A recent article in the Washington Post highlights an issue I alluded to in my recent post on government outsourcing functions. To summarize: The Alexandria school superintendent’s budget proposal called for eliminating 30 custodian positions and outsourcing the jobs to a private company. (The system already contracts with private companies for custodial services in many schools. This proposal would have completed the outsourcing.) The reason for the proposal was budget savings. After a lot of blowback, the superintendent relented some, proposing that custodians who had worked for the school system for at least five years could keep their positions during the next school year. That left 10 custodians facing the loss of their jobs.
This sort of outsourcing is common at all levels of government. In Richmond, the custodians for state buildings are not state employees, but work for a company that has contracted with the state to clean the offices. The same is true for security guards at the entrances to state buildings, with the exception of the Capitol Police.
Contracting out state jobs has serious consequences for the people affected. First of all, there is the issue of their salaries, which will likely be less than what the government was paying them. More importantly, perhaps, is the loss of health insurance. Government employees also have pension plans, which are unlikely to be available through the contracting company. Other important fringe benefits, such as paid medical and vacation leave, are not likely to be available with a contractor. As a result, an employee affected by outsourcing may have to choose between coming to work when sick or losing pay. Likewise, a parent staying home with a sick child would lose pay. Another major consequence is the sudden lack of stability. A government custodian or security guard may or may not be hired by the contractor when his or her job is outsourced. Even if he/she is kept on, that company may lose the contract to another company later on, creating additional uncertainty.
The obvious response to these observations is, “If a private company can do these government functions cheaper than the government can, why should the taxpayer pay more for the government to do it?” The answer is that there are costs to outsourcing that do not show up on the specific government agency’s bottom line.
We have recently been discussing the concept of externalities on this blog and I think that concept applies here. If the government worker whose job is outsourced loses his/her health insurance, at some point, there will be a cost to the public, whether it is a hospital having to eat the cost of indigent care or Medicaid paying the cost. Even if the worker makes enough that he/she does not qualify for Medicaid, but can be covered under Obamacare, the federal government, i.e., the taxpayer, will subsidize the cost of private medical insurance. We have discussed the problem of affordable housing. Does it make sense for the government to outsource jobs with the result that workers will be less well off and, therefore more likely need subsidized housing? We have discussed the importance of stable families to the development of children. When a parent has to worry about the stability of his/her job and paying the rent and medical bills with fewer resources, he/she has less time and emotional resources to devote to the kids.
There are also costs, albeit intangible, to the agency. Generally, a regular employee feels more invested in, and loyalty to, his/her employing agency, than does a contractor, especially those in the lower-paid ranks. An employee is treated as part of the team or “family”. Contract workers are often the outsiders, who do not get to participate in office social activities, such as birthday celebrations, baby showers, etc. Unlike full-time employees, contract workers may not report consistently to the same workplace, but rather be rotated among different sites under contract to their employer. The result is likely to be work that is not as consistent and of lower quality.
And, dare I say it, there is an element of right and wrong here. It is not right for governments to treat its lowest-skilled and lowest-paid workers differently than it does the rest of its workforce. As an Alexandria School Board member put it, “It is wrong to balance the budget on the backs of some of our lowest-paid employees.”