The impact of decentralization and privatization on municipal services

GENEVA (ILO News) - Despite years of downsizing and calls for privatization, the public sector remains the major formal employer worldwide providing jobs for 435 million people in the year 2000, according to latest International Labour Office (ILO) estimates. This compares with an estimated 155 million people employed by local government units.

Press release | 12 October 2001

GENEVA (ILO News) - Despite years of downsizing and calls for privatization, the public sector remains the major formal employer worldwide providing jobs for 435 million people in the year 2000, according to latest International Labour Office (ILO) estimates. This compares with an estimated 155 million people employed by local government units.

The fact that municipal services also are being provided by private contractors does not necessarily reduce the role and responsibility of the state, according to an ILO report * released in Geneva today ahead of a tripartite meeting of experts, 15-19 October 2001, to review municipal services in the sectors of education, health services, transport and utilities.

The report says there is a limited interest or capacity in the private sector to fully provide certain services - or there is reluctance of local governments to completely hand over services to private providers. Thus, public-private partnership has become a common feature in municipal services. Competition in the delivery of municipal services is being introduced mainly through contracting out to the private sector or through tender within the public service.

"Even though competition seems to increase efficiency, it may alter labour relations and reduce commitment of the workforce", the report says. Although working conditions after decentralization and privatization do not always show clear trends, "gains in cost efficiency and flexibility via privatization and decentralization may frequently be attributed to declining working conditions such as less time off and higher workload or work intensity".

"There is a positive correlation between decent work, efficiency and the quality of services", according to ILO expert Gabrielle Ullrich from the Sectoral Activities Department.

The ILO analysis insists that "decentralization may result in the local authorities having insufficient financial resources to ensure conditions of decent work, including pay. On the other hand, devolution to local governments may introduce more flexibility and improve efficiency, but central government is often reluctant to give up control over the total wage bill for the public service.

Public employment at local level, in most countries, has not suffered to the same extent as the central level. The total decline of public sector employment since 1998 is estimated at 15 million worldwide. Education and health services, however, now find it difficult to expand their employment at local government level because of human resource shortages rather than public service downsizing.

The meeting, with some participation of private employers, will bring together a total of 50 participants: 18 government representatives, 7 employers' and 25 workers' representatives. The meeting is open to the general public.

* The impact of decentralization and privatization on municipal services, Report for discussion at the Joint Meeting on the Impact of Decentralization and Privatization on Municipal Services, International Labour Office, Geneva, 2001. For information on the Joint Meeting, please contact: Gabrielle Ullrich, Sectoral Activities Department, phone: +4122/799-6819 (ullrich@ilo.org).