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IMPACT OF PRIVATIZATION OVER LABOR FORCE In a Sample of Privatized Firms in Chile

IMPACT OF PRIVATIZATION OVER LABOR FORCE In a Sample of Privatized Firms in Chile. CORFO, the Chilean Economic Development Agency SOE’s Administration & Privatisation Committee , SEP Carlos Mladinic, Chairman, SEP, cmladinic@corfo.cl. THE IMPACT OF PRIVATIZATION UPON LABOR FORCE.

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IMPACT OF PRIVATIZATION OVER LABOR FORCE In a Sample of Privatized Firms in Chile

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  1. IMPACT OF PRIVATIZATION OVER LABOR FORCE In a Sample of Privatized Firms in Chile CORFO, the Chilean Economic Development Agency SOE’s Administration & Privatisation Committee, SEP Carlos Mladinic, Chairman, SEP, cmladinic@corfo.cl

  2. THE IMPACT OF PRIVATIZATION UPON LABOR FORCE • There are multiple impacts from privatization upon workers and the labor force, which not necessarily involve a cutdown of workers in privatized firms. • In Chile, privatization has resulted in greater investment, which has had a positive impact over the country’s labor force. • In state-owned firms transferred to the private sector, workers are protected by agreements that increase stability, severance protection and direct additional benefits.

  3. BENEFITS FOR WORKERSPrivatizationsduring the 90’s W O R K E R S 1.- Advanced legal severance payment, plus additional compensation. 2.- Option to purchase shares for up to 10% of the firm at preferential prices. 3.- CORFO’s credit to purchase shares, payable in 18 years, with preferential interest rate. 4.- Personal credit of up to 87% the price of the shares as liquidity support for consumption (preferential rate) 5.- Special severance packages for workers dismissed during the first 24 months after privatization

  4. BENEFITS FOR WORKERSPrivatizationsduring the 80’s W O R K E R S 1.- Advanced payment of up to 90% of legal benefits; the worker is obliged to earmark 80% to purchase shares. 2.- 30% of the shares available for workers at preferential prices. 3.- The amount due of severance payment is paid when the worker retires. 4.- Preferential rate credit for personal consumption.

  5. COMPAÑÍA de ACERO del PACIFICO C.A.P (Iron Mines & Steel Mill)Trend for investments and Labor Force

  6. Compañía de Telefonos de Chile CTC (Basic Telecom Company) Trend of investments and labor force

  7. Compañía Chilena de Electricidad, CHILECTRA (Power Utility)Trend Of Investments And Labor Force

  8. Empresa de Telecomunicaciones de Chile ENTEL (Long Distance Telecom Company) Trend of Investments and Labor Force

  9. LAN Chile (Flag Airline) Trend of Investments and Labor Force

  10. IMPACT OF PRIVATIZATION UPON LABOR FORCE IN WATER UTILITIES

  11. A comparison: privatizations during the ‘80s and ‘90s: Sales values got by SEP

  12. OUTSOURCED LABOR FORCEFIRMS PRIVATIZED IN THE 80’s

  13. IMPACT UPON LABOR FORCEFIRMS PRIVATIZED IN THE 80’s

  14. FIRMS PRIVATIZED IN THE 90’sWATER UTILITIES Trend of Investments in US$ million and workers

  15. WATER UTILITIESTREND OF INVESTMENTS AND LABOR FORCE

  16. THE IMPACT OF PRIVATIZATION UPON WORKERS AND LABOR FORCEConclusions • Corporate investments have increased as a result of privatizations in Chile, with a positive impact upon the labor force. • In the sample of firms privatized during the 80’s, workers (both direct and indirect) increased their share of National Work Force from 0.58% in 1987, to 1.34% in 2000. Direct employment created by the firms of the sample privatized during the 80’s decreased from 0.41% to 0.28%. • Direct employment in the sample of firms transferred during the 90’s decreased by 32% during the last years. This may reflect previous overstaffing as well as deeper and quicker outsourcing processes. There are no figures available for indirect employment resulting from the externalization of operations or increased investments.

  17. THE IMPACT OF PRIVATIZATION UPON WORKERS AND LABOR FORCE Conclusions • Workers must be involved in privatization processes. In Chile, the success of the process is explained by the direct involvement of the workers, as well as by the execution of previous agreements that directly benefited them, for example: • Participation in the firm’s shareholding. • Privatization’s Success bonuses. • Extra compensation in case of discharge, during a specific time period, protecting the vulnerability of elder or less skilled workers. • Overall, special benefits well above those granted by state-owned firms.

  18. THE IMPACT OF PRIVATIZATION UPON WORKERS AND LABOR FORCE Conclusions • Investments made in 2000 in the sample of firms privatized in the 80’s exceed by 450% those made in 1987, prior to their privatization, while in 1995 they had been 660% greater. • Investment increased from US$ 71 million to US$ 221 million in water utilities privatized in the 90’s, with a positive impact upon the country’s employment. • Impact on employment does not depend on whether the firms’ shares are controlled by the State or by the private sector, rather on the growth of the industry, and on the ability to investment of such firms. • For example, telecommunications industry’s sales in 1987 –when the state-owned firms were privatized– amounted to US$ 308, while they reached US$ 2,613 million in 2000. However, this requires investment volumes that the State was unable to afford.

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