Industrial Relations in Europe 2012 - European Commission - Europa

purposes of the present analysis. These definitions and classifications are unable to draw a
clear demarcation between private and public sector organisations and employees, and are
therefore too wide and inclusive. These drawbacks are especially relevant with regard to
services related to education, health and social work activities, which in most countries are
provided not only by public organisations, but to a significant extent also by private sector
for- and non-profit organisations, with personnel on ordinary employment contracts. This
prevents a precise identification of the boundaries of the public sector, and consequently of
the size of public sector employment and its variation over time. Nonetheless, these are the
only data that allow systematic comparisons between countries and sectors. Therefore, it is on
these Eurostat NACE Rev.2 data that our analysis on public sector employment size and
structure is based, unless differently specified. For a discussion of definitions, see box 1.3.
Box 1.3: Statistical classifications for the public sector
The statistical classification of economic activities in the European Community
(NACE) represents the basic reference for all analysis of the economic structure in the
EU. However, NACE is organised along activity rather than ownership lines and
therefore it is not possible to distinguish between the private and the public sector when
looking at the different statistical data which are classified according to the NACE
taxonomy, such as employment levels. In the case of NACE Rev.2, the present version
of the classification system, which has been used since 2008, the core of the public
sector is to be found in section O (Public administration, defence; compulsory social
security), since most of these activities are performed directly by public employers and
public employees – although not exclusively.
Other important activities for the public sector – which are usually also quite relevant in
terms of employment – are sections P (Education) and Q (Human Health and Social
Work), since the public sector typically directly provides an important share of overall
education and health services. However, private organisations are widely present in
these activities, with a relative importance which depends on both national traditions as
well as on the national regulatory framework. This framework may in some cases
distinguish between the formal responsibility and possibly the funding of certain
services and the legal form as well as the substantive nature of the provider of the
service, so that it is not rare to find private organisations which operate within the
public education and health systems according to ‘accreditation’ rules, for instance. This
latter possibility points to a second very important issue when looking at statistical data
on the public sector: their cross-country comparability. Not only should data and
indicators be regarded in general as ‘proxies’ of the public sector size, because the
classification is built around activities, but also, in the various national settings, the
relative importance in each NACE section of public and private organisations and
employment is different.
1.3.2 The changing structure, role and functions of the public sector and of public
services
The public sector is of special relevance for the functioning of any economy and society and
for many decades after World War II the public sector was the main provider of fundamental
and vital economic and societal services such as education, public transport,
telecommunications, healthcare, postal services. During the past decades the public sector has
been faced with major challenges such as budget constraints and the need to cut public
services, which have led to profound structural reforms of the sector. These reforms are well
documented for the EU (e.g. Ferner, 1995; Schulten, Brandt and Hermann, 2008, Vaughan-
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