Government-led versus management-driven

In the reform of health sector employment arrangements, the issue of who initiated the reform is one which seems to have caused striking differences in the two countries. Here the process of restructuring and its impact on workers and unions, in English and Korean health sectors is contrasted.

England

After the 1979 election, the Conservative government introduced various types of market-style reforms. This marketisation strategy was, as Givan and Bach (2007: 135) describe, implemented through a range of practices that introduced competition and private sector service provision into the NHS. Among them, three changes were crucial for the spread of subcontracting as part of marketisation: the introduction of Compulsory Competitive Tendering (CCT); the establishment of self-governing hospital trusts; and the emergence of Private Finance Initiative (PFI).

It was not the first time the private sector had become involved with the health care services. Prior to the 1980s hospitals used private firms to supply support services but this was relatively small-scale and mostly in response to labour shortages in the 1960s, which was in a stark contrast to the mandatory regime from 1983 onwards (Givan and Bach, 2007: 137-138). Health authorities as the administrative organisations were instructed ‘to test the cost-effectiveness of their support services and to accept the lowest tender unless ‘compelling reasons’ dictated otherwise’ (Givan and Bach, 2007: 138). The Conservative government argued that contracting-

125 out ancillary services was a more efficient way of using limited resources (Davies, 2009: 20). In accordance with their 1983 election manifesto (Conservative Party, 1983), the Conservative government pushed health authorities to make the maximum savings possible by putting services such as laundry, catering, and cleaning to competitive tender, whilst also tightening up on management costs and exerting firmer control of staff numbers on the other.

Another challenge to the way hospitals managed health care was the establishment of hospital trusts. Some NHS hospitals were converted to trusts and from then on had the status of public corporations, with the ability to borrow independently for capital expenditure and to retain operating surpluses (Clayton and Pontusson, 1998: 93). An NHS trust, as a service provider, typically comprised a single large hospital or hospitals that competed against each other for government revenue (Givan and Bach, 2007: 140). The change meant that while decisions on spending were still highly centralised, responsibility for execution of spending plans and accountability for balancing the budget were placed on branch hospital management (Grimshaw and Carroll, 2008: 172).

The final element of the reforms carried out by the Conservative government was the Private Finance Initiative (PFI) which was a form of public-private partnership. Under the PFI system, a consortium of private sector firms provided the capital investment for a new hospital or the refurbishment of existing buildings and recouped the money through a charge on the services provided by the hospital (Grimshaw et al., 2002: 485-489). What is most relevant to this analysis is that each

126 tendering’ (Givan and Bach, 2007: 141). The PFI scheme transferred large groups of workers employed in the NHS hospitals such as cleaning, catering, portering, estates, and maintenance to the private companies. Such workers thereby received less generous pensions and were paid at lower rates than the NHS employees they worked alongside (Grimshaw and Carroll, 2008: 172). These ancillary services were then sold by the private sector consortium back to the client NHS hospital (Grimshaw and Carroll, 2008: 172). To summarise, under the PFI system, a private consortium was contracted to finance, design, build, and operate public service facilities by outsourcing support staff, whereby the policy of competitive tendering was effectively superseded (Givan and Bach, 2007: 141).

This radical organisational reshaping of the health service was maintained under the New Labour governments following 1997 without significant changes (Bach, 2004; Colling, 2001; Geddes, 2001; Givan and Bach, 2007). As Bach (2004: 184-185) argues, the state has intervened to a great extent in restructuring the health service by implementing general management, establishing the internal market, and developing the audit culture. Public hospital employers were pressurised to accept the changes resulting from central government’s demands for greater efficiency and the modernisation of service provision (Bach and Winchester, 2003) and hence hospital trusts were encouraged to adopt new managerial techniques focusing on value for money rather than public ethos (Bach, 2004).

This change was supported by the Conservative legacy that was the establishment of a cadre of managers that ‘were able to convert government aspirations for a more ‘business-like’ NHS into concrete managerial initiatives’ (Givan and Bach, 2007:

127 142). Despite the injection of marketised managerial initiatives and the transformation of the traditional role of the government as a ‘model employer’, the government still had a pivotal role in controlling the health service in that health care in England remained publicly-financed, even if some of the service were no longer publicly provided (Galetto et al., 2012).

Although policymakers in the New Labour government focused more on pragmatic justifications for marketisation than ideological drive (Givan and Bach, 2007: 134), research conducted by the Office for Public Management (hereafter OPM) provides evidence that implementing outsourcing policy was primarily driven by political will rather than evidence-based practice (UNISON, 2008a: 6). Research by the OPM also showed that each hospital Trust was forced to increase tendering and use of the private sector, which was the only option offered to trusts that wished to make service changes (UNISON, 2008a: 6)

As such, the use of subcontracting was initiated by government in England through implementation of CCT and PFI as part of health care reforms. Although the final decisions about whether to contract-out, and which and how many services to outsource were left to each hospital’s management, such decisions seemed to have been forced by the governments’ initiatives.

Korea

The spread of subcontracting in the Korean health sector tended to be driven more directly by the market than in England, although it was the case that the historical

128 features of government industrial policies and their effects on businesses have been related to this trend. According to Eun (2011b; 2012), one of the main reasons for management use of outsourcing in Korea was governments’ developmental industry policies. The Korean government in the 1960-70s encouraged large companies with 300 or more employees not only to pave a way for a subcontracting system as a way of concentration of capital but to use subcontracted workers as a means of effective labour control (Eun, 2012: 89-90). At that time industry policies driven by the government focused on fostering large companies at the expense of economic subjugation of small- and medium-sized companies to large ones, and creating a vertical labour control system with multi-layered subcontracting. Eun (2012: 90) argues that since the Asian financial crisis of 1997-1998, the combination model of direct employment with outsourcing has changed into a new model whereby subcontracted workers are substituted for a part of the existing regular workforce through the use of outsourcing, after massive dismissal of regular workers.

Such government initiatives, combined with the discourse of competition and efficiency, set up the standardised Korean model which aimed to utilise both regular workers as insiders and subcontracted workers as outsiders. Although only around 10 percent of hospitals were run by government agencies, the government intended to influence the market by drawing up guidelines on utilisation of workforce in publicly-owned hospitals. The government issued a guideline in 2001 which limited the proportion of regular workers which could be hired by public hospitals (Yoon, 2008a: 67-68). The proportion of contingent workers in the hospitals owned and run by public organisations stood at 13.6 percent in 1999 surged to 17.9 percent in 2001 and 26.8 percent in 2004 in the wake of this guideline.

129 The government announced a new policy on subcontracting in the public sector in 2006, stating that ‘all public institutions are allowed to outsource services classified as peripheral ones’ (The Korean Government, 2006: 24). This policy also allowed them to outsource core services if there were ‘rational reasons’ such as the possibility of making a huge cost reduction to compete with the private sector (ibid.).

This policy has been criticised not only by unionists but also by academics, arguing that the government’s outsourcing-friendly approach meant that many services were likely to be classified as peripheral, due to ambiguity over how core or peripheral services were defined (Yoon, 2008a: 68).

The government’s drive towards outsourcing encouraged businesses to contract-out more services across all sectors and this caused a stark division between internal and external labour markets in Korea. The health sector was no exception. As presented in Chapter 4, more than eight in ten hospitals (82 percent) have contracted-out at least one service as of 2010, far higher than the national average across sectors which stood at 54.6 percent (MoEL, 2010). Considering that subcontracting had been concentrated in the manufacturing sector up to that point, such figures confirmed that this practice had been extensively spreading into service sectors such as health care.

This form of labour market polarisation through the proliferation of subcontracting has been widespread throughout whole industries in Korea, and was encouraged by the trend of organisational isomorphism (Kim et al., 2011). It was accelerated by the

external shocks of the economic crisis, combined with actors’ strategic choices in labour market (Lee, 2011a: 299). After the Asian financial crisis of 1997-1998, the

130 Korean governments began to transform its approach from a developmental to a neoliberal state (Lim and Jang, 2006) and large firms with 300 or more employees started pursuing exploitative profit maximisation resulting in more inferior conditions in small subcontracting firms, which also led to an increase of contingent labour (Lee, 2011a: 299).

It is also noteworthy that this segmentation of the labour market was triggered by the weakness of trade unions’ power. Union density and collective bargaining coverage had both decreased, as explained in Chapter 6. In addition, unions’ activities had focused on representing the interest of existing regular workers based on enterprise consciousness.