Impact of Privatization on Workers - David Newby

Workers are affected both when public sector work is contracted out to private bodies and also when private firms "outsource" to subcontractors.

Historically, industries wanted "vertical integration"-keeping all operations from a product's start to finish within their own corporation, as, for example, in automobile production. Recently, in order to increase profits by cutting labor costs, industry has abandoned the earlier structure.

Corporations are now avoiding union wages by subcontracting with small non-union firms. This practice hurts not only union workers but also undercuts the general advances in wage standards that the union example has set for the whole economy.

"Outsourcing" to low-wage countries is a second serious threat to workers, who, as the foundation of the American middle class and the source of tax revenue for the public sector, paradoxically, are essential to the well being of the private sector.

In another effort to increase profits, private corporations have, for the past two decades, been seeking contracts for work in the public sector. Everything from garbage collection and social services and, most recently, even schools and prisons are among the targets.

Some argue that privatization will save taxpayer money, that government services will be revitalized by competition, that quality will be improved, that the community will benefit from contracting out, and that private sector employees are more efficient than public employees.
But we must ask what this privatization in the interest of corporate greed does to the workers. The following figures from 1995 show large reductions in pay and benefits to the point that many workers found themselves at poverty level.

1995 Hourly wages

public sector private sector
union jobs non-union jobs

garbage collectors $13.63 $6.90

registered nurses $21.06 $17.89

correctional officers $15.14 $10.84

janitors $10.26 $ 7.24

Also from 1989 to 1995 entry-level parking attendants, cashiers, security guards, and custodians lost between 25% and 32% when their job was privatized. At such levels such workers become eligible for public subsidies-health care, childcare, food stamps, etc. Obviously, the taxpayer is hardly the winner. Obviously too, if we are to make fair judgements, we must have accounting that accurately compares the full cost of private services with the same public service.
As private sources have demonized and undercut government through ridicule and critical stereotypes, we must reaffirm the belief that government, democratically controlled, can and must serve all the people of the nation with healthy, efficient, and well-run government and that mediocrity and increased conflict will be our destiny unless equality and social and economic justice are truly the goals of this nation.