SECTOR Home | What's New | About SECTOR | Meetings | Publications | Discussion Forum | Contact Us | Links | Site Map

Back to main meeting page

3. The impact of privatization and
restructuring on remuneration
and other working conditions

The various types of privatization and restructuring described in the previous chapters have often resulted in changes, although in varying proportions and degrees, in forms of remuneration and other working conditions.

A wage policy well adapted to structural changes and the maintenance or improvement of working conditions are recognized success factors in cases of privatization or the strengthening of competition between distributors.

3.1. Remuneration

3.1.1. Wage levels

The Joint Meeting on Employment and Conditions of Work in Water, Gas and Electricity Supply Services held in 1987 concluded that "the remuneration of workers in water, gas and electricity supply services should be determined through voluntary collective bargaining between employers' and workers' organizations, in accordance with the provisions of ILO Conventions Nos. 98, 151 and 154. Where such arrangements do not yet exist, they should be promoted" (paragraph 29) and that "the principle of equal pay for work of equal value should apply to women in water, gas and electricity supply services in accordance with the Equal Remuneration Convention, 1951 (No. 100), and Equal Remuneration Recommendation, 1951 (No. 90)" (paragraph 31).⁽¹⁾ The following tables (tables 3.1, 3.2, 3.3 and 3.4) show the evolution of wages between 1990 and 1997 in 13 selected countries on the basis of available data, for employees in the water, gas and electricity sector.

As can be seen from table 3.4, real wages increased sharply in China (+58 per cent over the period 1990-1996) and to a lesser extent in Singapore and the Republic of Korea (+47.6 per cent and +47.4 per cent respectively between 1990 and 1997). There were thus substantial gains in the purchasing power of employees in the sector in these Asian countries until up to a recent date.

There was also a relatively marked growth in real wages in Mauritius (+19 per cent) and, to a lesser extent, in Zimbabwe, despite significant fluctuations during the period 1990-1996, and in Australia (+12.9 per cent in 1996 compared with 1990) and New Zealand (+12 per cent in 1997 compared to 1990), with the employees of these two last mentioned countries having obtained a more regular increase in remuneration. In the other countries included in table 3.4, real wages in the sector either increased slightly between 1990 and 1997 (+3.2 per cent for employees in Canada; +1.9 per cent for manual workers in the United States) or fell (Botswana, Chile, Costa Rica, Egypt). It is not possible to establish a link with any privatization/restructuring processes which may have been undertaken during the period in these various countries; recent ILO studies on privatization and restructuring have not identified any clear patterns in pay levels. The impact of privatization and restructuring on wage levels may be positive or negative depending on the country, as confirmed by studies carried out on the subject by the ILO.

Table 3.1. Nominal average wages in the electricity, gas and water sector in 13 selected countries, 1990-97

Country	Time unit	Currency	Category of staff	1990	1991	1992	1993	1994	1995	1996	1997
Australia	Hour	Dollar	Employees	15.24	15.91	16.69	17.63	17.81	19.21	19.97	-
Botswana	Month	Pula	Employees	881	891	1 077	1 219	1 472	1 350	1 371	1 857
Canada	Week	Dollar	Employees	817	874	906	921	924	938	942	970
Chile	Month	Peso	Employees	203 907	264 105	319 362	263 975	288 438	325 832	378 896	401 512
China	Month	Yuan	Employees	221.33	243.5	282.67	359.92	512.92	653.58	734.67	804.08
Costa Rica	Month	Colon	Employees	37 889	45 171	53 675	67 990	74 679	103 452	93 867	105 795
Egypt	Week	Pound	Employees	40	57	47	69	65	70	-	-
Rep. of Korea	Month	Won	Employees	953	1 124	1 216	1 325	1 425	1 608	1 917	2 079
Mauritius	Month	Rupee	Employees	5 270	6 215	7 005	7 357	10 044	8 988	9 707	10 112
New Zealand	Hour	Dollar	Employees	15.56	16.23	16.76	16.58	17.27	18.07	19.19	20.21
Singapore	Month	Dollar	Employees	1 947	2 183	2 214	2 350	2 651	2 658	2 858	3 363
United States	Hour	Dollar	Wage earners	15.23	15.69	16.08	16.71	17.24	17.68	18.26	19.09
Zimbabwe	Month	Dollar	Employees	1 121	1 569	1 651	1 651	2 787	3 993	5 179	-
Source: ILO: Yearbook of Labour Statistics,1998.

Table 3.2. Average wages in constant currency in the electricity, gas and water sector (1990 prices) (Base Year: 1990=100)

Country	Time unit	Currency	Category of staff	1990	1991	1992	1993	1994	1995	1996	1997
Australia	Hour	Dollar	Employees	15.24	15.45	16.05	16.63	16.49	17.00	17.22	-
Botswana	Month	Pula	Employees	881.00	795.54	828.46	818.12	897.56	745.86	685.50	855.76
Canada	Week	Dollar	Employees	817.00	824.53	846.73	844.95	847.71	837.50	826.32	843.48
Chile	Month	Peso	Employees	203 907.00	216 479.51	226 497.87	166 022.01	162 959.32	170 592.67	184 827.32	184 179.82
China	Month	Yuan	Employees	221.33	231.90	250.15	270.62	308.99	336.90	349.84	-
Costa Rica	Month	Colon	Employees	3 7889.00	35 016.28	34 187.90	39 529.07	38 296.92	43 105.00	33 168.55	33 060.94
Egypt	Week	Pound	Employees	40.00	47.50	34.56	45.10	39.39	39.11	-	-
Rep. of Korea	Month	Won	Employees	953.00	1 031.19	1 048.28	1 086.07	1 104.65	1 191.11	1 350.00	1 404.73
Mauritius	Month	Rupee	Employees	5 270.00	5 808.41	6 254.46	5 933.06	7 551.88	6 374.47	6 471.33	6 320.00
New Zealand	Hour	Dollar	Employees	15.56	15.76	16.12	15.79	16.14	16.28	16.98	17.57
Singapore	Month	Dollar	Employees	1 947.00	2 119.42	2 088.68	2 175.93	2 366.96	2 331.58	2 485.22	2 874.36
United States	Hour	Dollar	Wage earners	15.23	15.09	15.03	15.19	15.26	15.11	15.22	15.52
Zimbabwe	Month	Dollar	Employees	1 121.00	1 275.61	943.43	737.05	1 020.88	1 191.94	1 272.48	-
Source: ILO: Yearbook of Labour Statistics, 1998.

Table 3.3. Index of average real wages in the electricity, gas and water sector (Base Year: 1990=100)

Country	Time unit	Currency	Category of staff	1990	1991	1992	1993	1994	1995	1996	1997
Australia	Hour	Dollar	Employees	100	101.4	105.3	109.1	108.2	111.5	113.0	-
Botswana	Month	Pula	Employees	100	90.3	94.0	92.9	101.9	84.7	77.8	97.1
Canada	Week	Dollar	Employees	100	100.9	103.6	103.4	103.8	102.5	101.1	103.2
Chile	Month	Peso	Employees	100	106.2	111.1	81.4	79.9	83.7	90.6	90.3
China	Month	Yuan	Employees	100	104.8	113.0	122.3	139.6	152.2	158.1	-
Costa Rica	Month	Colon	Employees	100	92.4	90.2	104.3	101.1	113.8	87.5	87.3
Egypt	Week	Pound	Employees	100	118.8	86.4	112.7	98.5	97.8	-	-
Rep. of Korea	Month	Won	Employees	100	108.2	110.0	114.0	1 15.9	125.0	141.7	147.4
Mauritius	Month	Rupee	Employees	100	110.2	118.7	112.6	143.3	121.0	122.8	119.9
New Zealand	Hour	Dollar	Employees	100	101.3	103.6	101.5	103.7	104.6	109.1	112.9
Singapore	Month	Dollar	Employees	100	108.9	107.3	111.8	121.6	119.8	127.6	147.6
United States	Hour	Dollar	Wage earners	100	99.1	98.7	99.7	100.2	99.2	99.9	101.9
Zimbabwe	Month	Dollar	Employees	100	113.8	84.2	65.7	91.1	106.3	113.5	-
Source: ILO: Yearbook of Labour Statistics, 1998.

Table 3.4. Evolution of real wages in percentage terms, as compared with 1990

Country	Time unit	Currency	Category of staff	1990 (%)	1991 (%)	1992 (%)	1993 (%)	1994 (%)	1995 (%)	1996 (%)	1997 (%)
Australia	Hour	Dollar	Employees		1.36	5.30	9.13	8.21	11.55	12.96	-
Botswana	Month	Pula	Employees		-9.70	-5.96	-7.14	1.88	-15.34	-22.19	-2.86
Canada	Week	Dollar	Employees		0.92	3.64	3.42	3.76	2.51	1.14	3.24
Chile	Month	Peso	Employees		6.17	11.08	-18.58	-20.08	-16.34	-9.36	-9.67
China	Month	Yuan	Employees		4.78	13.02	22.27	39.61	52.21	58.06	-
Costa Rica	Month	Colon	Employees		-7.58	-9.77	4.33	1.08	13.77	12.46	12.74
Egypt	Week	Pound	Employees		18.75	-13.60	12.75	-1.52	-2.23	-	-
Rep. of Korea	Month	Won	Employees		8.20	10.00	13.96	15.91	24.99	41.66	47.40
Mauritius	Month	Rupee	Employees		10.22	18.68	12.58	43.30	20.96	22.80	19.92
New Zealand	Hour	Dollar	Employees		1.27	3.57	1.48	3.73	4.62	9.14	12.94
Singapore	Month	Dollar	Employees		8.86	7.28	11.76	21.57	19.75	27.64	47.63
United States	Hour	Dollar	Wage earners		-0.94	-1.33	-0.26	0.17	-0.78	-0.09	1.91
Zimbabwe	Month	Dollar	Employees		13.79	-15.84	-34.25	-8.93	6.33	13.51	-
Source: ILO: Yearbook of Labour Statistics, 1998.

In the countries of Central and Eastern Europe, the effects of privatization and restructuring have been compounded by the shock resulting from the transition of the economy and society as a whole as well as the subsequent calling into question of an entire system of labour organization. Thus during the centrally planned period wages did not always correspond to the work carried out; wage structures were rigid and varied relatively little from one end of the scale to the other. The introduction of a new labour market has for several years involved the payment of remuneration which reflects, at least approximately, the job carried out. There has thus been some wage adjustment in this sense.

Under the former planned economy, although wages were not very high, social benefits (child-care facilities, housing, etc.) were very important. Transition may have had a negative effect on the benefits provided by the enterprise, and increased the share financed by wages. Only an analysis in terms of overall remuneration, comprising all the elements of real remuneration, would make it possible to determine exactly the consequences of transition on wages.

In Poland, Hungary and the Czech Republic the volume of employment, rather than wages, appears to have acted as an adjustment variable. But in other countries, such as the Russian Federation and Ukraine, where the privatization process is still in the very early stage, it is wages which have borne the brunt of the adjustment process. Since employers were reluctant to order massive lay-offs, workers were officially kept on within the enterprise, with very low or even no remuneration, but continued to receive certain benefits from the enterprise and to work more and more in clandestine employment.

In the former Soviet Union, the industrial apparatus was made up of large units which not only produced gas or electricity, but played an essential social role for workers and their families, as well as the local population -- a role which went far beyond that of enterprises in the industrialized market economy countries. The internalization of social functions and the need to maintain a large workforce to cope with production hiccups meant that Soviet enterprises functioned as both a link in the state chain and as economic agents.⁽²⁾

The payment of wages is sometimes linked to the payment methods of the operators themselves. Thus in the Russian Federation, the gas and electric monopolies have tended in recent years to grant reductions to their customers. Gazprom has obtained the right to grant up to 40 per cent reduction to customers paying with "real" money. In 1997, barely 10 per cent of natural gas deliveries were paid for in "real" money, and around 12 to 15 per cent for electricity; the remainder was settled through compensation arrangements, bills of exchange, reciprocal cancellation of debts, etc. This poses financial difficulties to monopolies and has repercussions on wages, contributions and taxes owed to the State or retirement funds.

The privatization of the water, gas and electricity distribution services may have a positive effect on wages as a result of changes in wage policy following transfer to the private sector. The corporatization of the Korea Electric Power Corporation resulted in average higher wages being paid than for either the private sector or when the Electric Power Company was formerly a government authority. In 1990, gross wages for male employees were 40 per cent higher than for their private sector counterparts.

In Argentina the real wages and salaries of employees of the Buenos Aires water concession increased by 45 per cent in the three years following privatization.

In the electricity privatization process in Pakistan, an agreement with the All Pakistan State Enterprises Workers' Action Committee in 1991 provided for a 35 per cent increase in basic pay and for allowances to be paid at the new rate. On the other hand, the contracting out of meter reading by Sydney Water in Australia has resulted in lower wages as meter readers are terminated and rehired for fixed periods. After calculation of base income levels and bonuses, annual pay is considerably lower than for full-time employees. As the contracted employees work full time for significant periods, it is difficult for them to take a second job. Formerly, such employees were redeployed on maintenance work during non-meter reading periods and so had ongoing employment and wages. However, wage levels also vary in the public sector, making it difficult to establish any precise comparisons.

3.1.2. Wage differences between the public and
private sectors and within the two sectors

Table 3.5, in which the countries are represented by numbers to preserve their anonymity, indicates the minimum and maximum annual wage rates (in ecus) of employees in the electricity sector in Western Europe for the year 1995 and whether the enterprise is public or private. An examination of the results reveals a large range of wage levels, with those in the private sector sometimes being slightly higher than those in the public sector.

Table 3.5. Pay rates in the electricity industry, clerical workers,¹ Western Europe, 1995
(ranked by minimum rate)

Agreement No.2	PUB(lic) or PR(ivate)		Minimum annual basic rate (ecu)		Maximum annual basic rate (ecu)
1	PR		32 675.44		53 587.72
2	PR		24 189.45		24 189.45
3	PUB		23 617.04		26 389.08
4	PR		21 961.44		32 942.16
5	PR		21 279.41		34 472.07
6	PUB		19 261.64		-
7	PUB		18 570.82		24 550.17
8	PUB		16 867.92		27 410.38
9	PR		16.281.85		17 543.55
10	PUB		15 134.14		22 953.74
11	PR		15 127.10		17 958.10
12	PUB		15 015.18		19 521.74
13	PUB		14 345.91		26 261.25
14	PR		14 186.17		22 981.49
15	PR		13 670.75		17 302.02
16	PUB		13 519.34		14 344.46
17	PR		13 352.32		17 168.65
18	PUB		12 866.01		16 732.98
19	PUB		12 002.78		17 440.55
20	PUB		11 944.63		43 099.17
21	PUB		11 175.00		18 625.00
22	PUB		8 100.18		13 545.45
1 Clerical workers were chosen since most replies concerned this occupational level.   2 Agreement numbers are arbitrarily assigned by PSPRU to preserve anonymity. Source: PSI/PSPRU survey.

Table 3.6. Pay rates in the water industry, clerical workers,¹ Western Europe, 1994
(converted to ecus at 1994 rates, ranked by minimum rate)

Agreement No.2	PUB(lic) or PR(ivate)		Minimum annual basic rate (ecu)		Maximum annual basic rate (ecu)
1	PR		15 196.83		21 895.83
2	PR		14 625.77		36 564.42
3	PUB		13 968.75		27 006.25
4	PR		12 459.52		31 185.46
5	PUB		12 258.73		16 053.41
6	PR		12 066.26		-
7	PR		11 895.97		11 895.97
8	PUB		11 452.07		20 071.90
9	PR		10 833.74		14 657.27
10	PUB		10.430.00		12 775.55
11	PUB		8 745.34		14 549.13
12	PR		8 395.67		13 226.15
13	PR		8 395.67		39 631.60
14	PUB		8 324.77		11 807.05
15	PUB		1 834.91		2 105.31
1 Clerical workers were chosen as most replies concerned this occupational level.   2 Agreement numbers are arbitrarily assigned by PSPRU to preserve anonymity. Source: PSI/PSPRU survey 1995.

There are also major differences between minimum and maximum annual wages in both private and public enterprises, which in recent years have reached as much as 30,000 ecus in the latter.

As in the electricity sector, wages in the private sector are often higher than in the public sector, but this time it is in the private sector that the greatest difference appears (around 30,000 ecus) between the minimum and maximum levels in some enterprises.⁽³⁾

Finally, PSI studies on wages reveal a lack of marked difference between wages in the public and private sectors in 1995 in electricity and in 1994 for water, at least in Western Europe.

The wage situation in the Czech Republic confirms that there are only slight differences between enterprises which have links with multinational enterprises and those entirely owned by the State. Two of the five privatized enterprises have withdrawn from the employers' association and are thus no longer obliged to follow the national regulations governing wages and working conditions. However, wages in these enterprises are apparently comparable to those in enterprises subject to national regulation. Furthermore, managerial salaries in the water sector in the Czech Republic have increased more in privatized enterprises than in the public sector.⁽⁴⁾

In other regions, various forms of privatization and restructuring also seem to have had no clear impact on wages. Thus, according to the Utility Workers Union of America, privatization and restructuring have in general had a negative impact on wages and benefits, creating smaller, less powerful units at the bargaining table. But in some cases, unions have been able to negotiate long-term agreements which at least lock in good benefits and working conditions for the time being.

Under the pay regrading that followed corporatization of the Philippines' public electricity company Napocor, pay rates of employees who remained were brought closer into line with those in force in private utility firms. Pay levels for most grades were consistently increased: by 100 to 150 per cent for professional and technical workers, and by 80 to 90 per cent for entry-level professional and technical workers. For non-professionals, the new pay grades meant decreases in pay of around 50 per cent for some categories of employees, as well as increases of 40 per cent for other categories. Even after these changes, pay at Napocor was still 28-40 per cent lower than the rates for equivalent grades in privately owned companies.⁽⁵⁾

3.1.3. Wage disparities

Another possible consequence of privatization is the introduction of major differences in remuneration according to the job carried out in the enterprise. Although there is a lack of data for an analysis to be made of wage differences between manual workers, engineers and managerial staff, the example of the United Kingdom does highlight some aspects of this phenomenon.

Privatization in this country has resulted in an enormous increase in the salaries of the directors of the privatized water and electricity enterprises at a time of massive redundancies (see table 3.7). The sale of public enterprises produced substantial overnight profits for the shareholders of the privatized enterprises and enterprise directors awarded themselves enormous salary increases; at the same time, profits and the share of managerial salaries linked to enterprise performance have risen significantly. This phenomenon, which can also be found in the telecommunications sector,⁽⁶⁾ has caused considerable public controversy.

From the middle of the 1980s, in France the EDF and GDF public enterprises were granted managerial autonomy and their performances have been evaluated according to the profitability criteria applicable to private enterprises. According to the CFDT trade union, these restructurings have not fundamentally modified wages or staff benefits. But the structure of remuneration has become more flexible, permitting some wage differentials for the same work between regions. Furthermore, according to the same trade union, an increasing number of staff, particularly among the most skilled, work beyond their normal schedule without further remuneration.

On the whole, the privatizations and restructurings of the 1990s have modified wage levels, sometimes upwardly, and increased wage disparities within firms, particularly in the transition economies. But this impact is at the overall level less important than on employment. All the changes in structure and capital described in Chapter 1 have also had repercussions on the structure of wages and wage policy, although here again developments have been fairly slow outside the transition countries, with continuity being the order of the day, sometimes independently of the nature of the ownership of capital.

3.1.4. A new wage policy

The privatization and restructuring of the public water, gas and electricity distribution services have in almost all cases been the result of a search for greater efficiency and productivity, which in return require the establishment by the enterprise of its own wage policy.

Table 3.7. Directors' remuneration in privatized utilities in the United Kingdom

	No. of directors		Board pre-privatization (£)		Board 1996 (£)
British Telecom	13		489 000		3 487 000
British Gas	12		495 000		3 413 000
Regional water companies:
Anglian	11		345 000		814 000
Severn Trent	10		397 000		1 249 900
Southern	9		n/a		857 000
South West	11		106 000		947 000
Thames	9		103 000		1 051 000
Wessex	10		159 000		682 000
Yorkshire	11		214 000		874 000
Total	71		1 324 000		6 474 900
Regional electricity companies:
East Midlands	8		185 000		1 297 971
Eastern	11		422 000		1 620 971
London	10		228 000		1 055 000
Midlands	9		200 000		982 000
Northern	8		200 000		1 336 000
Norweb (United Utilities)	10		250 000		920 000
South Wales (Hyder)	10		476 000		1 005 000
Southern	8		185 000		1 100 000
Yorkshire	11		167 000		1 111 300
Total	85		2 313 000		10 427 271
National Power	14		646 000		3 088 807
Powergen	11		n/a		2 015 901
National Grid	9		n/a		1 688 000
Utilities total	215		5 267 000		30 594 879
Note: Remuneration includes salary, taxable benefits, performance bonuses and pension contributions. Not options. Source: UNISON, United Kingdom.

The objective of a wage policy for the social partners is to establish just methods of remuneration and wage levels which will attract and retain those employees who are necessary to the smooth running of enterprises. An effective wage policy must foster real motivation and support of enterprise objectives and encourage employees to improve their work methods, acquire new skills and contribute to the fruits of new technology.

In practice, remuneration and incentive systems take account of the fact that the contribution of each employee involves a number of aspects and encourage workers to make use of their personal aptitudes while at the same time directing their efforts towards the interests of the enterprise, and even the general interest.

Compensating good performance does not merely involve the payment of bonuses. Remuneration is not always in cash form and may consist of elements which help increase the purchasing power or standard of living of employees. Examples include the distribution of shares at preferential rates and the provision of services offered by the employing firm at reduced rates or even free of charge. Such non-cash benefits are likely to appear, diminish or disappear with privatization or restructuring. As in other sectors and without doubt to a greater extent, it would therefore be appropriate in the utilities to focus on overall real remuneration, even if this is more complex at the human resource management level, in particular when transparency measures are introduced which allow employees to compare their wage components or standard of living.

At the Italian electric company ENEL, between 2.5 and 3 per cent of the annual wage bill is spent on company benefits schemes; at its EDF French counterpart, the figure is 1 per cent of the company's turnover. The EDF Social Action Fund employs 3,200 permanent workers and health care centres are available free of charge to employees. The forthcoming opening up to competition of these sectors in Europe could result in a review of various social benefits. Because of a retirement scheme which is advantageous to employees (departure at the age of 60; 55 for employees performing arduous tasks; pension calculated on the basis of the last wage) and the scope of its social benefits schemes, the cost of labour at EDF is said to be 50 per cent higher than that of its potential competitors.

As in many other sectors, the clearest trend over the last ten years in the water, gas and electricity distribution services is towards the individualization of wages, a technique which is designed to create greater worker involvement in company objectives. An example of a performance-related pay scheme is given in the following box.
 

Box 3.1 Thames Water pay structure The British enterprise Thames Water has operated a performance-related pay scheme since 1992 for certain staff and since 1994 for manual and craft employees. Employees are allocated to one of five performance categories, after assessment. The range of salary increases for each performance category in 1997 was as follows. Performance category Guarantee (%) Range of increases (%) Total (%)   Unacceptable 0 0 0 Acceptable 1.6 0 1.6 Good 1.6 1.4 3.0 Very good 1.6 2.4 4.0 Excellent 1.6 3.4 5.0 Employees who have already reached 115 per cent of their scales (i.e. above "excellent") received a fully consolidated increase based upon their assessed performance. In addition, the company's profit-share scheme allows employees to be paid up to an additional 5 per cent of the pay budget against the achievement of operational and financial targets. Thames Water pay structure as of 1 July 1997 Grade Job examples Minimum (£ p.a.) Maximum (£ p.a.)   A Operator, clerical assistant, messenger 9 861 13 341 B Operator, sewage operator, mains and service layer,receptionist, meter clerk, laboratory assistant 11 341 15 343 C Technician 1, technician 1 (sewerage), operator (water supply), building maintenance technician, driver (large specialist vehicles) 13 042 17 644 D tech Technician 2 (mechanical), technician 2 (electrical) 14 021 18 969 D Sewerage inspector, network services technician, technician 3, technician 1 (working supervisor), personnel assistant, shift controller, administration officer 14 998 20 292 E Technician 4 (mechanical/electrical), technician 4 (control and automation), field supervisor (network services), technician 3 (working supervisor), personnel officer, analyst programmer, scientist 18 246 24 686 F Senior scientist, hydrogeologist, area personnel officer, systems analyst 20 982 28 388 G Senior systems analyst, operations manager, planning manager 24 130 32 646 Note: Employees on bands E to G are not eligible for overtime payments. Source: Information supplied by the Transport and General Workers Union (TGWU), United Kingdom.

An individualized wage generally comprises two elements: the basic wage, which is linked to an evaluation of jobs, and sometimes calculated with reference to the civil service index, and a variable wage, which acts as a reward for the achievement of objectives.

Employers use wage individualization in particular to ensure that employees periodically expose part of their remuneration to "risk" and because such factors as performance, productivity, customer satisfaction, reliability, security or increase in turnover are deemed to be valid criteria for determining wage increases.

In Colombia, employees in the utilities, whether private or semi-public, have the same status as individual workers. Therefore, their terms and conditions of employment are governed by the new Substantive Labour Code which allows pay to be linked to the utilities' performance and earnings in accordance with the company's incentive plan.⁽⁷⁾

Another significant consequence of privatization in the utilities sector is that it allows a larger number of employees to become shareholders in their company. Although they are shareholders without any real power of control, they almost always enjoy advantageous financial conditions (free shares, reductions or payment by instalments). This method of financial participation not only strengthens employee loyalty at the enterprise but allows some measure of social harmony to be achieved at the workplace. Thus, acceptance of electricity privatization in Argentina through the sale of assets was eased by granting employees a 10 per cent share in the privatized companies. In addition, incentive bonuses linked to the company's performance and profits are paid, for example, in the electricity company SEGBA. Similarly, in Brazil, the Electric Power Workers' Union has set up an investment club through which workers and retirees will be able to buy up to 10 per cent of shares in the privatized CEEE, the electricity distributor in the State of Rio Grande do Sul. In Chile, the privatization process included the sale of shares to workers on preferential terms, with the larger companies offering shareholdings totalling 6 to 10 per cent of equity.⁽⁸⁾

Furthermore, as in many other sectors of the economy, the water, gas and electricity distribution sectors are undergoing a change in the structure of wages: the variable part of the wage is increasing while the fixed element is diminishing. Mutatis mutandis, this same phenomenon can be seen on the labour market, where the increase in wage flexibility is tending to reinforce the division of workers into two categories. On the one hand, elaborate remuneration systems are reserved for skilled employees enjoying a certain guarantee of employment (fixed employment, flexible wage), and on the other, more rudimentary mechanisms are used for poorly skilled workers, who are subject to the flexibility needs, in time and space, of the enterprise (fixed or relatively fixed wage, flexible job).

Thus, although there has been no brutal adjustment through wages during or after privatization or restructuring, wages are constantly undergoing gradual changes, with remuneration systems becoming more complex and thus sometimes less transparent.

The Tripartite Declaration of Principles concerning Multinational Enterprises and Social Policies, adopted by the ILO in 1977, states that "wages, benefits and conditions of work offered by multinational enterprises should not be less favourable to the workers than those offered by comparable employers in the country concerned".⁽⁹⁾ The foreign investments of such enterprises, however, often result in the expatriation of managerial staff and technicians from headquarters, with high remuneration, although most staff are recruited locally, since the construction or maintenance and distribution network management industries cannot by their nature be delocalized. The application of the Tripartite Declaration would seem to raise a few difficulties in these sectors in respect of which no request for an interpretation of the Declaration has been made to the ILO.

The impact of the various forms of privatization and restructuring on human resources is not limited to employment and wages. Working conditions are in all cases a major factor in the smooth running of an enterprise and the quality of life of workers, particularly when the latter are required to make efforts in terms of adaptation and productivity, which is the case during periods of restructuring or privatization. These concern in particular working hours and the organization of work, as well as occupational safety and health.

3.2. Working time and the organization of work

The Joint Meeting of 1987 emphasized in its conclusions that "the special character of work in water, gas and electricity services and the need to maintain their continuity and quality as well as safety standards impose particular constraints on working time and the organization of work schedules, due account being taken of the specific requirements of each of the services".⁽¹⁰⁾ These particular constraints and specific requirements are generally compounded by the fact of privatization and restructuring, which play an accelerating role within the continuous process of enterprise adaptation. The constraints tend to affect an increasing number of enterprises following the disappearance or dismantling of public monopolies and the definition of a new regulatory framework for the organization of work and working time of employees in the public or private enterprises concerned.

As regards overtime, the 1987 Meeting concluded: "Measures should be taken to combat systematic overtime, since it may, among other things, lead to physical or mental stress. Overtime should only be worked in cases of real necessity. It should not be a substitute for the recruitment of new workers. Where overtime and unsocial hours cannot be avoided, appropriate compensation, particularly in the form of increased remuneration, special monetary allowances and/or time off, should be given, in keeping with the laws and practices of particular countries."⁽¹¹⁾ These recommendations are still highly relevant in the present context of liberalization, various forms of public-private management partnerships, flexibility in the organization of work and privatization in the distribution services.

The disappearance or reorganization of local or national distribution monopolies imply the coexistence of public collective bargaining methods or even unilateral action, and private consultation techniques or the conclusion of branch or enterprise-level agreements. This complexity and diversification in the forms of social dialogue do not bode well for the harmonization of work schedules and working conditions in general, in the absence of agreements or legal provisions applying to all the employees of a sector. It should be remembered that distribution services are still often provided, particularly in the gas and electricity sectors, by vertically integrated enterprises, and that working conditions considered appropriate in one production unit may prove to be unsuitable in a distribution unit. The mergers which have occurred in the electricity sector, or the renewal of franchises and other forms of public service management transfers in the water sector, are likely to make even more complex the problems of the organization of work and working conditions for the enterprises and local authorities concerned. It is true that too often employment and working conditions are used as adjustment mechanisms, at least on a temporary basis, and are sometimes the main shock absorber of structural change, when financial goals become paramount in enterprise activity.

Examples of recent restructuring in two major public electricity distribution companies and its impact on the organization of work are those of Hydroquébec and Electricité de France (see box 3.2).
 

Box 3.2 Change in the organization of work and working conditions: EDF and Hydroquébec From the industrial model to the post-industrial model These two public enterprises, which operate within a very similar social and economic environment, have established comparable strategies. In overall terms the modernization process which they are undergoing can be described as a move from an industrial model to a post-industrial model. Although reference is still sometimes made to post-Taylorism in the case of industry, the term "post-bureaucracy" is often preferred in discussions about services. In the case of these two electricity enterprises, it is possible to speak of a post-bureaucratic model, because the commercial component has become clearly predominant, to the detriment of the public service concept, whose logic is based on the Weberian model of bureaucracy. This conflict between the two organizational models has meant that the move from the one to the other involves a radical change since it goes beyond a simple and gradual transformation of organization, and generates a perceived sense of discontinuity. Such a change cannot be achieved without fundamentally questioning the ways in which the organization is perceived by its members and the system of values governing collective relationships. The typical cultural differences between the two organizational models can be summarized as follows: Industrial model Post-industrial model Weak competition Strong competition Respect of regulations, programmes Initiative, adaptation, pro-active attitude Esprit de corps Enterprise mentality Subordination, direct control Autonomy, a posteriori control Emphasis on means and product Focus on goals and market Impersonal collective responsibility Individual responsibility Entitlement mentality Participant mentality Everything is important Management of priorities Staff seen as a cost Staff seen as a resource In these two electricity enterprises the reorganization resulted in difficulties for the staff, including redundancies (and the search for new jobs) and transfers (resulting in a change of residence, and acceptance of inadequate transfer benefits). Geographical mobility is spontaneously weak in the two enterprises for non-managerial staff, and its imposition during a period of structural change is not well accepted. Occupational mobility is often preferred, and is more in keeping with the tradition of the grade-based logic according to which access to a post can be gained through seniority and without account being taken of a worker's abilities. The general feeling is that the work burden has increased: staff reductions have given rise to problems of replacement in the event of absences and productivity requirements have led to an intensification of everyone's work. This has resulted in dysfunctioning and errors related to the reduction in staff, particularly during peak periods or holidays. Managerial staff under pressure In the two enterprises, strong pressure is being brought to bear on managerial staff, resulting from the performance demands placed on leaders and the teams which they direct. This virtually physical pressure is compounded by the psychological pressure of the crucial role which they have to play in the transformation of the system, despite the fact that in both companies, they have participated only to a very small extent in the strategic choices and decision-making processes. Furthermore, the role of managerial staff is becoming less hierarchical and increasingly one of providing support and motivation to more autonomous teams. The managerial malaise can thus be explained by the role which executive staff are called upon to play in ensuring the transition from the industrial enterprise to the post-industrial enterprise, in which they are required to be key actors in the process of change. Source: J.Y. Ménard and J. Barreau: Stratégies de modernisation et réactions du personnel, Editions L'Harmattan, Paris, 1997, pp. 112-115 and p. 241.

According to the Utility Workers Union of America, one benefit of restructuring appears to be the less immediate management supervision of every detail of the workday because of the downsizing of management which, coupled with cross-training, has given some workers more control and interest in their work, although they have become less sure about whether they will have any job at all.

In many instances of capital privatization or contracting out of utilities in the Asia-Pacific region, the potential impact on employment and working conditions has been mitigated by undertakings and guarantees given by governments, or by agreements signed between trade unions and governments and/or the new employing body. At their most general, such agreements or undertakings have covered all privatizations implemented in a country. Thus, the general agreement signed in 1991 in Pakistan between the Government and the All Pakistan State Enterprises Workers' Action Committee to protect employees in privatized industries stipulated that there would be no lay-offs and no deterioration in wages and other working conditions during the first year of privatization. A severance package was put in place for employees choosing not to work for the private company.

Labour market deregulation has been an integral part of a radical but entirely internally generated structural adjustment programme in New Zealand. In the public utilities, employment levels and working conditions have been altered by the combined and equally significant impact of labour marked deregulation and privatization. The initial fundamental change in working conditions in the public sector occurred under the State Services Conditions of Employment Act, 1988, which introduced private sector practices. In 1991, the Employment Contracts Act significantly changed the fabric of both public and private sector industrial relations. Its focus was on individual contracts and involved a campaign to de-unionize the workforce. The Government applied this legislation stringently to its own workforce. In this case, legislative change concurrent with privatization meant that the employment, wages and other working conditions of employees would not have been protected if such workers had remained in the public sector.⁽¹²⁾

The following table 3.8 indicates, for selected countries classified according to available data, the weekly hours of work for all employees in the electricity, gas and water sector.

This table reveals a fairly solid stability in the weekly hours of work in most countries in the period under review (1990-96). In Argentina, Australia, Colombia, the Republic of Korea, New Zealand and Thailand, the number of hours has however tended to fluctuate upwards. In Argentina, for example, after privatization of the SEGBA electricity enterprise serving the greater Buenos Aires area, the working day increased from six to eight hours. A reduction in the weekly hours of work is, on the other hand, more marked in Bolivia, Japan and Turkey among the countries surveyed.

The link between restructuring or privatization and working time is particularly difficult to establish. As in the case of wages, no clear conclusion can be drawn given the wide variety of enterprises present in the three subsectors and the different kinds of status of those enterprises and their workers. Restructuring always has an effect on the organization of work and working time because of the introduction of new methods such as teamwork, job cutbacks or the rejuvenation of the workforce, the merging or splitting up of units, flexibility for the purposes of service continuity, etc. The various forms of restructuring and privatization are, like the length and organization of working time itself, long and complex processes in this sector as in many others. Working time does not thus depend only on power relationships or negotiations between the social partners, but on the extent of the productivity gains achieved or desired, the quality and scope of the infrastructure concerned, customer requirements, applicable national legislation or technological, social or cultural factors.

Table 3.8. Weekly hours of work of employees in the electricity, gas and water sector
(selected countries)

Countries		1990	1991	1992	1993	1994	1995	1996
Argentina		39.4	39.9	39.7	40.9	46.5	44.0	-
Bolivia		46.6	-	-	40.0	40.2	40.6	40.0
Colombia		-	46.9	48.8	46.0	49.2	40.3	48.1
Costa Rica		47.5	45.7	48.4	47.6	47.5	47.4	48.2
Chile		-	-	45.9	45.7	47.7	46.0	46.3
United States		41.6	41.6	41.9	42.3	42.4	42.4	42.2
	(wage earners)
India		47.0	-	-	47.1	47.4	-	-
Japan		42.3	42.9	41.8	40.7	41.0	41.6	40.4
Korea, Republic of		47.8	48.6	49.1	48.0	47.7	48.9	49.7
Philippines		46.0	45.3	44.0	45.0	44.5	44.9	45.0
Thailand		45.0	39.3	44.5	41.5	44.8	48.5	-
Norway		36.8	36.1	36.5	36.8	36.6	36.9	36.8
Turkey		46.5	44.7	42.7	35.3	41.4	44.6	42.8
United Kingdom		38.4	38.4	38.2	38.1	38.3	-	-
Australia		35.8	35.6	34.9	35.9	36.8	37.2	-
New Zealand		40.7	40.3	41.1	40.9	41.2	41.2	41.5
Source: ILO Yearbook of Labour Statistics, 1997.

The PSI survey carried out in 1995 also examined working hours in water and electricity sectors. The number of hours worked per year in Western Europe was less in nearly all countries than in Central and Eastern Europe, especially for white-collar workers. Table 3.9 shows the range of different working hours and holidays in the electricity industry in Western Europe, ranked in order of annual hours worked with basic holiday entitlement. The figures suggest that the private sector agreements have slightly shorter working hours, but there is no consistent pattern. The shortest working week was in a public sector agreement, and the shortest annual hours, with maximum holidays, were also in a public sector industry.

Table 3.10 summarizes the range of working hours in the water industry in agreements in Western Europe, ranked in order of annual hours worked with basic holiday entitlement. The figures indicate that private sector agreements tend to have shorter working hours, but here again, there is no consistent pattern. For example, both the shortest working week and the shortest working year appear in a public sector agreement. The same is true within countries, where the sector is divided between private and public employers. In both Spain and the United Kingdom the working hours of public sector workers compare favourably with those of private operators.

There is no trend towards longer working hours in the private sector than in the public sector since the weekly hours of work vary between 35.6 hours and 40 hours in the former and between 36 and 41 in the latter.

In the electricity sector the number of working hours per year seems to be lower in Western Europe than in Central and Eastern Europe, in particular for white-collar workers.

Collective agreements in the private sector often refer a little less to hours of work than in the public sector, although the shortest working week is to be found in the public sector, as well as the lowest number of working hours per year. Furthermore, the working week varies between 36.25 hours and 40 hours in this sector and between 37 and 40 hours in the private sector.

Table 3.9. Hours and holidays in the electricity industry, clerical workers,¹ Western Europe, 1995
(ranked by annual hours worked with basic holiday entitlement)

Agr. No.2	PUB(lic) or PR(ivate)	Weekly hours	Public annual holidays	Basic annual holidays	Maximum annual holidays	Annual hours (basic holidays)	Annual hours (maximum holidays)
1	PR	38.00	11	33	38	1 649.20	1 649.20
2	PUB	36.25	11	19	26	1 674.75	1 624.00
3	PR	38.00	10	30	31	1 679.60	1 672.00
4	PR	37.00	8	26	31	1 679.80	1 642.80
5	PR	37.00	8	25	33	1 687.20	1 628.00
6	PR	37.00	8	25	25	1 687.20	1 687.20
7	PUB	38.00	11	27	27	1 694.80	1 694.80
8	PUB	38.25	9	30	45	1 698.30	1 583.55
9	PR	37.00	8	22	25	1 709.40	1 687.20
10	PUB	38.00	10	24	24	1 725.20	1 725.20
11	PUB	37.50	9	21	26	1 732.50	1 695.00
12	PUB	40.00	12	25	30	1 792.00	1 752.00
13	PUB	40.00	10	25	32	1 808.00	1 752.00
14	PR	41.00	10	20	30	1 894.20	1 812.20
1 Clerical workers were chosen as most replies concerned this occupational level.   2 Agreement numbers are arbitrarily assigned by the PSPRU to preserve anonymity. Source: PSI/PSPRU survey, 1995.

In the United Kingdom, in the now privatized electricity sector, the Engineers and Managers Association (EMA) reported that the major changes in work organization and the drastic reduction in staff with no reduction in output and demand for ancillary services have led to a major intensification in the pace and pressure of work and, for some employees at least, a significant increase in the hours actually worked. In the French EDF and GDF public enterprises, a framework agreement on the reduction of working time was signed in January 1997 which made access to the chosen working time a right available to all workers. The agreement makes provision for the reduction of working time of staff who agree to work at midday, in the evening or on Saturdays, depending on customer needs. Some units may see a collective reduction in working time, with the latter varying between 32 and 35 hours depending on local bargaining. Approximately 19,000 persons worked reduced hours in 1998. The legal annulment (in September 1998) of the 1997 agreement will require the holding of new negotiations, with account being taken of the new Act on 35 hours.⁽¹³⁾

The reduction of working time may be a source of job creation and at the same time help improve the service provided to users as a result of longer opening hours. The local public Gaz de Bordeaux company introduced a four-day week from 1996. The variable day thus released enables all the staff to benefit regularly from a three-day weekend. This arrangement has allowed jobs to be created and teamwork to be organized based on a sharing of knowledge and skills.⁽¹⁴⁾

Table 3.10. Hours and holidays in the water industry, clerical workers,¹ Western Europe, 1994
(ranked by annual hours worked with basic holiday entitlement)

Agr. No.2	PUB(lic) or PR(ivate)	Weekly hours	Public holidays	Basic holidays	Maximum holidays	Annual hours (basic holidays)	Annual hours (maximum holidays)
1	PUB	35.64	10	25	25	1 610.93	1 610.93
2	PR	36.00	11	25	25	1 620.00	1 620.00
3	PR	37.00	11	29	32	1 635.40	1 613.20
4	PR	36.90	10	29	29	1 638.36	1 638.36
5	PUB	38.00	10	30	30	1 679.60	1 679.60
6	PUB	37.00	12	22	30	1 679.80	1 620.60
7	PR	37.00	8	24	27	1 694.60	1 672.40
8	PR	37.00	9	23	27	1 694.60	1 665.00
9	PUB	37.00	7	25	25	1 694.60	1 694.60
10	PUB	37.00	10	21	25	1 702.00	1 672.40
11	PR	37.00	8	22	27	1 709.40	1 672.40
12	PR	37.50	8	24	28	1 717.50	1 687.50
13	PUB	37.50	10	21	26	1 725.00	1 687.50
14	PUB	38.00	9	24	45	1 732.80	1 573.20
15	PUB	38.00	10	23	23	1 732.80	1 732.80
16	PUB	38.00	10	21	30	1 748.00	1 679.60
17	PUB	38.00	6	25	31	1 748.00	1 702.40
18	PR	39.00	11	25	25	1 755.00	1 755.00
19	PUB	40.00	11	25	32	1 800.00	1 744.00
20	PR	41.00	10	26	26	1 845.00	1 845.00
21	PUB	40.00	15	15	31	1 848.00	1 720.00
1 Clerical workers were chosen as most replies concerned this occupational level.   2 Agreement numbers are arbitrarily assigned by the PSPRU to preserve anonymity. Source: PSI/PSPRU survey.

3.3. Occupational safety and health

In the event of even partial privatization, there is a risk of a deterioration of working conditions which is now inherent in any privatization or even restructuring process because of the priority generally given to financial performance. On the other hand, a private investor may introduce into the enterprise new working conditions or forms of remuneration which are compatible with good financial results. In situations of competition, however, it is workers who often bear the brunt of market pressure by having to work more.

The intensification of competition between firms and the lack of interest shown in human resources by some enterprises may lead to a deterioration in working conditions, including safety and health, even if employees assigned to distribution tasks are less exposed than those working in production units. However, this distinction is often artificial because of the vertical integration of some enterprises and the possibility of assigning staff to different kinds of posts.

In its 1987 conclusions, the Joint Meeting on Employment and Conditions of Work in Water, Gas and Electricity Supply Services emphasized that "occupational safety and health should not be regarded so much as a cost to the operation, but rather as an investment to protect the workers".⁽¹⁵⁾ This conclusion becomes particularly relevant in the context of restructuring, liberalization and privatization, which create a downward pressure on the costs of operators striving to win markets in the supply of water, gas and electricity throughout the world, or who wish to make an impression on the financial markets.

It is, however, difficult to measure the deterioration or improvement of safety. Reference can be made to statistics on the number of occupational accidents to gauge trends since privatization or restructuring. For example, in the utilities sector in all the countries of Europe over the last five years, there has been a drop in the number of accidents at work in general, and fatal accidents in particular. However, these statistics do not indicate whether the reduction is due to the efforts made by new enterprises or restructured enterprises or to the introduction of new safer technology. Such identification would require data on the new working conditions introduced by the new owner or new operator in respect of each workplace. Health and safety in the water services industry is an important, though often underrated issue. In addition to the classical hazards associated with most large industrial plants, workers also face dangers of occupational illness caused by working in proximity to unidentified pollutants, drowning, underground work, work in confined spaces, risk of explosion and working with water under high pressures.⁽¹⁶⁾

According to the Utility Workers Union of America, to the extent that the work which used to be done by union members is now done by companies which are non-union, good health care insurance at non-union companies is often a rarity, and on-the-job health and safety are sometimes compromised since United States health and safety laws often remain unenforced without the presence of a union. There has also been some weakening of federal oversight of nuclear power plants which may bode ill for worker and public health and safety at those facilities as well.

According to Brazilian trade unions, in the last two years, the reduction of the workforce in the electricity sector has resulted in increased stress being placed on remaining employees and a rise in occupational accidents, which included eight fatalities in 1998 in the operational area of Electropaulo (São Paulo).⁽¹⁷⁾

In the United Kingdom, the electricity privatization process of the 1990s has, according to the EMA trade union, resulted in a maintenance of the standards of safety as regards the public, although the trade unions are concerned that there has been a significant reduction in the safety of employees. Staff reductions have led to a loss of necessary skills and increased fatigue among the remaining staff, with inevitable consequences for safety. The overall number of accidents fell significantly over the six years, 1991-92 to 1996-97, reflecting the sharp reduction in the number of people employed in the industry, and the incidence per 100 workers also declined substantially, although the proportion of such accidents resulting in serious injury increased over the period.

According to the trade union of public service employees of Latvia (LAKRS), privatization of Latvijas Gaze has led to an improvement in work organization and safety at the workplace following the introduction of modern individual protective equipment, measuring instruments, and the presence of a doctor or doctor's assistant and the provision of consulting rooms in some workplaces. However, any other social guarantees and benefits applying to workers in Ruhrgas (a German company which holds 16.25 per cent of Latvijas Gaze's shares) are non-existent or considerably different in Latvia.

In Azerbaijan there has been no privatization in the public utilities, which still remain under public control. But marketing techniques are used in production activities for the fixing of prices and tariffs for water, gas and electricity. A reorganization of these services, where the obsolescence of the material-technical base has led to a number of accidents at the workplace, is now under way.

Although not enough time has yet elapsed to determine the precise impact of the various structural reforms, it would seem that the privatization and restructuring processes in themselves do not lead to a deterioration of working conditions. Everything would seem to depend on the conditions in which the economic and social reforms are introduced, the labour relations in the countries in question and the practices of foreign investors or participants in the privatizations, mergers and acquisitions and other kinds of restructuring processes. Agreements on health and safety in the context of deregulation can be important for maintaining standards as for example the 1996 agreement between the European Federation of Public Service Unions and Eurelectric.

1.  ILO: Report of the Joint Meeting on Employment and Conditions of Work in Water, Gas and Electricity Supply Services, Geneva, 1987, p. 29.

2.  J.R. Suesser: "L'emploi industriel en Russie dans les premières années de la transition (1991-96), Le courrier des pays de l'est (La documentation française, Paris), No. 427, Feb. 1998, p. 17.

3.  L. de Luca (ed.): Labour and social dimensions of privatization and restructuring (public utilities: water, gas, electricity), ILO, Geneva, 1998, p. 139.

4.  L. de Luca (ed.), op. cit., p. 140.

5.  ibid., p. 68.

6.  ILO: Structural and regulatory changes and globalization in postal and telecommunications services: The human resources dimension, Geneva, 1998, pp. 78-80.

7.  L. de Luca (ed.), op. cit., p. 190.

8.  ibid., pp. 194 and 195.

9.  Para. 33, p. 6.

10.  Report of the Joint Meeting on Employment and Conditions of Work in Water, Gas and Electricity Supply Services, op. cit., para. 22, p. 28.

11.  ibid., para. 26, p. 29.

12.  L. de Luca (ed.), op. cit., p. 68.

13.  Les Echos (Paris), 24 Sep. 1998, p. 10.

14.  Le Monde (Paris), 7 Oct. 1997.

15.  Report of the Joint Meeting, op. cit., para. 38, p. 31.

16.  Water PSI Programme, 1993/1.

17.  Information provided by IEPE.

International Labour Organization (ILO): Contact us | Site map |

Copyright and Permissions 1996-2009 International Labour Organization (ILO) - Disclaimer