The Public Sector Dilemma: Marginal Flexibilization As a Consequence of European Crisis Management and Fiscal Austerity

In the course of the European crisis management, some member states were forced to accept structural reforms and austerity measures in order to get financial support. Against this background, the governments of the concerned countries are faced with a dilemma: On the one hand, they must cut spending and consolidate their budgets in order to show credibility to international lenders. On the other hand, the public sector is a large employer with a strong responsibility for its employees, and its wage and employment policies are under close public scrutiny. In this paper, we employ power resource and labour market theories to analyse which new cleavages or conflicts arise from governments’ solutions to this dilemma and how this affects the working conditions of certain employment groups. Using EU-SILC data from 2010-2014, we find that the solution to the public sector dilemma generally resulted in the transformation of the public wage and employment structure through marginal flexibilization (implying that labour market newcomers are much more affected by job and wage cuts than the established employees), which has led to an increasing dualization along the age dimension.