Privatisation and the Impact on Employment

Informed by neoclassical economics, supporters of liberalisation and privatisation not only promise improved and more efficient services; they also claim that the market-oriented reform of the public service sectors will boost employment. Adherents of the neoclassical school of thought stress that market liberalisation has a positive long-term effect on employment levels even if it causes reductions and deterioration of working conditions during the necessary adaptation period. Such views are shared by important proponents within the European Commission (European Commission 1999; Raza 2008). In its 2003 "Green Paper on Services of Public Interest", the European Commission (2003, 4) assumes that the impact of market opening on net employment in the network industries has been broadly positive: "Job losses, particularly amongst former monopolies, have been more than compensated for by the creation of new jobs thanks to market growth". In a similar vein, Copenhagen Economics (in a study for the European Commission) comes to the conclusion that market opening in the EU-15 network industries boosted employment (Copenhagen Economics 2005). The authors argue that liberalisation and privatisation have led to lower input costs for other sectors, which has critically contributed to the overall growth of the economy and the creation of jobs. While the Commission (2003, 4) initially expected the creation of nearly one million jobs across the EU, Copenhagen Economics (2005) is more cautious and expects "only" the creation of half a million additional jobs.