Privatization Can Hurt More Than Help


Those far-out Libertarians and Anarchists ought to be smiling a bit these days as more and more Republicans and even Democrats move at least part way toward the extremists’ demands for massive reduction of government services.

Libertarians on the far right, like Anarchists on the far left, have long denounced almost all government as repressive. They want to drastically reduce both its size and power--and get rid of it completely, whenever possible.

The more moderate folk running our governments at all levels don’t want to go that far, of course, but they are taking strides toward partially dismantling public services. They call it privatization, which has an appealing ring to it for some people, even though it often hurts more than it helps.


Some are embracing the anti-government notion for ideological reasons, like the conservatives who cry, “Get the government off our backs!”

Others, including liberals, have more recently joined the campaign to turn government jobs over to private companies because they see it as an alternative to what they think are politically unpopular tax increases.

Increasing taxes on upper-income families would do them little damage and would raise enough money so that low- and middle-income public employees would not be forced to take pay and fringe-benefit cuts, which usually happens when a private company takes over their jobs.

Nevertheless, the buzz word of the 1990s is privatization, which is dreamed about as some kind of miraculous panacea that will allow us to continue getting most of the services we demand from government for less money.

That miracle rarely materializes.

Study after study shows that privatization can sometimes mean increased efficiency without bad side effects. Usually, however, a reduction in the cost to government--if there is any--comes from two sources: primarily from the pockets of the workers and, to a lesser extent, from reduced services.

Offsetting a significant amount of those “gains” made by privatizing is the profit the company makes for taking on a service that public employees had been doing.

Los Angeles County has been a national leader in the drive to privatize. County officials maintain that it has saved money and kept the payroll to about 86,000 over the past 10 years despite increases in population and demands for more service.

But services and operations ranging from mental health counseling to public library hours have decreased despite increased demand, and public employees have been badly hurt by the privatization process.

One typical example of the negative impact it is having on workers is the decision by Los Angles County to hire a giant multinational corporation, German-based Pedus International, to help clean the county’s public hospitals.

Before the county dumped its own hospital janitors, their wages were fairly good. Today, the average janitor on the county payroll makes between $8 and $9 an hour, with adequate fringe benefits, including health insurance. They aren’t getting rich on taxpayer’s money, but they make enough to keep them above the poverty line.

When the private, for-profit German firm took over the hospital cleaning task, janitors’ wages plummeted. Today, privatized janitors earn an average of $4.50 to $5 an hour.

That is the poverty-level average for all private sector janitors, but it was a hefty hit on relatively low wage workers. Adding to their misery is the absence of almost all fringe benefits.

The sharp income reduction isn’t going back to taxpayers. Part goes to profit for the German company and another part for a sad side effect.

You see, since most of the privatized janitors have no health insurance, they must depend on the county’s hospitals for free or nearly free medical help that is paid by--guess who?--the taxpayers.

Not unexpectedly, most of the opposition to privatization comes from public employee unions such as Service Employees International Union Local 660, which represents more than 40,000 county workers.

Kimberley Kyle, Local 660 researcher, says the county is exaggerating claims of saving money by privatization. She also contends that privatization is “eroding the pool of good jobs available to minority workers.” Los Angeles County is the largest employer of minorities in Southern California, she says, and more than 80% of all of the jobs turned over to private companies were held by employees who were black and Latino.

The private firms also use large numbers of black and Latino workers, but Anglos and women were hurt, too, when they were pushed into available lower-paying jobs.

Former President Reagan helped popularize privatizing, but the anti-government campaign is being pursued these days not just by conservatives and moderate Democrats.

Liberals are doing it too, and the motive of all of them is easy to understand: Demand for government service continues to rise--especially for education, health and prisons--while tax revenue falls in these recessionary times.

So come the calls for privatization, and usually, it is to no avail.

A recent Wall Street Journal nationwide study of for-profit, privately run jails concluded that they are “turning into quicksand for the companies and the communities involved.”

As a nation we have deluded ourselves into thinking we cannot afford the kind of government we want. Most of us ignore the fact that all of the taxes combined in the United States are lower than in any other industrialized country in the world as a percentage of gross national product.

Nobody says life is supposed to be fair, but this is ridiculous. We should not stomp on public employees by privatizing their jobs in the usually vain hope of holding down taxes for those in high income brackets.