Driving Forces Behind Privatization

Driving Forces Behind Privatization

The forces driving privatization of social services fall into several categories:

Private Vendors Seeking New Markets

When the welfare reform law expanded the allowable roles of contractors, an enormous new market opened up. The public wants social services to reduce poverty and build self-sufficiency; firms in the welfare "business" see an opportunity to enhance sales and profits. Legislative changes enhancing the roles of companies do not happen in a vacuum, of course; on the contrary, businesses lobby long and hard for these changes.

A common tactic used to get a leg up in contracting is the "revolving door" between public agencies and contractors. Public social service employees, particularly top managers, are sought by contractors for their credibility in the field and their personal connections to decision-makers.

Corporations have developed new models for eligibility predetermination in an attempt to circumvent federal restrictions prohibiting the privatization of eligibility determination. In many states they are promoting this model as a way to "modernize" welfare systems.

Ideology

The prevailing view in our society, and one aggressively fueled by privatization's advocates, is that the private sector knows best and can best deliver most services. However, this belief does not hold up for many government functions, particularly complex social services. Indeed, the private sector has not met the needs of the poor nor provided them a reliable route to self-sufficiency; this is precisely why effective public programs, such as Head Start and Food Stamps, were designed.

Because of the loud chorus in its favor, privatization is often seen as an end in itself, and the goal of providing high-quality, cost-effective services to the public is ignored. Privatization is often advocated with no credible evidence that it will further that goal.

Frustration

Many public programs have been underfunded and understaffed for years, leaving service recipients, agency staff and the public dissatisfied. Contracting is sometimes seen as a "silver bullet" for these deep-seated problems or a way for government agencies to wash their hands of tough challenges.

Funding and staffing challenges remain, however, regardless of who runs programs. Meanwhile, the public sector retains the ultimate responsibility for service delivery.

Cutting Some Costs But Ignoring Others

Employers may use contracting as a covert way to downsize, cut wages and benefits, or dismantle civil service or union protections. The problem with this approach is that good wages and benefits translate into low turnover and stable workforces, while civil service and union protections mean fair and productive workplaces. Studies consistently show that seeing workers as assets to be developed, not costs to be cut, confers significant long-run advantages and that basic fairness and job security encourage employee innovation.

Even if money is saved on workers' salaries or benefits due to privatization, costs are felt elsewhere. Indirect costs include lost tax revenues as wages fall, public money spent on health care for workers who no longer have health insurance, costs to workers themselves and their families, and costs to implement and monitor service contracts. Privatization advocates usually fail to account for such factors.

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