Income inequality is a hot topic today, but I bet you never stopped to think about whether your tax dollars were making it worse. That’s the case ITPI’s latest study makes as it examines how privatization triggers a race to the bottom for communities by rewarding corporations and replacing middle class careers with poverty-level jobs.
“Race to the Bottom: How Outsourcing Public Services Rewards Corporations and Punishes the Middle Class” documents how taxpayers are inadvertently funding this downward spiral. They are lured in by private company promises to run public services more cheaply, but often only realize those savings by slashing worker wages and benefits. As a result, workers have less money to spend in their communities, and often end up on public assistance — costing taxpayers even more in the long run.
In New Jersey, food service workers had their wages cut by $4-6/hour and many of their health insurance benefits wiped out when their jobs were outsourced to companies like Aramark, Sodexo and Compass. Food service companies have among the highest levels of employees and their children enrolled in the New Jersey FamilyCare program – driving up poverty and likely costing taxpayers far more than any savings realized from privatization.
Though our report highlights the degradation of outsourced government jobs at the state and local level, the same is also true for outsourced federal government jobs. A report released by Demos shows that nearly two million private sector employees working on behalf of the federal government earn wages too low to support a family, making $12 or less per hour.
It doesn’t have to be this way. ITPI’s report includes policy recommendations from our Taxpayer Empowerment Agenda, such as requiring contractors to show that cost savings derive from increased efficiency and innovation, not a decrease in wages, and requiring contractors to pay a living wage and provide health and other important benefits.
To explore other examples of outsourced public services, how this results in a race to the bottom for middle class communities, and our recommendations on what we as a country can do better, please read and share our report.