Public Sector Contracting: An Australian Study of Changing Work Conditions

Abstract

Throughout the 1990s, government reports such as the Competitive Tendering and Contracting Report (Industry Commission1996) and the Report of the Independent Commission to Review Public Sector Finances (McCarrey 1993), suggested that the contracting-out of government services would improve the delivery of public goods in Australia. This article reports on the findings of a case study of contracting-out of building maintenance services in the state of Western Australia in Australia. The study focuses on evaluating the impact of the contracting-out of these services on the wages and conditions of employees affected by moving from public sector to private sector employment. The study found differences in the employment conditions of white collar and blue collar workers. In general, the conditions of white collar workers improved but there was a marginal decline in the conditions of blue collar workers. The article concludes that while contracting-out created budgetary savings for government, these resulted partly from a reduction in wages and benefits of former blue collar staff, despite the best efforts of the Western Australian government to protect staff wages and benefits. The research makes an important theoretical contribution by arguing that the impact of contracting-out on staff wages, benefits and conditions is conditional upon the level of competition in the labor market for worker's expertise. In "thick markets", wages, benefits and conditions are likely to reduce, due to strong competition for expertise. However in "thin markets", wages, benefits and conditions are likely to increase, due to weak competition for expertise (Borland, 1994).

Responses to public sector reform policy

“…The State Government's agenda was to rationalize all government agencies and, in the case of MRWA, this meant moving all operating arms out of the ministry and contracting out most of the road projects. Ryan et al (2005) have already discussed contracting out in Western Australia in a detailed study concerning facilities management and have described the motives beyond the contracting out policy therein.…”

“…The Liberal government in Western Australia (WA) wanted efficiency and rationalization and this resulted in the structural changes and the move to contracting out (Ryan et al 2005). The Labour government in 2001 was driven by reform in the areas of communication and consultation with the community, and by concerns with regard to the environment and Aboriginal issues, which resulted in the appointment of a new Commissioner in 2001.…”

The Politics of Regional Disadvantage: Regional Differences in Public Sector Employment

“…For example, Silicon Valley fostered labour market segmentation with the growth of a highly-skilled workforce accompanied by growth in low-wage labour providing support services (Storper & Walker, 1989). Capital may solve labour problems through strategies such as sub-contracting, outsourcing or decentralisation (Herod et al, 2007) or creating job insecurity by varying the proportion of non-permanent workers (Ryan, Furneaux, Pink, & Brown, 2005). In the event of outsourcing, the increased price-consciousness of the private sector is likely to lead to lower wages for employees providing these services.…”