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Testimony on AB 598
  (Changes to the Municipal Employment Relations Act)

by Robert Kraig, Ph.D., Political Director,
SEIU Wisconsin State Council

Assembly Labor Committee, November 3, 2003

CONTINUED

The extreme character of this provision reveals a clear intent to promote the privatization of services currently delivered by public employees. This will have several negative consequences:

• The bill strips away one of the best existing safeguards we have against un-wise or politically motivated privatization schemes. The history of public services over the past quarter century demonstrates beyond doubt that current municipal labor law does not bar privatization.

However, collective bargaining does provide a forum for seriously analyzing the profit-motivated claims of private contractors that they can provide the same level of service at less cost.

There is persuasive evidence that privatization leads to a serious diminution in the quality of vital services.  A good example is the relative quality of public and private nursing homes.  Because it is well regulated, the nursing home industry is the only major sector we know of where there is detailed data that make it possible to compare the quality of publicly and privately delivered services.  By both federal and state measures, publicly owned facilities have a substantially higher quality of care, and virtually all the deplorable abuses the plague this sector occur in the privately owned facilities.

In addition there may be little or no cost reduction as contractors, once established, use the political process to fatten their bottom lines. In fact, the government in effect pays these interests to lobby itself, as contractors clearly see lobbying as an investment of their bottom lines to garner greater future returns. The nursing home industry again offers a good example, where Medicaid money “in effect” is used (because money is by definition fungible) to build large legislative operations and to pay pricey contract lobbyists.  Once contractors gain a foothold in government, it is very hard to regulate their services in the broader public interest.

The privatization process and the management of contractors cries out for more accountability and more transparency–not less, which is why several states have recently enacted significant contracting reforms,  sometimes referred to as public services accountability acts.

(2) Outlawing bargaining over privatization decisions guarantees a more confrontational process and poses a serious threat to labor peace.  As it suggests a clear intent to eliminate public jobs and to de-unionize, as the vast majority of contractors are non-union, it will force public employees who want to protect their jobs and their fundamental right to bargain collectively to resort to more militant tactics.  This is of course why the current municipal labor law regime was created in the first place.

(3) Privatization is bad public policy in a state which already has a shortage of good family supporting jobs. If privatization accomplishes anything at all, it is to lower the wages of working people. That is where the savings come from, if they are not ultimately lost to contractor profits.

The effects of privatization are especially dire for women who have less than a college education or who are minorities.  In a report by the Center on Wisconsin Strategy, Annette Bernhardt and Laura Dresser conclude that privatization substantially lowers the wages and benefits of such workers.^[1] Such workers tend to be concentrated in “at risk” job categories for privatization–in fact, 64% of publicly employed women without college degrees are in such classifications.

Bernhardt and Dresser: “On average, public sector jobs pay better and are more likely to include pension and health benefits. When governmental services are privatized, women–especially women of color and women who do not have a college education–will likely experience significant declines in how much they earn and in their health and pension coverage.”

In a state such as Wisconsin, which already lags behind its neighbors in the number of good family supporting jobs, to gut public sector employment is bad economic policy. Furthermore, anything which further exacerbates the economic gender and racial gaps in Wisconsin is unconscionable.