginia Power	12 600	10 500	16	Voluntary separation/retirement
Source: The table is a modified version of Edison Electric Institute's Survey of Utilities, as supplied by the International Brotherhood of Electricity Workers.

In Latin America, workforce reductions have been extensive in the privatization process of electricity and gas. Before the privatization of electricity in Argentina in 1992, the workforce of the public electricity enterprise SEGBA was cut from 20,271 to 15,806, a drop of 22 per cent. After privatization more redundancies and voluntary retirements followed and the workforce of 15,806 was cut by a further 28.4 per cent, to 11,307 (see table 2.11). For the gas sector the Argentine Government stipulated that privatized companies must absorb all former employees. However, voluntary retirement was offered, resulting in workforce reductions illustrated in table2.12.⁽¹⁹⁾

Table 2.11. Restructuring of electricity workforce after privatization in Argentina

Company	Number of employees
	At time of privatization (1990)	After privatization (1993) 1	Percentage change
Central Puerto	1 115	798	-28.4
Central Costanera	795	661	-16.8
Edenor	6 443	4 164	-35.3
Edesur	6 529	5 051	-22.6
Central Dock Sud	75	60	-220.0
Central Pedro de Mendoza	59	31	-47.5
Edelap	741	542	-26.8
Remaining SEGBA	59	n.a.	n.a.
Total	15 806	11 307	-28.4
1 The 1993 figures for Edesur, Central Puerto, Central Pedro de Mendoza and Central Costanera refer to September-October, while the others refer to February. Source: L. de Luca, op. cit., p. 194.

Table 2.12. Argentina: Gas del Estado, job reductions, 1990-93

Type of movement	Staffing 31.12.90	Decline 1991	Staffing 31.12.91	Decline 1992	Staffing 31.12.92	Decline 1993	Staffing 31.12.93
	10 425	331	10 094	9 681	413	304	109
Voluntary retirements		0		1 170		0
Transfers to privatized companies		0		7 969		304
Attrition		331		542		0
Source: L. de Luca, op. cit., p. 197.

Sizeable cuts in the number of electricity employees are also evident in Brazil in the 1990s, with a 27 per cent reduction between 1994 and 1997, from 188,208 to 138,226. Large-scale dismissals have occurred over short periods in some cases. For example, one company reduced the number of employees by 28 per cent over a six-month period in 1995.⁽²⁰⁾ Table 2.13 shows the workforce reductions made in a number of Brazilian electrical utilities already privatized or in the course of privatization. In the gas sector,where two state companies are in the process of privatization, there were already 360 redundancies in 1996 in one company (CEG) and in 1995 other redundancies and voluntaryretirements reduced the workforce by 45 per cent as compared with 1994.⁽²¹⁾

Table 2.13. Brazil: Electrical utilities already privatized or in the
course of privatization, change in workforce

Company	Before	After	Customer/employee ratio 1
CERJ	5 700 (1996)	2 160 (1997)	366
ESCELSA	2 500 (1994)	1 717 (1997)	730
Light	10 658 (1995)	6 541 (1996)	450
CEEE 2	n.a.	8 420 (1997)	320
CEMIG 2	19 981 (1991)	14 800 (1997)	270
COELBA 2	7 231 (1992)	4 763 (1997)	485
São Paulo companies 3	50 700 (1994)	35 600 (1997)	n.a.
n.a. = not available. 1 The most appropriate ratio is about 400 customers per employee. 2 Not yet privatized. 3 CESP, CPFL and ELETROPAULO. Source: Company data.

Employment reductions in the utilities sector seem to have had a varying impact on different categories of workers. In some cases, most categories seemed to experience similar levels of cuts. In the Czech Republic employment reductions in the 1990s due to water privatization affected skilled and unskilled workers alike and there was no significant difference for men and women.⁽²²⁾In Spain in the electricity sector skilled and unskilled men and women appeared to be similarly affected.⁽²³⁾

In other instances, unskilled or manual workers were more affected by cuts, as for example in the water industry in the United Kingdom.⁽²⁴⁾ In Sweden, lower skilled employees were targeted in the 1996 electricity deregulation process.⁽²⁵⁾ In France, it was above all the number of unskilled workers that was reduced during the period of restructuring, down from 60,087 to 40,219 in EDF and GDF combined. The number of semi-skilled workers tended to remain at the same level, but the number of more highly skilled staff increased from 21,171 to 27,711.⁽²⁶⁾ Open competition in the public electricity monopoly in Ireland led to the downsizing of 2,000 workers, mainly in unskilled and semi-skilled areas and affecting men more than women.⁽²⁷⁾

On the other hand, skilled workers may be exposed to more reductions. Skilled and semi-skilled workers were the most affected by reductions in the electricity sector in Norway in the 1990s. Men were more likely to lose jobs than women but in some cases the impact on women was greater. Major white-collar and clerical job losses in the gas and electricity utilities in the United States following restructuring have had a disproportionate impact on women. It is reported that women employees are particularly affected by contracting out, particularly in the water industry in the Asia-Pacific region.⁽²⁸⁾

In Côte d'Ivoire, as can be seen in table 2.14, management staff were more affected by employment cuts in electricity privatization and supervisory staff probably had to take on more management functions as their share of employment actually increased in the general context of cutbacks. The private contractor wanted to develop a less hierarchical structure and foster more initiative and responsibility, with the number of grades in the hierarchy being cut from 18 to nine and later to five.⁽²⁹⁾

Table 2.14. Privatized electricity company in Côte d'Ivoire:
Workforce size and categories

Category	1987		1988		1989		1990		1993		1994
Management	443	(11.3)	448	(12.0)	487	(13.1)	434	(13.6)	345	(11.0)	337	(11.0)
Supervisory	1 168	(42.4)	1 857	(49.7)	1 941	(52.1)	1 637	(51.0)	1 799	(57.3)	1 565	(51.0)
Manual and non-manual	1 819	(46.3)	1 430	(38.2)	1 294	(34.8)	1 130	(35.4)	996	(31.7)	1 166	(383.0)
Total	3 930	(100.0)	3 735	(100.0)	3 722	(100.0)	3 195	(100.0)	3 140	(100.0)	3 068	(100.0)
Source: Company data. EECI-CIE.

2.3. Employment status

Upon privatization, the question arises as to what extent employees are transferred from the public sector to the private companies and what is their subsequent employment status in the new company. A variety of practices exists in this regard. A 1995 survey by Public Services International (PSI) found that in nearly all countries in Europe, trade unions reported that the workers concerned were transferred to the private sector. In France, when water concessions are granted, workers are reportedly given three options: to remain as municipal employees and be redeployed; to be put on detached duty with renewal of contract every five years; or to be transferred and completely integrated in the new enterprise.⁽³⁰⁾

In Hungary, transfers to the private sector have been the normal practice in energy privatization. The transfers, with protection, were agreed between trade unions and the Government and written into the contractual conditions of the sale of the enterprises. The problem remains, however, that even with transfers employment cuts can always be made later on, and at that point the handling of redundancy becomes an issue.⁽³¹⁾

If employees are transferred, then the issue arises of what kind of employment status they have. In most cases, transferred employees are subject to private sector contractual arrangements, which may entail the loss of certain benefits granted to public sector workers, in particular job security. Yet there can be certain positive outcomes, depending on the company, labour protection laws and the industrial relations climate. For example, workers may be able to bargain collectively for higher wages or other conditions of work. In other situations, employees may retain their public sector status, as was the case in Japan when gas companies were privatized.⁽³²⁾ A new French bill on the deregulation of the electricity sector proposes to extend the favourable status enjoyed by workers currently employed by the EDF to all those working in the industry. In justifying the proposal, the bill states that "it is natural that all enterprises operating in the field of electricity should be subject to the same requirements. It is also desirable that there should be no reduction in social guarantees prejudicial to the welfare of employees". There could also be a mixed situation as in the case of Aruba, where most public sector workers were transferred to private water and electricity companies. However, 15 per cent stayed in the public sector.⁽³³⁾

In other countries, there may be no right or agreement to transfer to the private company. In the Philippines, where most public utilities have been privatized in the last decade, the law clearly states that when a public enterprise is sold or ownership transferred to private corporations, employees have no right to future employment in the corporation. The new owners have "full and absolute discretion to retain or dismiss" employees and to hire replacements. However, entitlements to severance pay and other compensation provided for under the law, contracts and collective agreements must be respected.⁽³⁴⁾

2.4. Measures to ease employment reduction

In many instances, employment reduction is accompanied by a variety of measures to ensure compliance with existing legal or collective agreement requirements and to avoid industrial conflict and socially or politically motivated criticism. Such measures are often implemented on a voluntary basis, but at times may be compulsory. They include severance pay for workers made redundant, dismissal with compensation, early retirement schemes, training, retraining and redeployment, and other measures such as reduced working hours and the hiring of young employees. These measures are often negotiated between governments, companies and trade unions before and during a privatization or restructuring process (see Chapter 4). For example, in Spain, employment reductions in the utilities have been based on collective agreements providing for voluntary early retirements, redundancy pay and rejuvenation of the workforce through the hiring of young people. Reorganization of plants was achieved without dismissals and accompanied by retraining and redeployment.⁽³⁵⁾ And in Sweden, after negotiation with trade unions in the electricity sector, pensions were offered to older redundant employees, lump-sum payments to those voluntarily resigning to start up on their own and skills development and training.⁽³⁶⁾ In the United Kingdom, despite the scale of job losses in the electricity sector, serious industrial action was avoided by providing generous voluntary redundancy and early-retirement packages, which included job placement facilities, retraining, seminars on assertiveness and self-employment, financial investment advice and general help lines.⁽³⁷⁾

In many cases, there are quite generous arrangements for redundancy payments, depending on provisions in national labour laws and collective agreements and often based on years of service. In instances of privatization, arrangements can still be fairly attractive, even when the economic situation of the countries concerned is weak. For example, under the privatization of the water supply in the Central African Republic, a redundant employee with 16years of service could receive an allowance equivalent to 31 weeks of the previous year's pay. In Côte d'Ivoire voluntary separations were encouraged through early retirement and resignation after a 15-year concession was granted for electricity generation and distribution; employees were offered an allowance of six months' to two years' pay, depending on the length of service.⁽³⁸⁾

Table 2.15. Côte d'Ivoire: Calculation of redundancy allowances
at the Société nationale des eaux (SNE)

	Length of service	Allowance per period of service
	Less than one year	0
	1 to 4 years	25% (x) number of years
	5 to 15 years	50% (x) number of years
	More than 15 years	75% (x) number of years
Note: The allowance for an employee with 16 years' service was [0.75 (x) 1] (+) [0.5 (x) 11] (+) [0.25 (x)4] = 7.25 twelfths of the total pay received during the last 12 months' employment at SNE. Source: ILO: Labour and social dimensions of privatization and restructuring, op. cit., p. 35.

The South African electricity company ESKOM has in place four different packages which are utilized in relation to downsizing. The most generous, in terms of benefits, is a voluntary separation package available to employees when the restructuring of an element of the company is imminent. A less generous severance package known as the "surplus package" is available in circumstances where the new restructured unit is being implemented and surplus positions have been identified. A third package is available to individual employees whose performance has been the subject of review and they have been required to undertake a six-month performance enhancement programme. Under the programme, specific requirements are stipulated and appropriate training is provided. When an individual employee fails to satisfy the requirements of the programme or chooses during its duration not to proceed with the programme and elects to leave the company, then this third package (known as the volunteers' package) is made available. Some six out of every ten employees who undertake this programme do so successfully, i.e. they remain with the company. The fourth package, known as the disciplinarypackage, is utilized when an employee who, following the initiation of a disciplinary processentailing formal warnings, counsellings, etc., chooses to resign following amicable discussions.⁽³⁹⁾

Trade unions have played an important role in obtaining compensation for redundant workers in the process of privatization of water and electricity. In Argentina, out of the 4,000 to 5,000 employees who lost their jobs during the electricity privatization, around 1,800 initially accepted compensation amounting to $37 million paid by the central Government. A further 1,700 were separated under a similar programme conducted by the concessionaire at a cost of $50 million. The state electricity company SEGBA paid out $55.5 million to a total of 5,601 employees. Of this sum, $52 million was provided by the new firms.⁽⁴⁰⁾ In the United Kingdom, redundancy packages were negotiated in the water industry with some being voluntary and others compulsory.⁽⁴¹⁾ In Ireland, a generous severance package is in place to address the downsizing process in the electricity sector. Under the national privatization scheme of major nationalized industries launched in 1990 in Pakistan, including utilities, an agreement was signed with the All Pakistan State Enterprises Workers Action Committee guaranteeing that there would be no lay-offs during the first year of privatization and a generous severance package for employees who resigned voluntarily.⁽⁴²⁾

In some countries, however, little or no compensation is paid to dismissed workers. Workers made redundant in the water industry in the Czech Republic received two months' salary in compensation (higher than this cannot be negotiated by law). If the worker was two years or less away from retirement then the employer had to pay the difference so that the worker could receive the full pension.⁽⁴³⁾ In Brazil, according to trade unions' reports, there was also a significant number of lay-offs in the electricity sector without compensation.⁽⁴⁴⁾ In the United States workers have been laid off in some instances without severance pay due to market pressures in the restructuring of electricity and gas utilities.⁽⁴⁵⁾

Early retirement schemes have probably been one of the most common measures used to speed up departures and reduce the workforce in the process of privatization and restructuring. In most cases, it seems that the schemes are implemented on a voluntary basis. In the United States, many companies instituted early retirement packages and lump-sum retirement schemes. With the corporatization and restructuring of the Manila waterworks and sewerage system in the Philippines in 1995, an early retirement scheme was put in place with associated benefits, including acceleration of the compensation package available under existing legislation. The first part of the Early Retirement Incentive Plan was implemented in 1996, with 2,200 employees taking early retirement.⁽⁴⁶⁾

In Brazil, electricity companies typically offered early or voluntary retirement during privatization. CHESF, the generating and transmission company for the north-east of Brazil, introduced retirement incentives which brought about the departure of 1,119 employees in 1995, or 12.5 per cent of the workforce. To counteract a problem of overstaffing, the electricity generation, transmission and sales company in the Brazilian State of Minas Gerais, CEMIG, introduced a voluntary retirement scheme, which resulted in a reduction in the number of employees from 19,891 in 1992 to 14,800 in 1997.⁽⁴⁷⁾

Often early retirement schemes are part of a package of measures to reduce employment levels. Corporate restructuring at Ontario Hydro in Canada began in 1993 and management sought to achieve their targets for downsizing by implementing a large innovative voluntary early retirement and severance programme, offered in three phases under five different titles: early retirement allowance, voluntary separation allowance, special retirement programme, voluntary separation programme and special separation programme.

The overall economic situation and social security system of a country certainly plays a role in determining the feasibility and effectiveness of early retirement measures. Early retirement measures offered to employees following privatization of electricity and gas could result in severe strain on existing pension insurance schemes, even to the point of collapse, as reported by a trade union in Tunisia.⁽⁴⁸⁾

2.5. Training, retraining and redeployment

Privatization and restructuring usually call for new skills to be developed and maintained in such areas as marketing, stock exchange trading, information technology and technical engineering. Often new employees who already possess these skills are recruited. However, it can also be beneficial to a private enterprise to retrain and redeploy former employees whose experience, knowledge and loyalty to the enterprise constitute a distinct advantage. But often redeployment is seen as only a short-term option by both management and staff and most employees tend to take redundancy packages where these are offered. For example, in the contracting out of Sydney Water in Australia, only 10 to 20 per cent of meter readers gained employment with the private companies.⁽⁴⁹⁾

In France, EDF and GDF provided training, retraining and redeployment possibilities at the beginning of the restructuring process.⁽⁵⁰⁾ Employees in posts affected by subcontracting of water connections and the extension of distribution in Tunisia initially received training and were redeployed to jobs involving monitoring of subcontracted work.⁽⁵¹⁾ In Ireland there has been training and some merging of the skilled and semi-skilled categories,⁽⁵²⁾ while downsizing in United States gas and electricity utilities required some retraining and cross training, with more blue-collar workers taking on more management functions.⁽⁵³⁾

The South African electricity company ESKOM has a one to two-year time frame and a range of measures to assist individual employee affected by restructuring. The company provides assistance through consultants who provide advice and counselling in the following areas: personal financial affairs, particularly regarding the use or investment of pay-outs; psychological counselling of employees to deal with the effects of potential retrenchment; and skills training available for alternative careers for future employment post-retrenchment. Employees interested in establishing their own enterprises are provided with advice about particular industry associations, the functions which the company is outsourcing and ways in which employees may be enabled to provide some of those services directly themselves or alternatively seek employment with the external provider of those services. The company also offers training through its own centre in skill areas which fall within the company's normal training programme but which can be accessed by potentially redundant employees, for example, welding and electrical cabling.⁽⁵⁴⁾

While public or private enterprises may not offer training and redeployment, some governments try to reintegrate redundant workers into the workforce, sometimes in cooperation with trade unions. In Brazil, the Ministry of Labour, together with the CGT trade union and some enterprises, developed a programme to help laid-off workers find new jobs or to retrain them. The Trade Union of Electricians of São Paulo and Federaluz launched a continuous vocational development programme to develop new skills for keeping jobs or finding new ones to address the increasing number of jobs becoming obsolete and the need for workers to have continuous or lifelong training. Similarly workers made redundant in water supply privatization in the Czech Republic can be given retraining through the national labour exchange system.⁽⁵⁵⁾

Some of the privatized utilities regard training and retraining as an important factor in changing enterprise culture and making the company competitive. For example, in Côte d'Ivoire, the management of the privatized CIE electricity utility regards training as vital to the creation of a new enterprise culture. On agreement with the government regulator, it took over the Electricity Trades Centre (CME) which provides a two-year course open to all African companies in the electricity sector. The Centre also organizes short courses of continuing education. Overall expenditure on training has grown steadily, representing 4 per cent of the wage bill in 1994andputting CIE on a par in this respect with electricity companies in industrialized countries.⁽⁵⁶⁾ Similarly, a privatized generating and transmission company in the north-east of Brazil opened training centres in Recife and Salvador. In 1995, 38 per cent of the workforce attended training courses. In another Brazilian company, 74 per cent of its workers received training in 1995.⁽⁵⁷⁾

In some countries efforts are made to organize enterprises more flexibly in order to be competitive. This often involves a package of measures and changes in work organization, working time arrangements and work sharing. Technological advances and the desire to introduce new forms of work organization such as teamwork, multiskilling and participatory management, usually require the enterprise to invest in training and retraining of employees.

2.6. Boosting labour productivity

While productivity increases are usually associated with a number of factors, employment reductions seem generally to be a significant feature contributing to productivity increases in the privatization and restructuring processes in the water, electricity and gas sector. In Brazil, productivity increases of 10.6 per cent during 1992-94 in the electricity sector were due mainly to an increase in demand, accounting for 7.8 per cent of the total. However, most of the remaining increase (2.6 per cent) was achieved through a reduction in staff.⁽⁵⁸⁾

In Côte d'Ivoire after privatization of the electricity utility in 1990, 93.4 kWh per employee were produced in 1995 as compared to 72.5 in 1990. The number of consumers per employee was 128 in 1990 and rose to 156.7 in 1995.⁽⁵⁹⁾ In three cities in Latin America the number of employees per thousand water connections fell, while operating revenues and gross income rose (see table 2.16).⁽⁶⁰⁾

Table 2.16. Water: Operating and financial indicators for three Latin American
cities before and after private sector participation (PSP)

	Buenos Aires				Cartagena de Indias				Santiago
	Before PSP		1995		Before PSP		19951		Before PSP		1995
Operating revenues (million $)	230		385		10		12		60		130
Gross income 2 (million $)	-8		133		-2.5		0.9		29		71
Working ratio 3	1.05		0.65		1.2		0.89		0.52		0.45
Collection rate (%)	80		6		50		82		90		94
Number of employees	7 450		4 250		1 200		385		1 717		1 945
Employees per thousand connections	6.4		3.3		14		4.5		2.1		1.9
1 Data for six months of operation. 2 Net operating revenues minus net operating costs (excluding depreciation and interest payments). 3 Net operating costs divided by operating revenues. Source: L. de Luca, op. cit., p. 187.

2.7. The creation of new jobs

Reports indicating the creation of new jobs in the water, gas and electricity sector are scarce. And when jobs are created they are usually in new fields and their number is very limited. In France, a small number of new jobs mainly concerned waste treatment and disposal, climate engineering, etc. However, the gas and electricity companies simply bought out other enterprises which offered such services, taking over their employees. Some additional jobs were created in relation to new products such as electric cars and natural gas fuel, and through extension of client opening hours. In Ireland, new jobs are emerging in areas such as marketing, information technology and technical engineering,⁽⁶¹⁾ while in Norway new jobs have been created in marketing, wholesale and on the stock market in electricity.⁽⁶²⁾

Chile is unusual in that since privatization in the last decade there have been no large-scale redundancies and employment has even grown in some utility companies. But there were extensive workforce reductions in the 1970s and 1980s which resulted in large public enterprises employing 40 per cent fewer workers.⁽⁶³⁾

Generally, trade unions view privatization and restructuring as processes rendering employment in the sector more precarious and unstable, particularly where there is increasing recourse to subcontracting and external service contracts. In Tunisia, subcontracted work is generally characterized by precarious employment contracts in a labour market where there is an abundance of cheap labour available. The production and distribution of water remain a state monopoly. However, in the framework of the economic structural adjustment programme, subcontracting to private operators of water connections and the extension of water distribution have emerged as steps towards privatization. In 1992, 10 per cent of water connections were subcontracted, rising to 43 per cent in 1997, and the figure is expected to reach 65 per cent in 2001. For water extensions, subcontracting went from 59 per cent in 1992 to 82 per cent in 1997 and will be around 90 per cent in 2001. It is still early to assess the impact of subcontracting on employment levels, but already there is perceptible decrease in the level of hiring.⁽⁶⁴⁾ According to the Utility Workers Union of America, little new work has been created and the tendency with restructuring is for the same work to be done with fewer people in a non-union setting at lower levels of wages and benefits.

2.8. Looking to the future

The employment reductions described in this chapter are of particular concern, as they often occur during economic recessions and in a context of already high unemployment. The utilities sector provides employment for only a tiny percentage of a nation's workforce, but the addition of more workers to the pool of unemployed already retrenched from other economic sectors may exacerbate existing poor labour and social conditions. The increasing profitability of privatized utilities can spur economic growth and employment creation. In certain industrialized countries, there is a distinct trend for a significant proportion of households, including workers, to hold shares on the stock market, contributing to their increased purchasing power. Increased profits can also be reinvested in infrastructure, maintaining adequate workforce levels and in the retraining and continuous training of the utilities workforce, thereby providing good quality services. However, fears have been voiced that human resource strategies tend to rely mainly on workforce reduction to provide ever increasing profits and dividends to shareholders. A number of reports point to problems of work overload and stress on remaining employees of the utilities. This not only jeopardizes their health and safety, but renders equal opportunity and family friendly workplace policies more difficult to implement as employees have to work harder and, at times, longer hours to guarantee services. In addition, consumers may be adversely affected by, for instance, increased risks of power failures and power shortages, as evidenced from recent incidents such as grid failure in some countries whose electricity sector has been completely privatized and the contamination of water supplies. In this sense, the costs of privatization and restructuring could be considered as having been passed on ultimately to workers and society.

One of the rationales for privatization has been the provision of gas, electricity and other services at lower prices. However, from a trade union standpoint, cheaper prices can mean further reductions in job levels, pay rates and other employment entitlements and working practices. They also lead to further insecurity and a decline in morale and loyalty to the company. When regulators apply stringent price controls on utilities, employees can be in a difficult position as companies argue that the only way to maintain profit and dividend levels is to cut costs, i.e. staffing costs. Unions claim that the extent of job losses has a direct impact on the quality of service to customers. In the wake of a dramatic rise in customer complaints, British Gas has recognized that the job losses occurred over too short a time period.⁽⁶⁵⁾

During the privatization and restructuring processes positive human resource strategies have been adopted in some cases. For example, moderating the pace of change has shown that desired reductions can be achieved through natural attrition and voluntary departures. Reorganizing work methods, retraining schemes and redeployment can help workers adapt to different new jobs and tasks. Job flexibility could advantageously substitute labour flexibility, although social partnership and dialogue are needed for its success, as will be seen in Chapter 4. Although employment reduction may be necessary due to past overstaffing, retaining the maximum number of employees possible is important for engendering the trust, cooperation and loyalty of the workforce which are essential factors for introducing change and boosting labour productivity. Finally, generous compensations on a voluntary basis have proven to be an effective measure to reduce tension in industrial relations and can help make redundancy less traumatic for the workers and their families.

In bidding for contracts, some companies have demonstrated their interest in easing employments reductions imposed by privatization and restructuring processes. For example, United Water in the United States undertook to work in partnership with the city of Buffalo to ensure that no involuntary staff separations would be imposed over the lifetime of a contract, and declared that their interests extended beyond economics and incorporated the human side of the business. In its submission statement the company declared that:

United Water is committed to employing existing staff and making significant investment in the greater advancement of each of its team members. United Water's price includes a guarantee of employment offers to all current employees, with no lay-offs or involuntary staff reductions during the first year of the contract, as required in the request for proposals. However, it is United Water's intent and goal to provide employment for the existing staff over the full five-year contract, with only voluntary staff reductions through normal attrition. This will be accomplished through our innovative approach to providing service-level enhancements, and through "insourcing" of minor capital improvements work, major corrective repairs and other services currently "outsourced" by the board. United Water is prepared to guarantee this employment with no involuntary staff reductions under an optimal long-term contract of at least ten years.

Ultimately the most important issue for employment growth is whether privatization and restructuring in the energy sector will provide both expanded as well as more efficient and cost- effective services. Achieving such outcomes may well stimulate long-term economic growth and have an indirect positive impact on total employment. However, job creation and the prevention of social exclusion through the redistribution of wealth will still depend to a large extent on the type of government policies and economic models adopted and implemented. It is clear that independently of privatization or restructuring, repeated disruption of utilities services can provoke increased unemployment. For example, in early 1998, an electricity crisis caused half of all cement production to be halted in Benin, causing major work stoppages in public works, roads and construction in the private sector.⁽⁶⁶⁾ As many privatization and restructuring processes are still quite recent, there is little evidence available at a disaggregated level to assess the impact on indirect employment and social cohesion of the privatization of a particular industry or utility. However, evidence suggests that the number and pace of privatizations, as well as the simultaneous presence of labour market deregulation, can dramatically affect the extent of employment reductions. Power failures in February 1998 in Auckland, New Zealand's most populous city, caused a severe economic slowdown. These followed a period of both privatization and labour market deregulation and sparked off an intense public debate on the limits of liberalization and the need for state regulation. Striking a balance between maintaining a good quality of service and keeping utility prices at affordable levels will undoubtedly be a key factor in achieving the often stated objective of privatization and restructuring -- the enhanced provision of efficient utilities supply and distribution. Rising tariffs result in lowering purchasing power and increasing production costs, which could have a negative effect on employment creation unless significant improvements in quality of service are such that increased productive capacity outweigh price hikes.

1. Information from the Utility Workers Union of America.

2. Information from the Public Services Union (UNISON).

3. L. de Luca (ed.): Labour and social dimensions of privatization and restructuring (public utilities: water, gas, electricity), ILO, Geneva, 1998, p. 77.

4. L. de Luca (ed.), op. cit., p. 188.

5. ibid., pp. 80 and 68.

6. Information from the Zambia United Local Authorities Workers Union.

7. L. de Luca (ed.), op. cit., p. 88.

8. Information from the Chemical and Energy Federation of the Democratic Confederation of Workers (FCE CFDT).

9. L. de Luca (ed.), op. cit., p. 134.

10. Information from the Norwegian Union of Electrician and Power Plant Workers (NEKF).

11. Information from the Services and Communications Workers Union (SEKO).

12. L. de Luca (ed.), op. cit., p. 29.

13. Information from ESKOM.

14. Deregulation of the UK Gas and Electricity Industries, report prepared by UNISON, for the Utility Workers Union of America Conference in Washington, DC, June 1997.

15. Information from the Federation of Related Industries (FIA-UGT).

16. L. de Luca (ed.), op. cit., p. 93.

17. Information from the Utility Workers Union of America.

18. L. de Luca (ed.), op. cit., pp. 232 and 237.

19. L. de Luca (ed.), op. cit., pp. 195 and 197.

20. Information from the Workers Institute of Study and Research (IEPE).

21. L. de Luca (ed.), op. cit., pp. 194 and 197.

22. Information from the Wood, Forestry and Water Industries Workers Trade Union.

23. Information from the FIA-UGT.

24. Information from UNISON.

25. Information from SEKO.

26. Information from FCE CFDT.

27. Information from MSF.

28. L. de Luca (ed.), op. cit., p. 70.

29. ibid., p. 29.

30. L. de Luca (ed.), op. cit., p. 136.

31. ibid., p. 136.

32. Information from the Federation of Gas Workers Unions of Japan (Zenkoku Gas).

33. Information from the Trade Union of Public Employees of Aruba.

34. Information from the Public Sector Labor Integrative Center.

35. Information from the FIA-UGT.

36. Information from SEKO.

37. Deregulation of the UK Gas and Electricity Industries, op. cit.

38. L. de Luca (ed.), op. cit., pp. 35 and 29.

39. Information from ESKOM.

40. L. de Luca (ed.), op. cit., p. 194.

41. Information from the Transport and General Workers Union (TGWU).

42. L. de Luca (ed.), op. cit., p. 85.

43. Information from the Wood, Forestry and Water Industries Workers Trade Union.

44. Information from IEPE.

45. Information from the Utility Workers Union of America.

46. L. de Luca (ed.), op. cit., p. 78.

47. ibid., p. 195.

48. Information from the Tunisian General Labour Union (UGTT).

49. L. de Luca (ed.), op. cit., p. 80.

50. Information from FCE CFDT.

51. Information from SONEDE General Labour Union (UGTT).

52. Information from MSF.

53. Information from the Utility Workers Union of America.

54. Information from ESKOM.

55. Information from the Wood, Forestry and Water Industries Workers Trade Union.

56. L. de Luca (ed.), op. cit., p. 29.

57. ibid., p. 195.

58. Information from IEPE.

59. L. de Luca (ed.), op. cit., p. 28.

60. ibid., p. 187.

61. Information from MSF.

62. Information from NEFK.

63. L. de Luca (ed.), op. cit., p. 184.

64. Information from SONEDE General Labour Union (UGTT).

65. Deregulation of the UK Gas and Electricity Industries, op. cit.

66. "Les entrepreneurs ne voient pas le bout du tunnel", in L'Autre Afrique (Abidjan), No. 47, 29 Apr.-May, pp. 13-14.

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