Employment protection regulations in local public transport: how do they affect production efficiency and competition?

Document Type

Conference Paper

Publication Date


Subject Area

organisation - competition, organisation - regulation


Employment protection in local public transport raises crucial questions in a period of changing regimes of how transport services are purchased by the government. Traditionally the government either produced passenger services itself or negotiated with private businesses. However, competitive tendering is increasingly introduced in European countries. This occasions much debate, as many – especially labour unions – argue that competitive tendering worsens working conditions. They are of the opinion that employees pay for the increased production efficiency gained through competitive tendering, as “slack” is reduced and employment relations become unstable. On this background there is a debate going on in Norway on how to regulate employment protection in the event of competitive tendering processes in local public transport. One alternative is to give the workers the same rights when competitive tendering is carried out, as they would have had in the events of transfer of an undertaking. This is practised in the capital areas of Denmark and Sweden and introduced in one Norwegian region. In a report by the Institute of Transport Economics (Osland/Leiren 2006), we map the expected results of franchising on employment relations which refer to employment protection, wages and pensions, working time, qualification requirements, and workers’ participation. We conclude that franchising is most crucial to employment protection. We suggest alternative ways of limiting this effect. One of the alternatives is to adopt employees’ rights in the events of transfer of an undertaking. However, the effects of such a regulation may vary according to different factors such as whether the employees have already been through a process of competitive tendering. We propose to map such factors and discuss the extent of how the regulation may affect employment relations. Moreover, we ask the question: How will the regulation affect other areas such as competition, production costs and administrative costs? Does the regulation cause unwanted risks for the Public Transport Administration and bus companies, thereby rising costs and distortion of competition?


Permission to publish abstract given by AET.