Privatization in the Age of Inequality

Everyone should check out the report released today by In the Public Interest on how privatization increases inequality. Here are the five key findings:

Creation of new user fees: The creation of new user fees to fund public services disproportionately impacts the poor. As government budgets have declined, some jurisdictions have tried outsourcing services to private companies and allowing those companies to charge fees to the end-user to subsidize or completely fund the service. Many of the services that use this contracting and payment structure are those that poor individuals and families must use or are subject to through their interactions with the government.

Increase in existing user fees: Residents of jurisdictions that have privatized critical public services such as water or transit have experienced steep increases in their rates—such increases particularly harm low-income residents and those on fixed-incomes.

Privatization of the social safety net: Programs that provide and deliver critical support to the poor are often the subject of privatization experiments, many times with tragic results. Because these programs assist those who have little to no political power, these programs are low hanging fruit for privatization.

Decreased wages and benefits: Privatization increases income inequality through the decline of contracted workers’ wages and benefits. When governments directly provide a service, they often provide living wages and decent benefits to workers. When private companies take control, they often slash wages and benefits in an attempt to cut labor costs, replacing stable, middle class jobs with poverty-level jobs.

Increased socioeconomic and racial segregation: The introduction of private interests into public goods and services can radically impact access for certain groups. In some cases, as the public park example in Section 5 shows, privatization can create parallel systems in which one system propped up by private interests typically serves higher-income people, while another lesser quality system serves lower-income people. In other cases, the creation of a private system, such as charter schools in a school district, siphons funding away from the public system meant to serve everyone. In some situations, poor individuals and families can lose access to the public good completely.

The report as a whole is highly disturbing and alarming. Whether we are talking about charter schools or hiring private agencies to manage funds for foster children or bringing in private contractors for any number of social services, privatization of our public services is a universally awful idea that centers profit in the hands of the few who make that profit on reducing wages and benefits, avoiding unions, hiring recent college graduates to replace long-term workers, and other strategies that have contributed to the broader crises of inequality and a lack of quality jobs in the economy. Yet the mania for privatization continues. Grover Norquist wins.