Minorities and Privatization

Once again the critics of privatization present a gratuitous and unbalanced picture of privatization. Their assertion that “public employment has been, and remains, a principal engine of minority economic progress,” ignores the scholarship of black economist Thomas Sowell, author of “Ethnic America.” Sowell found that those groups (e.g., the Irish in the l9th Century) who tended to rely on government employment for economic advancement entered the American mainstream at a much slower rate than did those groups that tended to seek economic advancement through the private sector (e.g., Jews, West Indian blacks and Japanese).

Authors McGee and Pastor also seem to be unaware of the Reason Foundation’s recent study of privatization potential in Los Angeles city and county. Our preliminary survey of seven firms that furnish many of the same services provided by the county suggested that the ethnic makeup of these private work forces were not substantially different from the overall county work force. This survey finding is supported nationally by a HUD-funded study conducted by the Joint Center for Political Studies.

As far as salaries are concerned, private contractors generally pay about the same, especially when the low-skilled work forces that provide some public services (e.g., garbage collection) are unionized as they often are. And although the taxpayer-funded public sector tends to give its employees much more generous benefits than the vast majority of private-sector workers, public-sector pension benefits are often not fully funded (e.g., in Los Angeles city).

As to the assertion that privatization is uneconomical, another HUD-funded study of over 120 Southern California cities found that there were significant cost savings for seven of eight municipal services when these activities were supplied by private contractors. Savings ranged from 37% to 96%. Of course, absent such hard data, privatization critics such as McGee and Pastor always trot out a few “horror stories.” Interestingly, 9 out of 10 times the root cause of these “horror stories” is that the government involved wrote a poor contract or failed to provide an adequate level of monitoring.

PHILIP E. FIXLER JR.

Director

Reason Foundation’s

Local Government Center

Santa Monica