New Report Documents How Privatization Steals Wages, Harms Communities

Friday, 06 June 2014 11:59 By Mary Bottari, PRWatch | Report Go to article

All across the country, public services are increasingly outsourced to private contractors in the name of efficiency and cost savings. But a new report from the non-profit research group In the Public Interest (ITPI) shows that outsourcing public services hurts middle and working class communities as well as workers.

The report, “Race to the Bottom: How Outsourcing Public Services Rewards Corporations and Punishes the Middle Class,” makes the case that when private contractors make huge profits from taxpayer dollars, money is often sucked out of local communities. Dollars that used to go to employees are sent to shareholders instead, harming communities as local workers have less to spend. Taxpayers take another hit when employees, who used to have access to health care and good wages, now have to rely on food stamps and Medicaid to survive.

“False promises of privatization trigger a race to the bottom. CEOs do well, but middle class jobs are replaced with poverty wages,” says ITPI’s Donald Cohen.

Privatization Fuels a Race to the Bottom

The “Race to the Bottom” report documents how when federal, state, and local governments pay hundreds of billions of taxpayer dollars to contractors for jobs that pay so little, they leave employees dependent on the social safety net. These costs are not being taken into account by governments. For example, the report cites a 2010 study that showed contracted school cafeteria employees in California received an average of $1,743 in public assistance–in effect, an additional public subsidy for a private contractor’s low wages.

Mary Sparrow was a housekeeper for the Milwaukee County Courthouse when it was privatized under then-Milwaukee County Executive Scott Walker in 2010. She was offered a new job by the new contractor, but her wages would have dropped from $14.29 with benefits to $8 without benefits. She searched for a better job, but in the meantime her unemployment benefits went to maintaining her healthcare benefits through COBRA and she had to dip into her son’s college savings account.

“Privatizing has had a devastating effect on our community. It is not just what we get paid, but what we spend in our communities. Privatizers get ahead, but not the front line workers,” said Sparrow.

The personal toll is high. “I still get calls from friends who want to give up,” says Sparrow, choking up. “This has been awful for us and I hope that any community or any state would think twice before privatizing.”

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