The San Diego mayor has tried since 2005 to privatize many city departments through "managed competition," a process borrowed from the Bush administration. As of January 2010, advocacy efforts have headed off the outsourcing until protections are in place to safeguard public accountability, service quality and workers' health coverage.
Workforce Issues
• Loss of wages and health benefits
• Reduced labor standards
• Worksite safety problems
• Inequitable treatment
When government privatizes, public employees are often replaced with contract employees, who usually receive lower pay and reduced benefits. A 2006 study by the Economic Policy Institute showed that nearly 20 percent of all federal contract workers earned less than the federal poverty level of $9.91 an hour, while 40 percent earned less than a living wage. All too often, the supposed savings from privatization are based on the private company’s failure to provide employer-sponsored health benefits. As a result, the workers often rely on public benefit programs, such as Medicaid and the Earned Income Tax Credit (EITC) program, to make ends meet. The additional expenses to these government programs are hidden costs to the community of privatization. Governments often fail to take these hidden costs into consideration when deciding whether to privatize or evaluating company proposals. Private companies may also engage in labor violations to keep their costs low. In 2004, the GAO reported that in more than 80% of 654 investigations by the Department of Labor, employers were failing to pay their employees the minimum wages and benefits required by the law. Further GAO reports reveal that some companies that contract with the federal government skimp on worksite safety. The GAO’s most recent survey in 1994 showed that 261 federal contractors administered facilities that had been cited for 5,121 violations of the Occupational Safety and Health Administration (OSHA) safety and health regulations. The vast majority of the worksites inspected – 88% --had one or more violations that posed a risk of death or serious physical harm to workers. In 69% of these cases, OSHA found that the company intentionally and knowingly committed the violation. Because the government typically chooses the lowest bidder in the proposal evaluation process, employers providing better working conditions may be denied contracts due to their higher costs.
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