What effect will the privatization of currently state-run enterprises have on the employment levels in those enterprises in the short run? and in the long run?
In the short run, employment will drop as the enterprise will have to reduce operating costs to make a profit. In the long run, privatization is usually beneficial in terms of profitability and employment growth. It depends upon the enterprise. One of many privatized industries that failed was Sabena Airlines. so did many factories in former East Germany. See http://www.cnn.com/WORLD/europe/9911/08/germany.carpetbaggers/
The effect of privatization on employment levels in state-run enterprises can vary in both the short run and the long run.
In the short run, when an enterprise is privatized, there is often a need to improve efficiency and reduce overall costs to make the company profitable. This can lead to downsizing and job losses as the new owners might restructure the organization to streamline operations and eliminate any inefficiencies. This reduction in employment levels is a common short-term effect of privatization.
However, in the long run, privatization can have positive effects on employment levels. When state-run enterprises are privatized, they are usually subject to market forces and competition. This can lead to more investment, innovation, and improved productivity. As the enterprise becomes more efficient and profitable, it can create new job opportunities, expand its operations, and contribute to overall economic growth.
It's important to note that the impact of privatization on employment levels can vary depending on the specific industry, market conditions, and the approach taken during the privatization process. Not all privatizations lead to increased employment or successful outcomes. Examples like Sabena Airlines and some factories in former East Germany illustrate cases where privatization did not result in improved employment levels or profitability.
To fully understand the effect of privatization on employment levels in a specific enterprise, it's helpful to analyze the market conditions, industry dynamics, and the specific strategies adopted during the privatization process.