Abstract
This article examines the impact of austerity policies in seven EU Member States on municipal employment and the ways in which social dialogue can influence consequences for employees. It provides a comparative institutional framework, looking at municipal tasks and powers, and the social dialogue institutions available in the respective countries. In addition, the outcomes of austerity policies are compared with regard to wages, employment levels and the public service provision, as well as the influence of social dialogue institutions on these outcomes. Trade unions and workplace employee representatives face a dilemma, having to choose between concession bargaining and opposition to employer plans in order to preserve public sector employment. Between and within countries there seem to be significant differences in their success. Generally speaking, however, these are tough times for municipal workers, their representatives and citizens dependent on the services municipalities offer.
Introduction
There is a growing body of evidence on the impact of the economic crisis on employment, wages and working conditions within EU Member States since 2008 (Bach and Bordogna, 2013; Glassner and Keune, 2012; Guyet et al., 2012; Lodge and Hood, 2012; Vaughan-Whitehead, 2013). The focus of most studies is on national economies. This makes sense given that what began as a financial crisis developed into a fiscal and economic crisis requiring governments to take action, especially EU Member States obliged to comply with EU requirements regarding their national deficits and debts (the EU Stability and Growth Pact). The EU has therefore played a key role in disciplining Member States and this has had a profound impact, with national governments adopting austerity measures affecting public services and public sector employment. It is not sufficient, however, to examine central government policies alone, as local government also plays a prominent role in public service provision and is regarded as the tier of government closest to citizens in many countries. In addition, in several countries local government is playing an increasing role in public service provision in the wake of central government reform policies aimed at decentralizing services to local government. These reform policies predate the economic crisis in such countries as Denmark, though in other countries such as the Netherlands the decentralization is part of the structural measures adopted by central government in response to the economic crisis and is seen as an opportunity to cut budgets for such services and to force local government to provide them more efficiently. There can also be no doubt that governments, as in the UK, are also engaging in ‘blame avoidance’ (Pierson, 1994), delegating unpalatable cuts to local politicians and shifting services to a variety of providers (Bach, 2012). Gaining an insight into the impact the economic crisis is having on public services and public sector employment relations therefore requires a study of local government developments.
Studying local government enables us to make another contribution. The prevailing focus on national economies has revealed the same basic recipes of austerity policies, consisting of a mixture of quantitative measures such as cuts in jobs and wages, and qualitative or structural measures such as privatization and outsourcing (Vaughan-Whitehead, 2013). Though measures vary between countries, these variations are often confined to the severity of the measures and their speed of implementation, linked to the financial vulnerability of each country (Bach and Bordogna, 2013; Lodge and Hood, 2012). By studying local government it is possible not just to examine such concrete choices as restructuring, downsizing or outsourcing but possibly also to look at investments in new initiatives and restructuring measures with the potential to enhance public service provision and alter public service employment relations. Our assumption that there will be variations between local government organizations within a single country as well as variations between countries is in line with evidence presented by Loboa and Adua (2011) about local government policies across the USA reflecting different political and managerial strategies. This variation may be related to an observation made by Glassner and Keune (2012: 14) that ‘the company level has become the main arena for social partner action in dealing with the challenges of the crisis’. In other words, local government is where the consequences of political decision-making can be influenced to some extent by the strategic choices made by local government employers, employee representatives and other stakeholders within the limits set by higher level political decisions. This special issue will study local government, both at sector and decentralized levels, guided by the following research questions: how and to what extent do local government austerity policies differ; what are the outcomes of these policies in terms of employment conditions and public services; and to what extent do these differ in relation to the strategic choices made by local government employers and employee representatives and to the institutional limits they are confronted with.
This special issue studies the impact of the economic crisis on public service employment and local government service provision in seven countries: Denmark, France, Germany, Hungary, Italy, the Netherlands and the United Kingdom. These countries represent a diversity of experience in terms of their differing legal, institutional and local government traditions and have been affected by the economic crisis to different degrees. This enables exploration of the relationship between national austerity and local government responses, indicative of the scope for strategic choice. Articles concentrating on local government in one country provide rich and in-depth descriptions taking the specific national institutional context into account. This introduction provides a framework and overview of the economic crisis and its outcomes, facilitating comparative analysis and conclusions. To further enhance comparative analysis all articles focus solely on municipalities. The following sections elaborate on this framework.
First, it is necessary to recognize that the economic crisis has affected countries to different degrees and that its impact on public service employment and public services cannot be isolated from other factors such as ongoing local government reform (e.g. the extent of privatization and outsourcing). The situation of the seven countries thus takes account of their exposure to the economic crisis and their specific public service reform initiatives and the legacy of these reforms.
Secondly, with regard to the focus, local government constitutes a broader concept involving various layers of government, not only municipalities but also regions and other entities. This special issue focuses on municipalities only, facilitating comparative analysis. Comparative information will be presented on the public services provided by municipalities and the position of municipalities vis-à-vis central government in terms of financial resources, helping to understand the room for manoeuvre municipalities have for strategic choice and for accommodating the consequences of austerity policies.
Thirdly, the assumption that social dialogue can contribute to shaping the consequences of austerity policies for public service employment requires us to analyse the respective institutions in our sample. The term ‘social dialogue’ is used here to refer to institutions for collective bargaining between employers and trade unions at sector and/or decentralized level and to employee participation institutions such as works councils.
Finally a summary overview of the outcomes regarding public sector employment and public service provision is presented. The emphasis is on municipal wages and jobs, indicating the impact of the quantitative measures governments are taking in response to the economic crisis. This emphasis is also a consequence of the institutional framework in the countries under study which generally rules out levels of public service provision as a direct subject of social dialogue. Our analysis of austerity’s impact on public service provision and employment is extended by the use of municipal-level case studies in each contribution, providing an insight into how austerity measures are being implemented and their outcomes. This approach extends the analysis of austerity measures beyond the dominant focus on national economies, highlighting the degree of relative autonomy at municipal level.
The impact of the economic crisis in a comparative perspective
The financial crisis of 2008 and the ensuing global economic crisis have had a major impact on national economies, although to different degrees. Bach and Bordogna (2013) have shown that cross-national variations in financial vulnerability have an important bearing on government responses to the economic crisis and subsequent consequences for public sector pay and employment practices. The EU countries included in this special issue can be categorized in their vulnerability based on levels of public deficit, public debt and GDP growth. Over the crucial 2008–2012 period Italy and France exhibited high to medium-high financial vulnerability, while the Netherlands and the UK are in the medium-high to medium category, Hungary in the medium category, and Germany and Denmark in the medium-low category, with a general downward trend seen over this period. A further implication is that countries in the high category experienced deeper austerity cuts at national level, and that in many cases these were passed on to local government.
While this special issue focuses on the impact of the crisis and its resulting austerity measures, it is important to emphasize that the 2008 economic crisis is not a one-off event the effect of which can be assessed as such. We need instead to examine its impact in a broader historical context. In some countries specific national events have had greater influence. German unification in 1990 had major consequences for Germany’s public sector, one of which was a steady reduction in employment, meaning that public sector employment in 2009 was only two-thirds of its 1991 level (see Keller, 2014). Germany was initially severely hit by the 2008 economic crisis but recovered quickly. Public sector employment has actually risen moderately since. Another illustration of the importance of distinctive national circumstances is provided by Hungary (see Neumann et al., 2014). Well before the 2008 economic crisis, the Hungarian government decided on austerity measures in 2006 to meet the convergence criteria regulating accession to the EMU. Its currency was so much exposed to financial market pressure that a swift bailout by the IMF and EU was needed to prevent its collapse in 2008. One cannot understand ensuing government policies without taking into account the idiosyncratic right-wing nationalist orientation of the Orban government elected in 2010. This ideological orientation, as Neumann et al. (2014) argue, explains such measures as the centralization of decision-making power and resources, the erosion of trade union rights and the transfer of former municipality-provided public services to church-based institutions. A final telling example is France (see Jeannot, 2014), where the newly elected President Sarkozy decided on austerity measures in 2007 but resorted to Keynesian rather than austerity policies when the economic crisis set in. Political discourse more or less negated ‘austerity’ until the 2012 elections and municipal public employment was not affected until 2013. These national cases illustrate that in some countries other events are important for understanding how the 2008 economic crisis affected public sector employment.
Municipalities: public services, financial resources and autonomy
Generally speaking, municipalities in the seven countries in this special issue have similar responsibilities in providing specific public services. Table 1 is based on the individual country studies, showing that municipalities have in common the provision of such services as the maintenance of public space and the environment; care for the elderly, children and young people; maintenance of schools; and local economic development. There are also differences between the countries, as seen in the fields of housing, cultural and sports facilities, and public transport. In some countries municipalities are responsible for providing these services, while in others they are not or can choose whether they want to provide these services. Being responsible for particular services does not necessarily mean that municipalities have to provide these services themselves. They may also engage non-profit organizations or create separate service units, possibly covering several municipalities, to provide these services.
Institutional features of municipal tasks and powers.
To understand the impact of austerity it is important to recognize the difference between mandatory public services such as social assistance for the unemployed or disabled citizens which central government has delegated to local government, and public services over which municipalities have discretionary power to decide what they provide. The importance of this distinction becomes clear when municipalities have to decide on cost-cutting measures. Delegated mandatory services cannot be cut, meaning that discretionary services are the ones most affected by spending cuts.
The economic crisis has generally affected municipalities in two ways: first, in the funding they receive from central government, and secondly, in the direct financial income they generate through their legal right to levy taxes and engage in financial activities. Local revenues make up less than half of municipality budgets (with the exception of Denmark). Table 1 shows that financial resources available to municipalities have decreased due to reduced central government funding, whether for municipal services generally or for specific services which municipalities are required to provide under national legislation. Overall the reduction of central government funding for municipalities varies from modest in Denmark to high in the UK. These reductions reflect in part the overall financial vulnerability categories noted earlier and in part the need to accommodate specific policy decisions relating to municipalities. Municipalities’ direct income has similarly been affected by the economic crisis, for instance with lower revenues from property taxes but also because a number of central governments have put limits on municipal rights to levy taxes. Though in most countries municipalities saw their direct income decrease, there are large differences between the countries as regards total income deriving from property and/or local business taxes. A recent OECD (2013) study found that total tax revenue received by local government in the UK in 2009 equalled 3.5 per cent of gross national product as compared to 2.4 per cent in France, 1.4 per cent in Denmark, 0.65 per cent in Italy, 0.6 per cent in the Netherlands, 0.45 per cent in Germany and 0.35 per cent in Hungary.
Country differences in the financial resources available to municipalities affect their response to austerity. However, municipal decision-making is likely to be dependent on other factors as well, such as municipalities’ formal discretionary powers vis-à-vis central government and central government decision-making regarding for instance the mandatory nature of services and public sector employment conditions. While for instance UK municipalities derive the greatest direct income from property tax, they remain highly constrained due to central government wage policy, the severity of financial reductions imposed on them and their dependence on central government funding. Generally speaking municipalities have few options other than cutting municipal employment and services because they face central government and public resistance to raising local taxes and because of the limits on the level of municipal debts allowed.
Municipal employment relations: collective bargaining and employee participation at organizational level
The degree of autonomy enjoyed by municipalities as public employers differs significantly (see Table 2). In all countries examined in this special issue there are institutional provisions for some form of collective bargaining between municipal employers and trade unions with the exception of France and, for certain categories of public employees, Germany and Hungary. Local government employees in France are public servants whose statute and salary are decided by central government, as is typical of the sovereign employer model (Bach and Kessler, 2007), though this does not preclude the important role of other forms of local social dialogue. A similar situation exists in Hungary for civil servants but not for public service employees employed by publicly funded organizations in education, health, social care and municipal companies providing public transport and utilities whose employment conditions are formally regulated by company-level collective bargaining. However, in Hungary, Italy and the UK formal institutional arrangements providing for free collective bargaining have been bypassed or modified by unilateral central government decisions, with such unilateralism clearly related to the economic crisis. Italy represents an extreme here, with central government unilaterally imposing a wage freeze for the 2010–2012 period then followed by central incomes control policy. A similar situation applied in the UK where local government, although formally independent of central government, was under severe pressure to implement the central government wage freeze. Thus in four countries, France, Hungary, Italy and the UK (at sectoral level), there was effectively no collective bargaining between municipal employers and trade unions over wages for municipal employees.
Social dialogue institutions in municipalities: collective bargaining and workplace employee participation.
In three countries, Denmark, Germany and the Netherlands, a two-tier system of collective bargaining exists. Municipal employer associations negotiate with trade unions over a collective agreement covering the sector, i.e. binding all municipal employers. Individual municipalities have the right to negotiate over supplementary arrangements, though their freedom varies greatly between Denmark (high) on the one hand and Germany (low) on the other.
There is an important difference between countries where central government unilateralism has determined wages and other employment conditions for municipal employees and countries with collective bargaining. Only in the latter have municipal employers been able to decide autonomously to what extent austerity measures will affect the wages and employment conditions of their employees or alternatively the public services provided to citizens. In the same vein, it is only in these countries where trade unions have been in a position to influence the implementation of austerity measures affecting wages and employment conditions.
Two factors included in this framework indicate the extent to which employee representatives are in a position to influence austerity measures and their implementation. One represents union power, measured by the union density rate in the municipal/public sector and the degree of fragmentation or collaboration between unions, while the other is the institutionalization of social dialogue at organizational level (Marchington and Kynighou, 2012).
In all countries in this study public sector union density rates are higher than in the private sector (data based on European Commission 2013: 135–137). However, figures vary widely, ranging from France with a density rate of 15 per cent to Denmark with a rate of 83 per cent (see Table 2). Countries like Italy and Denmark have a complex bargaining structure involving a large number of public sector unions. Overall, those countries where collective bargaining is the prevalent mode of regulating municipal employment conditions have the highest union density rates.
All countries in this study have some form of institutionalized social dialogue at local level. There are systems where trade unions have a voice at workplace level as in Denmark, Italy and the UK, and works/staff councils or committees in which employee representatives are elected and which also consist of non-union employee representatives as in France, Germany, Hungary and the Netherlands. The fact that works/staff councils may consist of members of competing unions or union and non-union members can but does not necessarily lead to internal difficulties, hampering their effectiveness. In most countries these social dialogue institutions have legal rights, some of which pertain directly to the sort of issues raised by municipalities’ austerity-driven interest in restructuring, downsizing and outsourcing.
Austerity policy outcomes
Assessing the outcomes of austerity policies at municipal level is not straightforward. Information predominantly consists of aggregate data which cannot be unequivocally interpreted as reflecting austerity policy outcomes and which does not always effectively capture important variations between municipalities within a single country. That said, austerity outcomes differ between the countries studied (see Table 3). While municipalities in all countries have suffered a decline in financial resources, municipal wages have been frozen in France, Hungary, Italy and the UK whereas they have risen moderately in Denmark, Germany and the Netherlands. Quite clearly, unilateralism has led to wage freezes while collective bargaining has allowed moderate nominal wage increases.
Outcomes of austerity policies indicated by developments of wages, employment and public services.
In most countries municipal employment has decreased. The UK and the Netherlands appear to have cut the most, and Denmark and Italy the least jobs. Hungary provides a mixed picture, with job losses due to cuts in financial transfers from central government, and stable levels of public service jobs transferred to church-based institutions. France and Germany differ, with a small increase in municipal employment. For France this may be related to a Keynesian response to the economic crisis and attempts to maintain employment, while in Germany municipal employment had already taken a drastic cut from the 1990s onwards following unification. There are other changes in employment conditions, such as the increasing use of temporary and part-time contracts in some countries, increasing working time flexibility without financial compensation for employees, and a rise in the pension age. The articles that follow this introductory article analyse these changes in greater detail.
Overall, changes in wages and employment are in line with the type of quantitative measures taken by national governments in response to the crisis. The combination of the changes in these two domains of municipal employment conditions do not provide evidence of a trade-off. While there is evidence of a combination of wage rises – employment cuts (Denmark, the Netherlands) and wage cuts – employment growth (France), there are also cases of wage rises – employment growth (Germany) and wage freezes – employment cuts (Italy, UK).
The changes in public service employment conditions generally go hand-in-hand with changes in the quality of public services offered to citizens. Reductions in municipal employment tend to lead to lower service levels, for instance reduced opening hours of administrative units, closed libraries and swimming pools or limits on their opening hours, or online self-service instead of personal coaching for jobseekers dependent on social assistance benefits. The cases described in this special issue indicate that municipal management is using austerity as an opportunity to rewrite service delivery provisions. Experiences vary, with examples of service withdrawal but also the use of spending cuts to reorganize and improve services. The French case study for instance shows improvements in the upkeep of public spaces through reorganizing maintenance teams on a neighbourhood basis.
Transferring municipal services to non-municipal organizations occurs for a variety of reasons, not always related to cutting costs, as seems to be the case in Hungary where formerly municipal services have been transferred to church-based institutions. However, other cases of externalizing public services go hand-in-hand with deteriorating employment conditions, as in the Netherlands where public-private partnerships have taken over services from municipalities, and in Italy where social services have been outsourced to non-profit organizations. Interestingly, privatization or outsourcing has in some cases been reversed. A few examples of re-municipalization are reported in Germany, Hungary and the UK, and seem to be driven by service quality issues, though also by the desire to maintain local political control.
Social dialogue and municipal austerity measures
With reference to the characterization of the local level as the arena where social partners have to deal with the consequences of the crisis (Glassner and Keune, 2012), what about the influence of social dialogue institutions, either through trade union action or through consultation and co-determination by works/staff councils? Decisions on austerity policies as such seem to be outside the agenda of social dialogue institutions, reflecting in part the extent to which national governments’ autonomy has been curtailed by the requirements of the EU Fiscal Compact (Bach and Bordogna, 2013). In countries such as the Netherlands this distinction between political decisions and administrative managerial implementation has been institutionalized in the sense that political decisions are excluded from the remit of works councils, whereas in the private sector strategic management decisions are subject to the right of advice by works councils.
Trade unions and works/staff councils have to deal with the consequences of municipal decisions on staff employment conditions (see Table 4). The primary concern is to prevent redundancies and any deterioration of working conditions. Trade unions and staff/works councils appear to be moderately successful in countries with established social dialogue traditions, such as the Netherlands. Compared with initial restructuring plans presented by city managers, trade unions and works councils have been successful in reducing the number of job cuts and preventing redundancies, as shown in the case studies. Concession bargaining and in some cases proactive participation in developing restructuring plans targeting public services seem to be the basis for successful influence. However, when the municipal employer is not inclined to consult with employee representatives and tends to push through change quickly, conflict is likely to arise, as the only option available to unions and works councils in defence of employee interests is industrial action or recourse to legal appeal mechanisms. The case studies in this issue seem to indicate that this has not been successful in reversing managerial decisions.
Influence of social dialogue on austerity outcomes at municipal level.
Concluding remarks
Our concluding remarks begin by addressing the research questions upon which this special issue is based. The articles show that the economic crisis has had a serious impact on all seven countries studied. The extent of financial vulnerability differs between the countries, influencing the severity of national government policies as Bach and Bordogna (2013) have shown. As EU Member States, most countries have been compelled to take action under EU regulations on national debt and deficits. National government policies have generally conformed to the pattern of quantitative measures described by Vaughan-Whitehead (2013), consisting of wage and employment cuts and freezes, and qualitative or structural measures such as decentralizing public services to municipalities. However, this general description needs to be qualified. The degree to which countries are affected by the economic crisis does not alone determine the austerity policies decided by national governments. In a few countries like Germany, Hungary and France other significant national political and economic factors influenced government policies, shaping their response to the economic crisis. As a result government austerity policies affecting municipal public services and resulting in cuts in municipal employment are not to be found in Germany and France.
Austerity measures have affected municipal employment both directly and indirectly. In all countries central government funding to municipalities has decreased, but least so in Germany and France. Given that local government’s capacity to levy taxes is restricted and that local revenues make up less than half of municipality budgets (with the exception of Denmark) reduced central government funding has indirectly led to austerity measures in municipalities. In some countries central government has decided on direct austerity policies freezing or controlling public sector wages (France, Hungary, Italy, UK), and measures freezing or cutting public employment by specific ratios as in Italy.
Generally speaking the austerity policies decided by municipal employers and in some cases by central governments have led to a deterioration in the employment conditions of municipal employees. In all countries except France and Germany, municipal employment levels have declined since 2008. This will also have long-term consequences, such as reduced employment opportunities for young applicants and reduced chances of promotion. In addition, the wages of municipal employees have been frozen or have only risen minimally due to unilateral central government decisions (France, Hungary, Italy, UK) while wages that are the result of collective bargaining have risen moderately (Denmark, Germany, the Netherlands). It is difficult to infer conclusions on public service provision from the results of municipal employment cuts. Some of the articles suggest that municipal services have been affected because of for instance reduced opening hours of administrative units, closing libraries and swimming pools or reducing their opening hours. Other cases suggest that the quality of public services has not been affected as in the case of maintaining public spaces in St. Etienne in France and in the case of social services transferred to church-based institutions in Hungary.
Obviously, municipal employers and trade unions and staff/works councils have been confronted by major constraints such as reduced budgets, unilateral central government policies on public sector employment and wages, and central government and EU-imposed institutional requirements regarding debts, deficits and levying taxes. However, within these limits municipal employers and employee representatives have a certain decision-making leeway – albeit highly constrained – influencing outcomes in terms of employment conditions and local services. One area of choice for municipal employers is the extent to which they engage in social dialogue over the consequences of austerity measures. Where this is the case, employee representatives appear willing to engage in concession bargaining in order to save jobs and prevent or limit redundancies. Another area of choice involves the externalization of public services. In countries like Italy and the Netherlands public services have been transferred to non-profit or private organizations at the initiative of the employer. The subsequent deterioration of employees’ employment conditions has been a reason for union opposition in Italy and works council-induced guarantees in the Netherlands. In other countries like Germany, Hungary and the UK, the re-municipalization of services is on the agenda in order to regain control over service delivery and employment conditions. In these cases unions may be more willing to accept trade-offs, accepting changes in employment conditions involving greater flexibility and performance targets.
Have social dialogue institutions influenced the outcomes of austerity-induced municipal policies? Only moderately so, depending on whether they were in a position to engage in collective bargaining and consultation – i.e. no unilateral decision-making by central and/or municipal government – and to focus on the employment consequences of restructuring, downsizing and outsourcing. When employee representatives were in a position to influence such outcomes, their success seems to have been dependent on their strength and institutionalized rights. However, these conditions do not per se suffice, as illustrated by similar cases in the same country where in one case cooperation was successful, delivering more positive outcomes for employees and citizens, and in the other case was not. Such intra-country differences suggest that other conditions are important. Socially responsible employers, wider user-oriented views of public service provision and the quality of employer-employee relations are all important in maintaining and improving public services in times of austerity, likely to continue for some time to come.
Footnotes
Funding
We acknowledge the financial support of the European Commission under the EU-financed project ‘Social Dialogue and the Public Services in the Aftermath of the Economic Crisis: Strengthening Partnerships in an Era of Austerity’ [grant number VS/2011/0412].