Abstract
This article analyses the impact of new public management on employment relations in public healthcare in Hungary and Slovakia. We argue that hospital corporatization – a process which changed the ownership structure and management of public hospitals without privatization – created an opportunity for institutional change in collective bargaining. However, the interaction between hospital owners and managements, the state and trade unions accounts for the absence of major institutional change. Instead, corporatization helped maintain bargaining coordination in Slovakia and bargaining fragmentation in Hungary.
Introduction
Public service management has been central to political debates across Europe during recent decades. Increasing demand for public services coupled with the tightening of government budgets provoked a series of reforms that further intensified with the 2008 crisis. Some reforms involved privatization, while others achieved more efficient service provision without involving private capital. The second type is often described as new public management (NPM; Bach and Kessler, 2007; Barzelay, 2001); this includes a broad variety of organizational innovations that bring market mechanisms into public services without direct privatization.
Healthcare is one of the sectors most exposed to such restructuring (Grimshaw et al., 2007: 609). As healthcare is labour intensive, wages can account for 60–85 percent of total operating expenses (Schwartz, 2001: 28). NPM reforms aim at more individualistic and flexible human resource management through performance-related pay, short-term contracts, managerial autonomy in pay setting and less regulated hiring and firing (Hannigan, 1998: 308). In a bid to create the institutional background for these changes, NPM also entails collective bargaining decentralization (Bach, 1998).
However, there is little research on how reform goals translate into actual outcomes in employment relations in particular national settings and affect the practices of managers, trade unions and employees. While the strategic interaction between employers, employees and the state plays a central role in how NPM blueprints are executed and which outcomes they produce, actor-centred comparative approaches of their impact on employment relations are scarce. In addition, the limited empirical evidence (Brandt and Schulten, 2007; Duncan, 2001; Galetto et al., 2014; Grimshaw et al., 2007; Schulten et al., 2008) focuses on older European Union (EU) member states.
This article attempts to fill these gaps by examining the effects of such healthcare reforms on employment relations in Hungary and Slovakia. Both countries undertook wide-ranging reforms focusing on hospital corporatization, but differed in the mode of implementation and effects on working conditions. Corporatization is a legal-organizational change which turns public hospitals from public budgetary institutions into corporations with public ownership (Brandt and Schulten, 2007: 113; Stark, 1996: 1001). In some cases, ownership and management remained with central government, while in others they were devolved to municipalities, territorial administrative units or public non-profit companies. Along NPM principles, corporatization allows a fundamental transformation of employment relations. Hospitals are expected to operate according to market rules, and employees lose their protected public employee status as their employment relations come to be governed by the general Labour Code. Thus, corporatization grants public sector employers an opportunity to break away from established bargaining structures, wage-setting mechanisms and employment conditions (Galetto et al., 2014).
We develop an actor-centred framework to analyse how this opportunity to reform bargaining institutions and shape bargaining outcomes in public healthcare was utilized. Bargaining institutions encompass the processes and structures through which employment issues are governed: the levels, salience, coordination, regularity and coverage of collective bargaining, and the enforcement of collective agreements. Bargaining outcomes involve the collective agreements concluded, their wage provisions, non-wage benefits, working time and other terms of employment.
We argue that corporatization triggered a dynamic process in which a top-down, policy-driven organizational change interacted with responses of healthcare actors. In this process, they redefined their power resources and sought new accountability standards in their mutual interactions (Stark, 1996). Despite the opportunity for institutional change in established bargaining institutions and outcomes, including bargaining decentralization and divergence in wages and working conditions, the actors’ interests and interactions prevented major institutional change. In Slovakia, coordinated bargaining persisted in a two-tier bargaining system, which in turn facilitated dualization in working conditions between corporatized and non-corporatized hospitals. Employees in corporatized hospitals had to bear the brunt of wage moderation, while non-corporatized hospitals were more open to bargain concessions to the benefit of hospital workers. In Hungary, employers and trade unions did not utilize corporatization as an opportunity to overcome bargaining fragmentation across hospitals, and working conditions deteriorated both in corporatized and non-corporatized hospitals as a result of government austerity.
In the remainder of this article, we present our actor-centred framework, summarize our research methods and present empirical evidence. We conclude with a generalization of our findings in a broader comparative perspective.
Bringing the actors in: employers, trade unions and corporatization
Corporatization is an organizational change whereby hospitals in public ownership change from government institutions into public (for-profit or non-profit) corporations. Direct hierarchical control of hospital management and financing is replaced by a more relaxed, arm’s length oversight and indirect public funding (Brandt and Schulten, 2007: 113). This is in line with the NPM agenda of ‘deliberate changes to the structures and processes of public sector organizations with the objective of getting them … to run better’ (Pollitt and Bouckaert, 2004: 8). However, it remains unclear how government-initiated ‘deliberate changes’ interact with the behaviour of healthcare actors. Although corporatization creates uncertainty for new owners, managers, employees and their trade unions regarding hospital functioning and employment relations, the only clear actor-oriented proposition in NPM literature is that reforms will be more effective if coupled with management change. For example, in the 1980s in the United Kingdom, responsibilities were handed over to ‘general managers’ (Bolton, 2004: 19), new managers who were willing to change employment relations. How NPM treats employer preferences is, however, contradictory: granting managers more autonomy in dealing with their workforce, but in some cases also prescribing very specific measures such as performance-related pay, short-term contracts and relaxation of hiring and firing rules (Hannigan, 1998: 308). In sum, corporatization is an opportunity for institutional change in employment relations, but the literature neglects how such institutional change actually occurs.
The standard literature on NPM focuses on the strong role of the government in the reform process. Public sector managers are often mentioned, but they feature as instruments to carry out government policies rather than as independent agents. Employee representatives are entirely missing from the picture. To address these shortcomings, we add a broader actor-centred perspective which takes account of lower-level actors’ rational interests and interactions (Scharpf, 1997). During healthcare reforms, the formation of interests is influenced by actors’ responses to new uncertainty through diversifying their assets and power resources, seeking adaptability and revising accountability standards. Actors thus ‘redeploy available resources in response to their immediate practical dilemmas’ (Stark, 1996: 993–995). Recombination of assets, power resources and interests helps hospital managements, owners, the state, trade unions and employees to adapt to the environment after the established hierarchies, management structures and power relations have been blurred. Adaptation happens at the price of decreasing accountability, or compliance with certain general standards of operation (Stark, 1996).
How do these theoretical insights translate into expected responses and strategic interactions of the actors? As employers, corporatized hospitals face increasing budgetary constraints. We expect hospitals to seek to maintain access to public finances through political ties, while attempting to run the hospitals more efficiently. In turn, the established relations with employees and trade unions can be endangered, because employers will prioritize efficiency and use the opportunity to break away from established bargaining structures. We expect this response from employers especially if corporatization also brings management change. If corporatization would not yield a change in hospital owners or managers, traditional institutional links with employees (including bargaining coordination and public sector privileges) might survive. In sum, employer commitment to bargaining coordination is likely to suffer under corporatization.
Trade unions will also seek adaptation to uncertainty. In the wake of corporatization, they have to choose between a defensive strategy (rejecting corporatization and fighting for its reversal) and an adaptive one (adopting policies suitable for the new environment; Schulten et al., 2008: 305–306). In theory, these strategies can be pursued simultaneously, but given the limited capacities of trade unions in the region, they have to decide which activity to focus on. Assuming that corporatization is a reversible process, and as long as there are hospitals that remain under direct government control, unions are expected to prioritize the maintenance of old, public sector accountability standards (such as centralized wage bargaining and public sector pay scales), rather than working towards new flexible standards in corporatized hospitals. In other words, we expect trade unions to adopt a defensive strategy, using their limited resources to stop the corporatization process and to defend the existing workers’ privileges in not-yet-corporatized hospitals (Bernaciak et al., 2011). This defensive stance will be stronger if corporatization overlaps with initial cleavages within the hospital system according to establishment size, geographical location or differences in skill levels. For example, larger university hospitals with a higher share of skilled medical professionals have more bargaining power which may enable them to avoid corporatization, or negotiate more concessions after it occurs. Powerful groups which can threaten to quit their jobs or emigrate may be able to sustain bargaining coordination and prevent deterioration in working conditions (Kaminska and Kahancová, 2011). Links between strong political parties and weak trade unions are salient features of Eastern European industrial relations (Avdagic, 2005), and these might also push trade unions to adopt a defensive strategy, depending on political allies (mostly opposition parties) in their struggle against corporatization.
The employers’ push for bargaining decentralization, coupled with unions’ defensive strategies may yield dualization in bargaining processes and outcomes (Palier and Thelen, 2010), whereby some employees (insiders) retaining coordinated bargaining coverage and stable working conditions, while outsiders excluded from these deals face less stable employment conditions and wages (Grimshaw et al., 2007). In our context, dualization occurs between employees in corporatized and non-corporatized hospitals: the former lost their public employee status, and therefore, their wages and working conditions are deteriorating compared to the conditions of the latter.
Finally, the state is an important actor that drives and facilitates corporatization in its own interest. It aims to avoid management and financial responsibility for corporatized hospitals, but seeks to maintain political control to ensure healthcare provision for the citizens. In other words, it delegates economic but not political control. Apart from its general responsibility for healthcare provision to citizens (and voters), possible rent-seeking behaviour of leading politicians in the (often non-transparent) hospital business can serve as a motivation to maintain political control. Besides this interest, the state has to cope with the attempt of both employers and employees seeking political support for their interests (trade unions for maintaining the public sector standards in bargaining procedures, wages and working conditions, and employers for maintaining access to public finances to operate the hospitals without losses).
Given these interests, interaction between employers and trade unions, with an indirect role of the state in employment relations, can yield institutional change in collective bargaining procedures and outcomes after hospital corporatization. The established hospital structures, power relations and access to political support further shape the actors’ interests.
Figure 1 outlines the proposed mechanism of effects on employment relations as channelled by actors’ interactions. We expect that in corporatized hospitals, management pushes for bargaining decentralization, individualization of employment relations, lower wages and more flexible working conditions. Where bargaining structures are already fragmented, we expect employers to resist union efforts to introduce multi-employer bargaining and common accountability standards between hospital managements and workforce. Decentralization can happen through a move towards establishment-level bargaining or even through a full replacement of collective bargaining by unilateral human resource practices. Bargaining outcomes should be subject to similar pressures: corporatized hospitals abandon public sector employment regulations, which lead to more discretion over wage setting, a dispersed remuneration system and more flexible working conditions (Brandt and Schulten, 2007).
How corporatization can lead to dualization.
The analytical framework leads to four testable propositions. First, corporatization challenges the established arrangements for governing the workforce (Galetto et al., 2014). This implies bargaining decentralization. Second, because of corporatized hospitals’ new budgetary constraints and trade union interest in protecting working conditions in non-corporatized hospitals, we expect deterioration and/or the dispersion of wages and working conditions in corporatized hospitals. Third, in a comparative perspective, this leads to comparably better wages and working conditions in non-corporatized hospitals. The second and third propositions together lead to our fourth proposition on dualization, or the growing gap in wages and working conditions between employees in the two types of hospital. In the remainder of this article, we present empirical evidence to test our propositions.
Methods
Since we focus on how the effects of corporatization were channelled through actors’ interests and interactions to deliver results in bargaining processes and outcomes, a narrative account of actors’ responses to reform is appropriate. We employ a qualitative comparative research design based on case-study evidence from Hungary and Slovakia. This method is further justified by the lack of measurable indicators in the existing literature encompassing our independent variable (corporatization). We present descriptive statistics for wage movements as bargaining outcomes (dependent variable). Hungary and Slovakia were selected because both experienced corporatization after the mid-2000s, with the aim of making public healthcare more efficient. However, the effects differed between the two countries, and this is one of the main issues to be explained. In this sense, the case selection drives our theory, thereby avoiding the fallacy of selecting a dependent variable that can distort the validity of our claims (Geddes, 1990). For example, if we had only selected countries where corporatization produced dualization in employment relations, we could have wrongly claimed that corporatization necessarily leads to dualization.
We use our cross-country comparison to formulate general arguments, but the core of the analysis lies in the comparison between corporatized and non-corporatized hospitals within each country. As with Western European experience (Grimshaw et al., 2007), governments did not corporatize the entire hospital sector immediately. Some important hospitals remained under direct state control and represent a benchmark for evaluating changes in the corporatized hospital subsector. Our analysis covers the period 2001–2012 when NPM reforms were implemented. Evidence was collected within the European Commission’s Framework Programme 7 project GUSTO (2009–2012). We conducted interviews with key healthcare actors in both countries, as in Table 1. All interviews were recorded and transcribed.
List of interviews.
In addition, we consulted numerous legal documents, collective agreements, reports, media coverage and internal trade union statistics. Statistical evidence on wages and employment originates from the Hungarian Central Statistical Office (KSH), the National Institute for Quality and Organizational Development in Healthcare and Medicines (GyEMSzI) and the Slovak National Centre for Healthcare Information (NCZI). In Hungary, we also consulted the database of collective agreements (MKIR), and the Report on outsourced hospital activities by the State Audit Office (ÁSz, 2009). Acknowledging the limited available evidence on this topic and the contested quality of some data sources, we have revisited the interviewed organizations at different time periods and have supplemented our evidence with media coverage on effects of corporatization and changing hospital employment conditions since the reforms. This supplementary evidence helps to strengthen the general reliability of our information.
Hospital structure and healthcare sector employment relations
Prior to healthcare reforms, local governments owned and operated most Hungarian hospitals. Variation in their financial capacities produced some diversity in working conditions, but most of the financing remained centralized. The Slovak hospital structure comprised a few large hospitals and a group of smaller hospitals, both financed from the central budget. Through public service laws and collective agreements, working conditions were comparable across both groups.
The structure of employers’ organizations and trade unions in healthcare differs between the countries. In Hungary, union membership in healthcare fell from 34 percent in 2001 to 20 percent in 2009 and continues to decline (Busch et al., 2010: 296). According to administrative data from its leadership, the main healthcare union, Democratic Union of Health Care Workers (EDDSz), covered 16 percent of hospital employees in 2009 (Bálint et al., 2009). The interviews revealed that the union faces organizational difficulties at the workplace level, and its monopolistic position has been challenged by smaller alternative unions. Moreover, EDDSz switched membership between different trade union confederations twice in recent years. On the employers’ side, there is no effective sector-level association and bargaining remains fragmented across establishments.
In contrast, Slovak healthcare actors enjoy a relatively stable position. Healthcare is one of the best organized sectors in the economy. Bargaining coverage reached 95 percent and union density 51 percent in 2006 (Czíria, 2009). Corporatization brought a split of the single employers’ federation into the Association of State Hospitals (AŠN SR) (previously AFN SR), which in 2014 organizes 24 non-corporatized hospitals and the Association of Hospitals (ANS), which covers 57 corporatized hospitals. While the structure of employer associations stabilized after 2006, trade unions fragmented along occupational lines. Alongside the largest union Federation of Healthcare and Social Work (SOZZaSS) and the smaller but more militant doctors’ union Doctors’ Trade Union Federation (LOZ), the nurses’ and midwives’ union Federation of Nurses and Midwives (OZSaPA) was established in 2012. Despite fragmentation, all unions fight to protect working conditions in both corporatized and non-corporatized hospitals. Collective bargaining occurs at the sectoral (multi-employer) level between unions and each employer association, with additional wage agreements at hospital level.
Hospital corporatization in Hungary and Slovakia
Corporatization in Hungary started in the late 1990s as a decentralized process driven by local governments, some of which saw this as a means to achieve more flexibility and to attract private capital. Corporatization accelerated in the mid-2000s as central government supported more independent hospital management and the takeover of local hospitals by private providers (ÁSz, 2009). During this period, two private companies, HospInvest and MediSyst became major players, integrating several regional hospitals. After the government failed to introduce a partly private insurance system, private providers returned hospital control to local governments (Borbás, 2010: 80). In this way, corporatization became dissociated from privatization. After reaching a peak with 8 percent of total hospital employment by early 2009, the importance of for-profit enterprises shrank rapidly, becoming marginal by 2012. Comprehensive structural reforms stopped by 2009, but the financial crisis squeezed central and local healthcare budgets further. In this environment, hospital owners and managers continued to increase their financial autonomy and flexible human resource management. This time, local owners turned hospitals into non-profit companies. Data from the Central Statistical Office KSH show that the number of employees in non-profits boomed after 2008 and reached 28 percent of the total hospital workforce in 2010. This trend reflects the owners’ attempts to rid themselves of the constraining public sector employment framework, and thereby realize opportunities for institutional change.
The main healthcare union, EDDSz succeeded in challenging outright privatization but failed to prevent corporatization in the period between 2006 and 2010. It also led demonstrations against HospInvest’s takeover of a major regional hospital. At national level, EDDSz supported a successful referendum initiated by the then opposition party Fidesz that prevented private capital involvement in the national health insurance system. In contrast to privatization, corporatization was a smaller-scale and politically less conspicuous process. EDDSz was opposed, but the process was popular among local governments regardless of political affiliation. The change of government in 2010 stopped the corporatization process; as part of a broader policy agenda, the new government re-centralized public services including healthcare and strengthened the statutory basis of their employment relations.
In Slovakia, full marketization of public healthcare was not feasible in the light of political pressures and fierce public opposition. The pro-reform government after 2002 therefore pursued corporatization. After the government bailed out hospital debts, a new ownership and control structure was implemented. Large public hospitals and specialized healthcare institutions were spared corporatization, remained under state control and continued to enjoy privileged access to public finances. The control of smaller (corporatized) public hospitals was handed over to local governments and municipalities. This step aimed at stimulating market-oriented behaviour, avoiding debts and decreasing direct dependence on the state budget. The new hospital owners had no choice but to accept reluctantly their new role in managing hospitals with high budget constraints, and corporatized hospitals adapted to the new situation through severe austerity measures. This also influenced their approach to wage bargaining and fuelled a growing gap in working conditions between corporatized and non-corporatized hospitals. The increasing divergence of interests, managerial autonomy and budget constraints between corporatized and non-corporatized hospitals resulted in the split into two separate employers’ associations.
The government aimed to corporatize the remaining public hospitals, but its successor elected in 2006 stopped this process, and the discrimination against the corporatized hospitals in access to public finances continued. Another change of government in 2010 resuscitated the earlier corporatization attempts, ending the preferential treatment of non-corporatized hospitals. The new government decided to corporatize all remaining hospitals by the end of 2011, but unexpected trade union resistance blocked this second corporatization wave. With coordinated action by the LOZ union, hundreds of doctors in university hospitals threatened to quit their job (Czíria, 2012a). The threat of critical staff shortages forced the central government to agree to stop further corporatization and to increase doctors’ wages significantly in both corporatized and non-corporatized hospitals. We argue that through this action, unions declared their commitment to earlier public sector accountability standards without differentiating working conditions by type of hospital ownership. While LOZ primarily defended workers’ conditions in non-corporatized hospitals, its demand for a wage increase across both types of hospital can be seen as an effort to overcome the dualization in working conditions that corporatization has produced. While LOZ only addressed the interests of doctors, the nurses’ union OZSaPA engaged in a similar action in 2012. The SOZZaSS union demands equal wages across healthcare occupations in all types of hospitals and did not openly support the action of LOZ and OZSaPA.
In sum, while corporatization was intended to improve the functioning of public hospitals in both countries, the implementation process differed because of political preferences by central government and responses of healthcare actors. In Slovakia, corporatization was part of a top-down reform process, while in Hungary it initially occurred without direct state intervention. Corporatization ended in both countries after 2011: in Hungary, by central government decision, while in Slovakia it was trade union action which ended further corporatization attempts. In Hungary, all hospitals were re-centralized; in Slovakia, the position of hospitals corporatized in the mid-2000s remained unchanged, while corporatization of the remaining university hospitals has been abolished. Some owners of corporatized hospitals have fully adapted to the current situation: instead of open opposition to the dual hospital structure, they succeeded in improving hospital performance through austerity, reorganization, dismissals and wage moderation.
Similarities between both countries in the corporatization process include the loss of public employee status for healthcare employees. This shift from governing employment relations through distinct public sector legislation to the ‘regular’ Labour Code sets the legal base for changes in bargaining institutions, including the opportunity for employers to foster flexible employment relations or to break away from established bargaining structures. Second, in both countries, we note a continuity of types of actors involved, including local/regional hospital owners and trade unions. In the initial corporatization years, no private actors entered hospital management in Slovakia, while in Hungary they soon left the field after fierce resistance to privatization. This fact can limit the extent to which employers took advantage of new accountability standards including bargaining decentralization.
Corporatization and bargaining procedures
Above we proposed that corporatization opens opportunities for institutional change in collective bargaining. In Hungary, collective bargaining traditionally played a limited role in determining hospital employment relations. Most aspects of employment – including wages, promotion and working time – are governed by specific legislation for the public sector, and there are no sector-wide agreements. Nevertheless, until recently, the government consulted trade unions in public sector quasi-bargaining forums before legislative procedures (Berki et al.,2012:12). Statutory wage scales used to be supplemented by fragmented establishment-level collective agreements, securing additional benefits depending on the financial situation of local governments.
In Hungary, the main procedural effect of corporatization was strengthening the existing fragmentation of bargaining. First, after corporatization, coordination efforts through ‘quasi-bargaining’ between central government and public sector unions ceased to cover a large segment of the hospital workforce. Second, the already fragmented employers did not seek to foster bargaining coordination, remaining reluctant to form a sectoral employers’ association; hence, the entire responsibility for bargaining rested at establishment level. Here, employer responses varied: while some hospital managers took advantage of corporatization to eliminate collective bargaining completely, others coordinated their adaptation strategy with local unions. This variation deepened the fragmentation in the hospital-level bargaining system. To reverse fragmentation, EDDSz called for the establishment of sectoral bargaining structures. In this respect, corporatization could have served as an opportunity for unions to establish new accountability standards through bargaining coordination. However, union efforts failed because of employer and government resistance, the lack of organizational and institutional capacities on the part of EDDSz and the absence of political support. Therefore, we argue that through actors’ responses, corporatization produced neither bargaining centralization nor decentralization, but reinforced the existing institutional infrastructure in hospital-level bargaining.
In Slovakia, the central government decided to shift responsibility for healthcare bargaining onto the sector-level social partners, but still kept political control over several corporatized hospitals, by nominating members to hospital boards. Since 2006, healthcare developed its own bargaining system without formal ties to public sector bargaining. Corporatization posed a challenge for the continuity of bargaining coordination, because the differing budget constraints of corporatized and non-corporatized hospitals produced a divergence in hospital interests, which resulted in the division into two employers’ associations. Nevertheless, employer associations and trade unions retained associational strength and preferred multi-employer bargaining as a new accountability standard in employment relations.
Collective agreements were first concluded in 2006 and amended in 2007 and 2008. However, as budgets of corporatized hospitals continued to shrink, bargaining disputes escalated from differing views on wage rises. Thus, it became increasingly difficult to conclude wage agreements. ANS regularly rejected union proposals for wage increases despite labour shortages, deteriorating working conditions and poaching of employees by better paying non-corporatized hospitals. All of the regular bargaining rounds between 2009 and 2011 came to a standstill, and had to be concluded via arbitration. In 2012, trade unions reached an agreement only in the non-corporatized subsector (AŠN SR) but not in the corporatized subsector (ANS).
In sum, the effect of corporatization on bargaining procedures in Slovak healthcare points at the emergence of dualized, or two-tier, sectoral bargaining, separating corporatized and non-corporatized hospitals. Within each of these tiers, coordinated bargaining has shown remarkable stability despite the expectation that employers would prefer decentralization. Other factors playing against bargaining coordination include budget constraints among corporatized hospitals as opposed to the non-corporatized ones, and cases when serious wage conflicts postponed the conclusion of collective agreements and made arbitration necessary. While corporatization increased pressures to decentralize bargaining, we argue that it also created conditions for strengthening bargaining coordination by shifting the bargaining responsibility onto healthcare actors. Through the responses of the actors, especially employers, but also unions and the state, coordinated bargaining has not been abandoned after corporatization.
Recalling our first proposition, we argue that instead of utilizing the opportunity for institutional change, actors’ responses to corporatization helped reinforce bargaining fragmentation in Hungary and coordinated bargaining in Slovakia. Instead of seeking to adopt new accountability standards towards employees through fundamental changes in employment relations, hospitals remained formally or informally attached to bargaining procedures from the pre-corporatization period. The role of employers and unions in sustaining the existing bargaining procedures is further pronounced through the lack of legal enforcement of collective agreements: enforcement depends on the actors’ associational strength and voluntary compliance with collective agreements. The state did not directly engage in shaping employment relations in the corporatized hospitals, thereby facilitating an outcome dependent on the interaction of employers and unions in each country.
Developments in bargaining coverage align with the presented trends in bargaining procedures. Our interviews revealed that in Slovakia, collective bargaining coverage remains 100 percent among ANS and AŠN SR members and about 95 percent in public healthcare in general. In Hungary, bargaining coverage rates across different hospital types can only be estimated from various data sources, which include KSH, MKIR and GyEMSzI. In 2012, non-corporatized hospitals were almost fully covered, whereas coverage stood between 65 and 80 percent in corporatized establishments.
Corporatization and bargaining outcomes
Throughout the reforms, wages and wage-related benefits remained the most important issue in bargaining. The union and employer representatives interviewed maintained that other aspects of employment conditions, most importantly working time provisions, do not differ substantially in the corporatized and non-corporatized establishments, because of labour shortages in the entire healthcare sector. Below we focus on the effects of corporatization on wages.
Healthcare wages have exhibited different trends in Hungary and Slovakia as compared to the rest of the economy. Regardless of institutional status, wages in Hungarian hospitals have been in relative decline since 2003, slowly between 2003 and 2008 and more sharply after 2008. Healthcare wages were the same as the national average in 2003: 100 percent in the non-corporatized and 96 percent in the corporatized non-profit segment. By 2011, they had fallen to 85 percent of the national average in the non-corporatized and 79 percent in the corporatized segment. In Slovakia, with the exception of medical doctors, wages in healthcare have been systematically below the national average since 1991. The trade unions’ priority was to close the gap, and substantial increases were finally achieved following corporatization after independent bargaining was established in 2006. Average wages in healthcare rose from 86 to 102 percent of the national average between 2005 and 2008. Medical doctors benefited disproportionately, from 156 to 202 percent of the national average during the same period. Slovak trade unions nevertheless remained dissatisfied because corporatization also brought a divergence between corporatized and non-corporatized hospitals in their capacities to concede wage increases, weakening the unions’ bargaining power. Unions increasingly targeted their action against the state rather than employers’ associations, as well as collective bargaining used political and other channels of influence to achieve wage rises.
A comparison of wage trends in corporatized and non-corporatized hospitals in both countries suggests first that actors utilized the opportunity to revise wage-bargaining strategies differently, and second that their action produced different outcomes. In Hungary, wages converged across the corporatized and non-corporatized hospitals while in Slovakia the gap between the two groups increased. In Hungary, public sector wages were constantly losing real value between 2008 and 2012; therefore, the exclusion of corporatized hospitals from public sector quasi-bargaining did not lead to a divergence in wages. Even without sectoral bargaining coordination, corporatized hospitals considered public sector wage movements a benchmark that was low enough to keep pace with. It was a widely held belief that corporatized hospitals cannot pay less than the severely depressed public sector wages. A major worry of EDDSz was that ‘corporatized’ workers would lose eligibility for the 13th month salary (Tóth et al., 2009). Corporatized hospitals indeed faced budget constraints to cover this benefit, but during 2009–2010, the 13th month salary was scrapped in non-corporatized hospitals, too. Interestingly, some corporatized hospitals unilaterally introduced fringe benefits, taking advantage of more lax income tax regulations in the corporate sphere and fending off some austerity effects.
Table 2 compares wages of different employee groups in Hungarian hospitals in 2008 and 2011, supporting our claim that the gap between corporatized and non-corporatized hospitals was shrinking. Here, we focus on non-profit hospitals, as for-profit employers left the sector after 2009, and follow developments until 2011, when re-centralization started to dominate the agenda in Hungarian healthcare. Until 2008, wages in corporatized hospitals stagnated, while in non-corporatized hospitals they increased moderately, yielding a 13 percent wage gap between the two groups. Nevertheless, after 2008, gross monthly wages in the non-corporatized segment dropped by 13 percent (from €746 to €649), a steeper decline compared to the 9 percent reduction (from €662 to €606) in corporatized establishments. Consequently, the difference between ‘corporatized’ and ‘state’ hospital employee wages shrank to 7 percent by 2011. We have to add though that the better resistance capacity of corporatized hospitals against austerity did not result from strengthened collective bargaining structures, but most likely from the more lax regulation of wage-related benefits in the non-profit sector. To judge possible dispersion of wages across different employee groups, we disaggregated wages for manual and non-manual workers (data are unavailable for occupational categories in different organizational forms). Table 2 suggests that corporatization did not have significant dispersion effects, as wages for manual and for non-manual workers followed the same trends in all types of establishments. Indeed, in non-profit hospitals, the wage difference between manual and non-manual workers became slightly smaller during the observed period.
Average nominal gross monthly wages (€) in non-corporatized and corporatized hospitals, Hungary, 2008 and 2011.
Source: KSH.
Conversion from HUF to EUR at yearly average central bank exchange rate.
In Slovakia, corporatization had a clearer dualization effect on wages than in Hungary. The fact that corporatized hospitals faced increasing budget constraints translated not only into tougher bargaining procedures and frequent arbitration, but also into more moderate bargaining outcomes. In non-corporatized hospitals, the multi-employer collective agreement brought four 10 percent wage increases between 2006 and 2008. After the economic crisis, unions and the AŠN SR did not agree on further wage increases, but arbitration resulted in an increase of 2.5 percent from November 2009 and 2.5 percent from April 2010 (Kahancová, 2011). Finally, the 2012 agreement between SOZZaSS and AŠN SR brought an 8 percent increase for medical and non-medical staff in the non-corporatized hospitals (TREND, 2012). In contrast, collective wage increases in corporatized hospitals remained very modest and resulted from tough bargaining and trade-offs between ANS and the unions. After the 2006 bargaining failure, arbitration stipulated two waves of wage increases of 3–4 percent in 2009 and 2010. Facing a divergence of interests, unions increasingly sought public support and used threats that medical staff would emigrate or quit their jobs in order to reach wage increases (Kaminska and Kahancová, 2011). The best-known case is the 2011 LOZ action, which produced wage increases for doctors and stopped further corporatization efforts.
Evidence on wage levels for particular occupations in the corporatized and the non-corporatized hospitals support our findings that employees in non-corporatized hospitals bargained better deals for themselves in Slovakia (see Table 3). Doctors, nurses and non-medical staff all received smaller wage increases in the corporatized hospitals when compared to the non-corporatized ones.
Average nominal gross monthly wages (€) in non-corporatized and corporatized hospitals, Slovakia, 2008 and 2012. a
Source: Authors’ calculations, Laufiková (2009).
Arithmetical average for various types of corporatized hospitals. Averages in each category separately show the same trends.
Besides the differences between wages in corporatized and non-corporatized hospitals, further disputes evolved around occupational wage gaps. The 2011 militant resignation campaign by LOZ encouraged nurses and midwives to form OZSaPA and seek public support for wage increases. However, their action was less successful. The central government promised wage increases for nurses, but shifted the responsibility onto hospital managers. To cope with doctors’ and nurses’ wage rises within tight budgets, managers in corporatized hospitals responded through strict wage restraint and even wage decreases for non-medical staff, dismissals and work and contract reorganization for nurses (Czíria, 2012b). This situation caused a further deterioration of working conditions and growing dissatisfaction of employees in the corporatized subsector. OZSaPA and SOZZaSS remained too weak to prevent this deterioration, but continue in their efforts to introduce a nationwide regulation on healthcare wages.
Reflecting on our second, third and fourth propositions, in Slovakia we document a deterioration of wages in corporatized hospitals but constant wage increases in the non-corporatized segment. Bargaining outcomes thus demonstrate a growing gap in wages and working conditions, or dualization. In Hungary, minor signs of dualization between corporatized and non-corporatized hospitals were observable in initial phases of corporatization. In recent years, wages in the (non-profit) corporatized and the non-corporatized sector started to converge as a result of austerity measures that equally affect both segments. The lack of effective union resistance to the race to the bottom in hospital wages also contributed to this outcome. In sum, our fourth proposition holds less clearly to Hungary than to Slovakia.
A comparison of findings in the two countries suggests that contextual factors (the broader reform policy and austerity measures) can influence how actors frame corporatization and its effect on bargaining outcomes. In Slovakia, a more relaxed general fiscal environment allowed non-corporatized hospitals to accede to employee demands. In Hungary, continued austerity measures in the non-corporatized sector made public sector wages an easy benchmark to follow.
Conclusion
This article has provided insight into how an important aspect of public service reform shapes employment relations. Our theoretical aim was to fill the gap in the literature on conceptualizing hospital corporatization and its effects on established patterns of employment relations. The article extends the NPM literature with an actor-oriented framework that accounts for the influence of healthcare actors in the execution of nationwide and government-initiated organizational reforms at central and local levels. Our empirical aim is to uncover the actors’ responses to reforms: in particular, whether corporatization produced institutional change in collective bargaining, degradation in wages and working conditions in the corporatized hospitals, and a growing gap between corporatized and non-corporatized hospitals.
We argue that corporatization is a dynamic process in which the effects of a policy-driven organizational change interact with responses of employer and employee representatives. Healthcare employers and trade unions adjusted their strategies to the post-corporatization environment, re-established their power relations in the new conditions of austerity and budget constraints and sought political allies for defending the status quo in employment relations and access to public finances. This adaptation brought the persistence of established bargaining institutions on the one hand, but differences across bargaining outcomes and working conditions on the other hand. The lack of institutional change relates, first, to sustained bargaining fragmentation in Hungary and bargaining coordination in Slovakia. Differences in outcomes are exemplified mainly by different trends in wage movements across corporatized and non-corporatized hospitals in each country. In Hungary, wages converged across the corporatized and non-corporatized hospitals while in Slovakia the gap between the two groups increased.
The lack of motivation for employers to use the opportunity to abandon the old employment relations after corporatization is perhaps a surprising finding. However, it becomes less of a puzzle when we acknowledge two factors. First, the character of public ownership remained intact despite ownership decentralization. Instead of utilizing the corporatization opportunity for change, employers sought commitment to familiar benchmarks in public sector bargaining procedures and outcomes. Moreover, some hospitals faced labour shortages, which weakened the bargaining position of employers and prevented a race to the bottom in wages and working conditions until the moment when the benchmark in non-corporatized hospitals also changed. Second, the initial hospital and employment structures as the starting conditions for corporatization and actors’ responses are crucial contextual variables. In Slovakia, corporatization followed the already existing cleavage between university and smaller hospitals operated through regional governments and municipalities. In Hungary, the fragmented bargaining pattern and the reliance on national statutory regulation prevented a clear-cut dualization in bargaining and working conditions.
What is the relevance of these arguments from a broader perspective? Our analytical framework is general enough to motivate further research to uncover the interests and interactions of various actors in public sector reforms and their impact on employment relations. Further research could be conducted to explore how the generally better working conditions of public employment in Western Europe interacted with corporatization in these countries and how corporatization effects evolved in comparison to Central and Eastern Europe. From the perspective of outcomes, further research could investigate whether dualization in bargaining outcomes will be stronger in countries where corporatization also brought more fundamental changes to hospital ownership and management structure. Finally, a new avenue of research could investigate the way in which public healthcare employment reforms affect service quality. Formally, corporatized hospitals have to deliver the same services under the same conditions as non-corporatized ones. Given the labour intensity of healthcare services, the dualization of the hospital workforce might eventually impinge on service outcomes and therefore on patients.
Footnotes
Acknowledgements
The authors thank Tibor Meszmann and Nicholas Wallace for research assistance, and Dorothee Bohle, Paul Marginson, Achim Kemmerling and the three anonymous referees for constructive feedback.
Declaration of Conflicting Interests
The author(s) declared no potential conflicts of interest with respect to the research, authorship, and/or publication of this article.
Funding
The author(s) disclosed receipt of the following financial support for the research, authorship, and/or publication of this article: We acknowledge the financial contribution for the research from the EU FP7 Programme GUSTO.