Privatization Hurts Workers, Does Little to Reduce Waste

Despite some minor victories and strident anti-government battle cries, a lengthy war to slash the size of government is bogged down and shows no signs of ultimate victory.

There is general agreement, even among the most militant anti-government warriors, that relatively little was accomplished by President Reagan at the national level to turn over to private entrepreneurs work traditionally done by government employees.

President-elect George Bush hasn’t even hinted whether he plans to carry on Reagan’s attack on government services.

A bit more has been done at the local level around the country, but far less than enthusiastic advocates of privatization want. There are no figures measuring the overall success rate of local-level privatization, but Los Angeles County data shows that it has been small.

The conservative majority on the Los Angeles County Board of Supervisors is said to have been on the front line of the war for the past 10 years, trying to give county workers’ jobs to for-profit companies.

But after all the supervisors’ anti-government talk, private firms are getting only a piddling 1% of the county’s $8.1-billion budget to do work previously done by county employees.

The minimal success of the privatizers doesn’t mean for-profit firms cannot do some jobs for less money than government. The trouble is, they usually do it by reducing wages of workers sharply so the company can make a profit and still trim costs to the government.

That is hardly an innovative management tactic and it can devastate the lives of public employees by throwing them out of work or forcing them to accept lower wages.

The latest example of local-level privatizing is the agreement reached Dec. 9 by Supervisor Pete Schabarum, Los Angeles Mayor Tom Bradley and others to trim the size of the troubled Southern California Rapid Transit District.

Over the furious protests of unions representing RTD employees, a portion of the RTD was carved out so that two private transit firms, Laidlaw and Embree, can run buses in the San Gabriel Valley area.

Schabarum and others hope that more cuts will follow, which will further splinter RTD and could worsen service.

And the workers will suffer. RTD drivers have a top pay scale of $14.75 an hour. The private companies will pay drivers an estimated one-third less in wages and provide fewer fringe benefits.

Also, the private firms will cut their costs by using government-furnished, costly new buses for the San Gabriel lines. The RTD buses come out of the district’s own budget.

Efficiency of the privately run buses can be increased if company officials crack down on the abuses uncovered among RTD employees--abuses ranging from fare box pilfering to excessive overtime.

One example: Until recently, an RTD driver could skip work on a Friday and make up the lost day by working Saturday--at time-and-a-half wages.

Abuses such as that should have been eliminated long ago by RTD and the unions representing its workers. Many were taken care of in April when contracts were renegotiated, in no small part because of the threat of privatization.

Schabarum’s push to chop up RTD and serve pieces to private companies is just part of his ongoing crusade for privatiza tion and against unions.

But Bradley, who always has had strong labor support in his political campaigns, shocked union officials when he joined Schabarum. He may have deserted the workers partly because it is difficult to defend RTD’s wasteful practices.

However, that useful goal almost certainly could have been achieved sooner without privatization and splintering RTD if Bradley and other political leaders had made unequivocal demands for reforms.

The same point can be made about privatizing in general:

It makes no sense to bash public employees and kill off government-operated services to improve them. Better leadership in government usually can do the same thing.

The threat of privatizing can at times force improvements in government service, but the tactic is still rare for two principal reasons:

First, few for-profit companies are demanding that they get work customarily done by government because there isn’t much profit in it.

Secondly, there is little evidence that privatization eliminates government waste.

Princeton sociologist Paul Starr, who has written about the issue extensively, says a quick glance at just the recently exposed contracting scandals among multibillion-dollar defense companies should be enough to dampen the ardor of even the most enthusiastic advocates of privatization.

And remember Conrail, the freight railroad.

Conrail was created by the government in 1976 by buying some bankrupt private freight companies. The government put up capital to modernize it and managed it so well that the railroad became profitable again.

Last year, the profit-making Conrail was privatized again. It cost the government $7.6 billion to restore the railroad’s financial health and then it was sold to private investors for $1.65 billion.

Elizabeth Dole, then transportation secretary, said the sale that cost the government about $6 billion should “break the ground for more privatization.” Now that the widely admired Dole is to be secretary of labor, will she encourage the Bush Administration to make similar money-losing deals to speed the feeble privatization crusade? One would hope not.