Peter Ellguth/Susanne Kohaut June 2013Institute for Employment ResearchNuremberg

Public Employment in Germany before and after the world wide re-cession

(Preliminary version, please do not cite)

Paper submitted for the 10th European Conference of the International Labour and Employ-ment Relations Association (ILERA) in Amsterdam

Public Employment in Germany before and after the world wide recession

1. Public Sector in Germany

In Germany the public service has so far played a rather subordinate role in empirical labour market research. Furthermore, relatively little empirical research has been conducted into the conditions of employment in the public sector, although as an employer the state has some distinctive features compared with employers in the private sector of the economy. Germany is a federal state with three levels of public organisations, the federal, state and local govern-ment. As public employers the state differs from the employers in the private sector, among other things due to the division of their staff into two status groups (civil servants and public employees and the legal obligation to provide public goods and services (Keller/Henneberger 1993: 256). Since the reunification for Germany in 1990 the public service in Germany has been undergoing a period of radical change. The tremendous growth of public employment due to the reunification led to serious chances in the public sector. Management methods typical of the private sector were introduced (“new public management”), not only as a result of the generally poor budgetary position. Other changes included the privatisation of the postal service and the railway, outsourcing of public services and the competition between public and privates enterprises as a result of the liberalisation. The restructuring process also led to a substantial reduction of employment in the public service. By now the public sector can be seen as a “prototypical example of a ’lean state’ in comparison with the majority of EU or OECD member states” (Keller 2011:2337).

In principle industrial relations in the public sector in Germany are comparable with those in the private sector. Here, too, the dual system of representation of interests applies, with in-dustry-wide collective agreements and staff councils at firm level. Like in the private sector, wage negotiations are conducted between employers’ associations and trade unions. One important characteristic of the public service, however, is that employers’ associations only exist at local government level (Vereinigung der kommunalen Arbeitgeberverbände – Associ-ation of Local Government Employers) and at state government level (Tarifgemeinschaft der Deutschen Länder – Collective Bargaining Union of the German Länder). At federal level the Federal Ministry of the Interior (Bundesministerium des Innern) is responsible (Keller/Hen-neberger 1993: 250, Keller 2006: 82). Nonetheless the conditions of employment are very similar on all three levels. (Keller 2006: 81f).

The German dual system of representation of interests is of major importance in the public service. This can also be seen in the continued clearly broader coverage of both employer and employee representation compared with the private sector. The proportion of establish-ments which are bound by collective agreements and have a staff council is also consider-ably larger than that of private-sector firms.

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The restructuring measures introduced in the public sector in the last 20 years and the sub-stantial budget deficits have led to short-term cost calculations pushing long-term considera-tions regarding the scope and quality of government action into the background. “Public em-ployers are giving up the role model function that they used to have as ‘model employers’ for the private sector and the labour market as a whole, too, and are bringing their strategies into line with those of private employers” (Keller 2006: 94, translation by the authors). Whether this affects the employees’ conditions of employment and if so, how, has not been examined systematically and empirically to date, however.

Only a few studies deal with a comparison of private and public employers at all (see Keller/Henneberger 1993, Henneberger 1997, Bellmann et al. 2009) and these always com-pare the private sector as a whole with the public sector. The obvious differences between the two sectors with regard to the establishment size structure, the coverage of collective agreements and of the representation of interests within the establishments are not con-sidered in these studies. Yet in particular the existence of collective agreements and a works or staff council have an important influence on the conditions of employment in an establish-ment. Against this background we wish to select a different approach: using the data from the IAB Establishment Panel, the conditions of employment in the two sectors are to be com-pared, though with a restriction to establishments that are really comparable, in other words adequately similar.

In a first step our methodological approach comprises methods of descriptive statistics, which we use to compare establishments in the two sectors which are both bound by in-dustry-wide collective agreements and have a works or staff council. This provides a first impression of the differences between private and public employers.

In a second step we continue our attempt to form comparable groups. Procedures that are frequently used in other contexts (especially evaluation research) are suitable for this. With the aid of matching methods, pairs of public and private-sector units are to be formed for se-lected topics, though without the causal-theory claims that are otherwise associated with this approach. The paper is thus intended to contribute towards a better understanding of the state as an employer and of the conditions of employment in the public sector.

For Germany empirical analyses of the working conditions in the public and the private sector with data from 2008 (collected before the world wide recession) show that the public sector still provided to some extent better working conditions than the private sector, measured by indicators like job security, non-regular employment and further training. More recent findings also indicate that the incidence of collective agreements and works councils were not af-fected by the recession in neither of the sectors. Therefore, we also address the question whether the working conditions in both sectors were affected by the crisis and if so how. Al-though there were no additional budget cuts in the public sector in Germany in the last years, the working conditions in the private sector might have changed leading to more pronounced differences between the sectors.

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2. The data basis

The IAB Establishment Panel1 is used as the data source. This is an annual survey conduc-ted among just under 16,000 establishments from all sectors and establishment size classes in Germany, which provides information about a broad range of establishment structures and parameters. The sampling frame of the IAB Establishment Panel is the Establishment File of the Federal Employment Agency (Bundesagentur für Arbeit - BA), which is aggregated from the employment statistics and contains all establishments/agencies with at least one em-ployee covered by social security.2 The establishments are drawn in accordance with the principle of optimum stratification, whereby the probability of selection increases with the size of the establishment. Ten establishment size classes, 17 sectors and the federal states serve as stratification variables. In order to depict newly founded establishments and to com-pensate for the effects of panel mortality, establishments are added to the sample every year. To offset the disproportionality of the random sample, the descriptive findings are each weighted to the benchmark figures of the population according to the Establishment File of the BA.3

In the IAB Establishment Panel there are basically four variables which can be used to as-sign the establishments to the three sectors: sector affiliation, the legal form, the type of busi-ness volume and the question as to whether an establishment is recognised as non-profit-making.4 To our knowledge the IAB Establishment Panel is the only comprehensive data set on establishments that contains information identifying the third sector. As we are examining the public service here and are comparing it with the private sector, we consider it necessary to delimit and exclude the third sector. The corresponding establishments of the third sector, which follow a management logic and target orientation of their own,5 are not to be included in the comparison of the sectors of interest, where they might ‘blur’ any existing differences. The third sector is only mentioned in the following in order to distinguish it from the other sec-tors.

On the basis of the criteria cited, establishments are assigned to the public sector if they belong to the field of public administration, social security or defence. In addition, establish-ments from other sectors of the economy are also regarded as belonging to the public ser-vice if they report being a corporation under public law or having a budget volume and if they are not non-profit organisations.

One reservation must be taken into account, however: the sampling frame of the IAB Estab-lishment Panel comprises establishments with at least one employee covered by social se-curity. Owing to this design the public service is under-recorded, as pure ‘civil servant estab-

1 The survey is conducted by Infratest Sozialforschung Munich.2 One-person establishments or establishments with only marginal part-time employees are not

recorded, which is of only minor importance for our purposes, however. 3 For further information on the IAB Establishment Panel, see Fischer et al. 2009.4 Using the definition of the sectors described in the following, 1,416 establishments in the first sec-

tor, 12,182 establishments in the second sector and 1,610 establishments in the third sector are available from the sample for further evaluations.

5 On the structure and conditions of employment in the third sector, see Dathe u.a. 2010.

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lishments’, i.e. establishments / agencies with no employees covered by social security at all, are not contained in the population. Units with solely civil servants on the staff are probably mainly in state authority task areas such as the police force, tax and financial administration. Such establishments or agencies with no employees covered by social security are also pos-sible when certain jobs that do not require civil servant status are outsourced

Establishments from all sectors of the economy (apart from public administration) are as-signed to the private sector, as long as they are neither non-profit organisations nor corpor-ations under public law. Nor may they have reported a budget volume as their business volume. This means that privatised formerly state-owned enterprises are assigned to the private sector here if they meet the criteria mentioned, even if they are still mainly in public ownership and are not active on pure competitive markets.

Finally, the third sector is defined as the non-profit sector. In our sample this includes all establishments that are recognised as non-profit-making.

3. General description of the sectors

On the basis of the outlined subdivision of the economy into the three sectors – public, private and non-profit, there now follows a brief description of the sectors along a few indicat-ors. This serves as a first orientation with regard to the importance of the sectors and the institutional differences between them and is intended as preparation for our construction of the comparison groups.

Table 1 first shows the relative size of the three sectors. 9 out of 10 establishments belong to the private sector. According to our definition the third sector currently comprises 7% of the establishments, only 4% are assigned to the public services. Due to the fact that the estab-lishments and agencies in the public sector are substantially larger, about 13% of the em-ployees work in this sector. The further comparison illustrates the differences between the sectors as regards the prevalence of institutional bodies responsible for the representation of interests at firm and industry level.

Table 1 about here

As mentioned earlier, the dual system of representation of interests which characterises Ger-man industrial relations also in principle underlies the labour relations in the public services (see Keller/Schnell 2003: 185). At industry level the right to free collective bargaining applies (exception: civil servants), at establishment level the Federal Staff Representation Law (Bundespersonalvertretungsgesetz - BPersVG) or the State Staff Representation Laws (Landespersonalvertretungsgesetze) are in effect, which largely correspond to the regula-tions of the Law on Labour Relations at the Workplace (Betriebsverfassungsgesetz) (see Kippels 1990, Kossens 1996 on the differences).

81% of the workforce in the public sector work under sectoral collective agreements. If com-pany-specific or in-house agreements are taken into account, the figure rises to 95%. In the

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private sector industry-wide collective agreements apply for just 44% of the employees. The significance of company-specific agreements is also considerably lower than in the public services, at 6%6. With regard to both figures, the third sector lies somewhere between the private and the public sector.

Figures on the prevalence of staff councils are rare (e.g. Schnabel 2007: 205, Ellguth 2003: 195, in each case on the basis of the IAB Establishment Panel). Generally, however, they are reported to have almost comprehensive coverage with reference to employees. Our res-ults confirm this impression (Table 1). 92% of the employees in the public services have ac-cess to workplace employee representation, compared with 39% in the private sector. Here, too, the third sector lies between the other two sectors, at 63%.

This brief comparison should have made it clear first of all that when examining the differ-ences between the public and private sector it makes little sense to compare the two as a whole. Our strategy is therefore to construct comparable groups of establishments or agen-cies in both sectors as far as this is possible. The third sector is disregarded in the sub-sequent considerations. Second, although it is possible to compare establishments with and without institutions of employee representation for the private sector (for research findings in particular for the firm level see Jirjahn 2005, Addison et al. 2004), this makes no sense for the public sector. With almost full coverage, collective agreements and employee representa-tion at establishment level are virtually a hallmark of the public services and cannot therefore be made the subject of comparisons or impact analyses.

Instead, we first wish to concentrate on establishments or agencies in the two sectors which are bound by collective agreements and have a works or staff council, and to compare them. What is behind this approach is the idea that the different conditions of employment in the two sectors of the economy can presumably be put down largely to the institutions of em-ployee participation which exist virtually throughout the public sector and that a comparison of the two sectors thus has to take this into account. For the public sector this means only a comparatively limited loss of establishments/agencies.7 For the private sector on the other hand, the restriction to the core area of employee participation is associated with an extreme reduction of the sample size and the population (see Table 2). Of the approximately 1.8 mil-lion private-sector establishments, 67,000 are left for the comparison. That is just under 4% of establishments that belong to the core area of the dual system of employer and employee representation. However, 29% of the employees in the private sector work in these establish-ments.

Table 2 about here

6 Examples of company-level or in-house collective agreements in the public services are the col-lective agreement between the Federal Employment Agency (Bundesagentur für Arbeit) and the trade unions ver.di and dbb Tarifunion, or collective agreements for hospitals. The corresponding stipulations are generally along the lines of the Collective Agreement for the Public services (TVÖD).

7 A distinct proportion of the establishments / agencies are lost since in both sectors only those units which have the minimum number of employees required for the election of a form of employee representation are taken into account.

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It is significant that this procedure results in the average establishment sizes converging at a considerably higher level. In the public services the workforce figures increased by a factor of 1.7, in the private sector by as much as a factor of 8.5. All in all we are therefore dealing mainly with medium-sized and large units in the rest of the paper, all of which are bound by industry-wide collective agreements and also have a works or staff council.8

4. Indicators of the quality of employment

If public employers are to be compared with those in the private sector, the question first arises as to which criteria describe employment and working conditions. Employment condi-tions have been a key topic in labour-market-policy debate at international level since the 1990s. Since 2003 one of the general aims of the European Employment Strategy has been to improve the quality of work. In this context the European Commission developed a concept to describe the dimensions of the quality of work and employment.

Although the quality indicators of the European Commission were developed for comparing the quality of working conditions in individual countries and therefore not all of the indicators can be measured at establishment level, the concept nonetheless provides an aid for struc-turing an examination the quality of work. The quality indicators of the European Commission are summarised in Overview 2.

Overview 2: Dimensions of the quality of work and their operationalisation

Categories of the European Commission

Examples of indicators used by the EU

Indicators in the IAB Estab-lishment Panel

Social dialogue and em-ployee participation

Employee participation, pro-portion of employees covered by collective agreements, number of working days lost due to industrial action

Collective agreements and works council in the estab-lishment

Flexibility and security

Proportion of employees work-ing part-time voluntarily/ invol-untarily or on fixed-term con-tracts

Proportions of part-time em-ployees (‘regular’, marginal), proportion of employees on fixed-term contracts, labour turnover, temporary work via employment agencies

Promotion of gender equal-ity

Gender-specific wage gap, unemployment rates by gender, gender division by occupational group / sector

Proportion of women, propor-tion of women in managerial positions, women as a per-centage of skilled workers

Work organisation and work-life balance

Employment rates by gender and household situation, avail-ability of child-care

Measures aimed at reconcil-ing work and family in the establishment (only for private sector), leave of ab-sence for family reasons,

8 The results of the following comparisons of course not only reflect the institutional setting of the establishments but are also dependent on the extensive convergence of the establishment size.

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long-term working time ac-counts

Diversification and non-dis-crimination

Employment rates by gender, age, ethnic group, disability

Proportion of older workers, measures for older persons

Productivity and high stand-ard of living

Development of labour pro-ductivity, proportion of high-skilled workers

Proportion of high-skilled workers, income

Opportunities for life-long learning and skill develop-ment

Proportion of further training measures, proportion of em-ployees who work on a com-puter

Proportion of employees in further training

Intrinsic quality of work Self-reported satisfaction with working conditions, tenure

None

Health and safety at workNumber and costs of accidents at work, rates of work-related health problems

None

Integration and access to the labour market

Transitions from unemploy-ment into further training and employment

None

Source: description following Siebern-Thomas (2005: 201), IAB Establishment Panel

For lack of a simple, generally recognised definition of quality of work this multidimensional concept was developed, which covers the dimensions outlined below. Under the dimension of “social dialogue and employee participation” the European Commission understands that all employees are informed about the development of their working environment and their company and can be involved in it. Possible indicators for this are the use of collective agreements by the establishments and the existence of works or staff councils. We consider this indicator to be so important that it is already taken into account in our study when we form the comparison groups.

The European Commission demands a balanced ratio of flexibility and security in order to promote a positive attitude among employees towards change on the labour market. The state continues to be regarded as an employer with particularly secure jobs. Indicators at establishment level are labour turnover rates as well as proportions of part-time employees, fixed-term employees or temporary agency workers.

The promotion of gender equality as an objective means that men and women are guaran-teed equal opportunities with regard to the value of their jobs and careers throughout their entire working lives. The relevant indicators available in the IAB Establishment Panel are the proportion of women, the proportion of women as a percentage of all skilled workers and the proportion of women in managerial positions.

The category “work organisation and work-life balance” means that a balance between working life and private life should be facilitated above all by means of working time regula-tions and additional services (child-care). In principle there are indicators available in the IAB Establishment Panel for this aspect. However, the questions about measures aimed at re-

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conciling work and family are aimed primarily at the private sector. For this reason this di -mension of quality of work is disregarded in the rest of the paper.

All employees should be treated equally and without discrimination in relation to their gender, age, disabilities, ethnic background, religion or sexual orientation. This principle comes under the category “diversification and non-discrimination”. As the quality of work is considered at establishment level in this paper, we are only able to make statements regarding older workers. There is no information in the IAB Establishment Panel on the other forms of dis-crimination (apart from gender, which is already used in the promotion of gender equality).

The aim of the EU is a high level of labour productivity and a high standard of living in all regions. This dimension cannot really be portrayed using establishment data. However, the amount of income earned from work is closely connected with the standard of living and is an important factor of quality of work. For this reason the wage bill per full-time equivalent in the establishment is included as an indicator.

One aspect of good quality of work is that the employees receive adequate support in life-long learning in order to exploit their potential fully. At establishment level the proportion of employees in further vocational training is a suitable indicator.

Three more dimensions of quality of work should be mentioned for the sake of completeness: the jobs should demonstrate an intrinsic quality which conveys job satisfaction and is com-patible with the employees’ qualifications and skills. One possible indicator of this is the self-reported job satisfaction. It is not possible to measure such indicators at establishment level. The IAB Establishment Panel also does not contain any information about health and safety at work. This category of quality of work, which is important in principle, includes both phys-ical and psychological factors. Health and safety at work is intended to guarantee continuous participation in working life. The dimension “integration and access to the labour market” cannot be recorded at establishment level as it concerns in particular transitions out of the education and training system or out of unemployment into employment.

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5. Conditions of employment in the public and private sectors

5.1 Comparison of establishments bound by collective agreements and with a works or staff council

In our comparison we first deal with the aspect of flexibility and security. Employment secur-ity has always been considered a typical characteristic of the public sector (Keller 2010: 32 ff). For a long time the so-called regular employment relationship was the standard in the public services, characterised among other things by full-time work, integration in the social security systems and permanent employment contracts. Due to the introduction of “flexible” forms of contracts and employment, the employment structures have changed in the public services, too. The scale of labour turnover in the establishments and agencies (measured as the number of inflows and outflows in the first six months of 2008 in relation to the mean size of the workforce in this period) provides a first indication for assessing employment stability in both sectors.

Table 3 about here

As is shown in Table 3, the labour turnover rate in the private sector (establishments with collective agreements and a works council) is considerably higher at 8.7%, than that in the public sector (5.7%). One reason for the imbalance is considerable differences in staff in-flows, with 4.7% as compared with 3.0%. The private-sector establishments are either more able to take on more staff or are dependent on hiring new staff in order to compensate for outflows. This can be investigated by looking at the reasons for leaving (see below). What is interesting, first of all, is the role played by fixed-term contracts. The increasing importance of fixed-term employment relationships has recently been emphasised in labour-market-policy debate. The possible effects on the ability of those affected to plan their lives have also been addressed (e.g. O.V. 2010). The underlying research provides evidence that the public ad-ministration holds a leading position with regard to the proportion of new hires with fixed-term contracts and points out the different motives in the economic sectors (see Bellmann et al. 2009, Hohendanner 2010).

A comparison of the establishments which have collective agreements and a works or staff council in the two sectors shows, however, that with regard to the proportion of fixed-term employment contracts for new hires the private sector (60%) somehow exceeds the public services (51%). In particular the influence of the works council on the usage of fixed-term employment becomes apparent here. In the literature this is explained primarily as a strategy to protect the core workforce (see Boockmann/Hagen 2003).

The other side of the coin is the staff outflows, where there is an equally large predominance of the private sector (4.0% as against 2.7%). With the IAB Establishment Panel it is possible to distinguish between dismissals and quits. The most important measure of employment security from the employee perspective is probably the proportion of dismissals or layoffs. In the public sector these measures fall below the detection threshold. In the private sector dis-

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missals and layoffs are by all means an element of personal policy in firms but only account for a small proportion (0.6%) of the outflows.

Employees in the public services also rarely leave their employers of their own free will (0.5%). That is different in the private sector. There quits (1.3%) account for roughly a third of all staff outflows. However, the data do not show what motives are behind these differences. There are hardly any differences between the sectors concerning the proportions of outflows for other reasons, e.g. cancellation of a contract by mutual agreement, transfer, retirement or incapacity for work. With regard to hiring behaviour, it is therefore more the loss of employ-ees that influences private-sector employers than the dismissals they have announced them-selves. All in all, it is of course the considerably higher outflow rates that necessitate the higher recruitment rates and make the turnover rates considerably higher than in the private sector on the whole.

One criterion for assessing (poor) quality of jobs is the divergence from the benchmark of the regular employment relationship (Mückenberger 1985). The corresponding forms of employ-ment, which are generally termed atypical, include part-time work, marginal part-time work, fixed-term employment and temporary agency work (see Keller/Seifert 2006; for a discussion on the relationship between atypical and precarious employment, see Brehmer/Seifert 2008; on increasing the flexibility of staff deployment in the public services, see Czerwick 2007: 136ff). With regard to part-time employment the European Commission distinguishes between voluntary and involuntary part-time work. This distinction cannot be traced using establishment data. A possible alternative is the distinction between “regular” and marginal part-time employment as in the definition of the different forms of atypical employment. “Reg-ular” part-time employment is not regarded as problematic per se in the literature. However, that is not the case with marginal part-time employment, which is considered inadequate compared with standard employment relationships in terms of income, employability, access to further training, social security and such like.

Table 4 about here

On the whole a good one in four employees in the public services works in some form of part-time employment. The rate is therefore twice as high as in the comparable establish-ments in the private sector (28% as against 15%). What is interesting is that this dominance of part-time employment in the public sector is based solely on the use of regular part-time work (26%). Marginal part-time employment is of only minor importance here, at 3%. How-ever, in the private-sector establishments (with collective agreements and a works council) too, the proportion is relatively limited, at 4%. In the private sector as a whole the proportion of marginal part-time jobs is three times larger. This is mainly due to the comparatively low prevalence of works councils (on the relationship between works councils and marginal part-time employment, see Pfeifer 2007). The supposed role model character of the public sector in the form of a restrained use of marginal part-time employment disappears almost entirely when we compare the units which have employee representation institutions.

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As expected, temporary agency work does not figure in the public sector. In the comparable private-sector segment, on the other hand, at least 4% of the workers come from an employ-ment agency. The statement from the temporary employment agency sector that “the public services is now also discovering temporary work via employment agencies” (Obertreis 2009) has so far not been reflected in relevant figures.9

Fixed-term employment was already an issue when we examined labour turnover. Besides the recruitment practice – measured as the proportion of all new hires which are fixed-term employment contracts – the stock of employees with fixed-term contracts of course also gives some indication of employment security. In addition to its adjustment function, this type of contract is frequently discussed on the one hand in terms of the increase in the precarity of careers (Giesecke 2006). On the other hand the use of fixed-term contracts as a screening instrument and their function as a bridge to permanent employment is emphasised (Ho-hendanner/Gerner 2010). With regard to the proportion of fixed-term employment the public sector (8%) does not differ dramatically from the private sector (7%). In the public services the funding for jobs being limited to a certain time period is frequently a reason for fixed-term contracts (Hohendanner 2010). The extent to which fixed-term contracts really create a transition into regular employment (in the same establishment) can be examined using the data from the IAB Establishment Panel.

If cases of workers being given a regular employment contract after a fixed-term contract has expired are examined, and if this is seen in relation to the total number of exits out of fixed-term employment (workers taken on permanently and separations after the expiry of a fixed-term contract), it emerges that despite the high significance of new hires on fixed-term con-tracts in the public sector (51%), transitions into permanent employment relationships are comparatively rare (40%).10 In the comparable private-sector establishments, with a similar recruitment practice (60%), the bridging function of fixed-term employment is seen far more frequently (59%).

Turning to the subject of further training: the preservation of employability and the possibility of career development are, of course, a characteristic of the quality of work. The general im-portance of company further training is also underlined again and again against the back-ground of the expected skill needs. In contrast to the impression gained from looking at the overall sectors, the establishments/agencies in the public services are involved in further training only slightly more intensively than those in the private sector (see Table 5). There is also only a slight difference between the sectors with regard to the proportion of employees involved in further training11.

Table 5 about here9 The practice used by public employers of setting up so-called jobs pools in order to place surplus

staff in vacant posts, which is sometimes described as temporary work, is not recorded in the data.10 It must be pointed out again here that using the data from the IAB Establishment Panel it is only

possible to observe cases of workers being taken on permanently within the same establishment. 11 In the IAB Establishment Panel the employers surveyed have the possibility to report the number

of cases of participation or the number of persons participating. The details of cases of participation were converted into person-related data using a conventional procedure (see: Düll/Bellmann 1998).

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Wages and wage differentials between the public and private sector are regularly discussed during wage negotiations in the public services (on wage formation in the public services, see for example Henneberger 2004: 221ff). Depending on the origin of the information, the exhausted treasury funds, the general overpayment of public employees or their need to catch up with wage development in the private sector are emphasised. In the research literat-ure wage differentials for different employee groups are examined. In addition to gender-spe-cific differences (gender wage gap), the comparison of employees in the public and private sectors is a major topic of interest (e.g. Tepe/Kroos 2010; Melly 2005; Allington/Morgan 2003; Jürges 2002). The results, which are based on individual data, illustrate that a differen-tiated examination of individual employee groups reveals different wage differentials in each case. In particular women in the lower income groups tend to benefit from employment in the public sector, while men in the upper income groups have to accept the highest wage differ-entials (e.g. Tepe/Kroos 2010: 9).

It is not possible to conduct differentiated analyses of wage differentials using the establish-ment information at our disposal regarding the wage bill in the month of June (excluding the employer’s contribution to social security). Our intention is rather to examine whether some-thing like a trade-off of remuneration components in return for employment security can be observed at establishment level (see Henneberger 1997: 142ff.; Pfeifer 2011), well aware that the situation can be very different for the individual employee groups. The following com-parison of the units with collective agreements and a works or staff council is to be regarded with greater scepticism than the preceding comparison, however, in so far as the wage level also depends to large extent on other establishment-specific and individual factors. The es-tablishment-specific factors that are likely to be of most importance are not only the size of the establishment but also the skills structure and the proportion of women.12

Table 6 about here

According to our descriptive results the wage level per full-time equivalent13 in the public sec-tor is not lower on average than that in the private sector. In this comparison there is no sign of a loss of pay as the price for greater employment stability. However, it remains to be seen whether this still holds when the additionally available establishment-specific information is taken into account (see next section).

5.2 Comparison on the basis of matching methods

After comparing private-sector and public establishments with institutional settings that are actually comparable, we wish to go one step further and increase our demands regarding

12 These and other establishment-specific characteristics are controlled for in our subsequent ap-proach (see section 5.2). It would only be possible to take individual heterogeneities into account with corresponding data on individuals.

13 For the calculation of the full-time equivalents the IAB Establishment Panel contains information on ‘regular’ part-time employment and marginal part-time employment. A part-time employee in west-ern Germany is taken into account with a factor of 0.6, and in eastern Germany with a factor of 0.7 owing to the larger number of hours worked on average per week by part-timers there. In both parts of the country marginal part-time employees are taken into account with a factor of 0.2.

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comparability. Matching methods are used for this in order to form pairs in the sense of differ-entiated comparison group formation without any claims as regards causal explanation. It is therefore a hitherto unusual adaptation of this procedure to a subject for which there is no treatment and where it is not the effects of the treatment that are to be examined. We ‘only’ aim to obtain two groups of establishments which differ in no respect other than their sector affiliation, as far as this is possible. Any differences in the variables of interest after the matching procedure can then be interpreted as genuine differences between the sectors. With this approach we also want to clarify how robust the results are which were described previously on the basis of the comparison of establishments with collective agreements and a works or staff council.

Our approach follows studies on gender-specific wage differentials in which the pay of fe-male employees is compared with that of male employees with the same observable charac-teristics. The comparison groups are formed using matching methods (see Hirsch et al. 2009).

In concrete terms, for our purposes probit models are first estimated for an establishment’s affiliation to the public sector. All available establishment-specific variables which influence the likelihood of belonging to the public sector and are potentially associated with the out-come variables of interest are used as matching variables (see Caliendo/Kopeing 2008: 38). Our selection of matching variables follows the relevant literature. Each public establishment/agency is then matched with a private-sector establishment with identical or at least comparable characteristics on the basis of the propensity score (statistical twin). There are a number of different methods available for matching the pairs. We present the results of nearest neighbour matching without replacement.14

We apply the following analyses to the aspects of employment security, non-regular employ-ment, further training and pay. For examining the various measures of labour turnover, the probit estimate includes establishment size (in log form), compliance with an industry-wide collective agreement, the age of the establishment, the proportion of women, the proportion of part-time employees, the skills structure, the proportion of marginal part-time employment, the location of the establishment, investment activity, an expected shortage of skilled man-power, the proportion of employees with paid overtime, provision of further training and the wage per full-time equivalent (see also Brixy et al. 2006). The matching procedure can be regarded as successful when the matching variables no longer show any significant differ-ences between the two groups after the pairs have been matched.15

14 In this method each ‘twin’ is used only once, which can be described as the restrictive variant. To support the results we also used alternative methods, e.g. kernel matching, where each case (within the common support) is included in the matching procedure, but the cases are weighted according to their proximity (in terms of the propensity score) (see Caliendo/Kopeinig 2008). The results of the different matching methods, which essentially correspond to those presented here, are available from the authors on request.

In this study PSMATCH2 and Stata 9.2 are used, on this issue see Leuven/Sianesi (2003).15 A table with the probit estimate for the matching procedure can be found in the appendix, together

with an overview of the matching quality. The corresponding Information on the following three topics is available from the authors on request.

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Table 7 about here

Table 7 shows the outcome variables of interest when the “twin establishments” in the public and private sectors are compared. On the whole the differences reported earlier (see Table 3) are confirmed. Labour turnover remains clearly lower in the public sector, although the difference decreases slightly. The differences with regard to permanent hires and dismissals are particularly striking here, too. In the light of these results the public services appears to be a stronghold of strong job security, albeit with considerable barriers to access regarding permanent employment compared with the private sector.

Our descriptive findings on non-regular employment comparing establishments/agencies with collective agreements and a works or staff council (see Table 4) still hold after the matching procedure - albeit a bit less pronounced.

Table 8 about here

Regular part-time work remains a domain of the public sector, whereas marginal part-time is used as much as in the private sector. Temporary agency work is still virtually non-existent in the public services with in average a few percent in privately owned firms. Fixed-term con-tracts are to the same extent part of the personnel policy in both sectors.

The results presented earlier with regard to the establishments’ commitment to further train-ing (see Table 5), are largely confirmed and clarified. Concerning the decision to finance company further training, the public employers show somewhat stronger commitment.

Table 9 about here

As regards the proportion of employees included in further training, no significant differences between the public and the private sector can be ascertained.

In the comparison of establishments/agencies with collective agreements and a works or staff council in the public and private sectors, no differences in pay (wage per full-time equi-valent) emerged (see Table 6). The comparison of twin establishments matched with regard to their wage variables reveals a clearly different picture. In the public-sector establishments pay on average is significantly and, at about 10%, also noticeably lower than in the compar-able establishments in the private sector.

Table 10 about here

Supported by existing research this difference seems to be quite plausible. In the public ser-vices, establishments obviously offer greater employment security (on average). This does indeed seem to be accompanied by a noticeably lower average wage level than in the private sector. However, here too, we must be cautious. As suggested earlier, other (individual) factors may be at work here which cannot be controlled for with the available data and can have an influence on the wage level. Ultimately there is a need for further research here, which can only be met by using combined employer and employee data.

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6. Quality of work before and after the crisis

As pointed out earlier restructuring through privatization and budget reduction in Germany began already in the 1990th. Since then the public sector decreased considerably. If the Ger-man public sector by now is really a “lean state”, then the question arises whether it was af-fected by the worldwide recession or not. In this chapter we want to take a closer look on possible changes in the public sector between 200816 and 2011. In many European countries the recession led to major cuts in the public sector. In Germany on the other hand special programmes to fund public investments were introduced and there were no layoffs in the public services.

Table 11 about here

Furthermore, a comparison of the structure of the public and the private sector before and after the crisis shows almost no differences within the sectors. As shown in table 11 import-ant characteristics of the respective sector like the average establishment size, the distribu-tion of employees, the proportion of women as well as the share of workers with industry-wide collective agreements and works councils remained constant during this time.

Table 12 about here

But although the structure of the sectors has not altered there could still be changes in the quality of work. To compare the working conditions between 2008 and 2011 non standard forms of employment, further training and wages are chosen as indicators. Again the results are calculated for the sectors as a whole and for the firms with collective agreements and works councils in both sectors. Overall no major differences in the various employment forms neither in the public nor in the private sector can be seen (table 12). There seems to be a minor increase in part-time employment covered by social security in the public sector. All other indicators remain constant over time with one exception. The proportion of fixed-term employees/exits taken on permanently has increased in the public and the private sector firms with collective agreements and works councils. There is almost no change in the sec-tors as a whole. This is plausible because works councils tend to protect the core workforce of their firm against layoffs and employers therefore have to hire new personal on a fixed-term basis.

Table 13 about here

Looking at the indicator “further training” (table 13) it can be seen that there is a slight in-crease in the provision of further training in the public and the private sector over the years with the exception of private firms with collective agreements and works councils. But the proportion of firms providing further training was already on a very high level in 2008.

Table 14 about here

16 The data for 2008 were collected in June 2008 before the world wide recession.

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The last indicators, the wage per capita, shows that the employees neither in the private nor in the public sector had to accept wage cuts, on the contrary the wages increased in both sectors. Looking at the complete sectors the rise in salary was around 2 percent. When con-sidering only firms with collective agreements and works councils the rise was even higher. Employees in the private sector gained almost 3 percent, employees in the public sector even 7 percent. Our results indicate that although the world wide recession had a serious impact on the German economy the working conditions of the employees in both sectors all in all did not change significantly and there even was a rise in salary.

7. Conclusion and outlook

The starting point for our examination of the state as an employer and our comparison of the sectors was the fact that collective agreements and works or staff councils are integral ele-ments of the public service. A comparison has to take this into account, as the institutions representing employee interests have a significant effect on the conditions of employment. The comparison of the public service and the private sector as a whole that is otherwise cus-tomary in the literature depicts differences between the sectors which are not necessarily based on particular features of the sectors but primarily on structural differences between the two sectors of the economy.

Focusing on private-sector establishments that are comparable with regard to the institutions of employee representation means a strong selection and concentration on the medium and large units. The majority of the private-sector establishments for which there are no equival-ents in the public sector are therefore excluded. If the establishments which are identical in this sense are now compared, clear differences in the conditions of employment remain. The results diverge in some cases substantially from those that would emerge when comparing the two sectors as a whole. In this respect our analyses deliver new and unexpected insights.

The paper focuses on characteristics which correspond to the dimensions of the quality of work as defined by the EU, in so far as they can be operationalised at establishment level and have been taken up in the debate surrounding the state as a role model employer or its departure from this role. Our aim is to provide an impression of existing differences in the sense of a more ambitious description. To this end we proceed in two steps: first we examine only those establishments in the two sectors which are bound by collective agreements and have a works or staff council. Then in a second step we use matching methods to form pairs of establishments which are also as similar as possible with regard to other characteristics and differ only in their sector affiliation. We do not intend to make a causal interpretation of the results but to support our findings on the basis of the groups specified previously.

One characteristic that is attributed to the public service is confirmed impressively, and that is the strong employment stability, which can be seen in both lower rates of dismissals and quits and fewer recruitments. These results, which are reassuring for insiders, of course mean large obstacles to access for outsiders. The leading position regarding fixed-term re-

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cruitments which is generally attributed to the public services can no longer be confirmed when similar establishments in the two sectors are compared. However, the comparatively poorly developed bridging function into regular employment in the public service remains and seems problematic in terms of labour-market policy in view of the large proportion of fixed-term contracts. The lower wages which are often mentioned as the other side of the coin can only be determined (at establishment level) in the comparison using matching procedures.

The frequently claimed increasing flexibility in the public services and the associated import-ance of atypical forms of employment can only be partly substantiated. Regular part-time employment is particularly important in the public sector. With regard to marginal part-time employment, on the other hand, there are hardly any differences between the two groups. The supposed role model function of the public service can therefore mainly be attributed to structural differences between the two sectors when viewed ‘naively’. Temporary agency work is of virtually no importance in the public services, the proportion of employees on fixed-term contracts, in contrast, is larger.

On the whole our examination of the public sector by comparing selected groups of similar establishments provides an impression of the employment conditions and the existing differ-ences from the private sector. The empirical results indicate that the state continues to provide better conditions of employment than the private sector despite economisation and privatisation trends. As a result of the rather “unorthodox” methodological approach of first using only the establishments with collective agreements and a works or staff council for the comparison, it was possible to gain new insights. In addition, the matching method proved to be a good procedure for supporting descriptive results at a “higher level”, though without be-ing able to derive any causal interpretations from it.

To a certain extent the results on wages take a special position. The data available at estab-lishment level are presumably insufficient for studying wages, as the wage level depends in particular on the individual characteristics of the employees. As mentioned earlier, there is a need for further research here. By using combined employer-employee datasets it would be possible to take into account both establishment-specific and individual characteristics.

Comparing the working conditions in 2011 with the ones 2008 before the world wide reces-sion no significant changes with regard to forms of employment are to be observed. The pro-vision of further training and the participation in further training slightly increased in both sec-tors. Although the world wide recession had serious consequences for the German economy, wages in both sectors increased at least a little during this period. Our results also indicate that there is no divergence or convergence of the sectors in matters of working conditions.

It would be interesting to extend the analyses conducted here to cover other groups of estab-lishments. Using the same methods it would thus be possible, for example, to compare pub-lic and private banks, or public utilities and their private-sector counterparts. The findings obtained in this way would contribute towards a better understanding of how the different sectors work. The non-profit sector is another possible field of research. In view of the in-

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creasing size of this sector, the conditions of employment there are also gaining in import-ance and deserve closer examination.

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