The study found that contracting with private corporations generally reduces worker wages and benefits, which leads to a host of negative effects for the community at large:”There is a wealth of evidence that outsourcing public jobs often diminishes quality without substantial cost reduction," Greenwood says in the release. "Unfortunately, few states and cities have a serious oversight process to let citizens evaluate what is happening. Elected officials often talk about wanting to boost the economy and create opportunity. But many don’t realize how the decisions they control can contribute to the problem... or be part of the solution.”
• Reduced spending in local communities and declining retail sales
• Risks to public health and safety with less experienced employees and more bureaucracy
• Fewer opportunities for middle-class jobs and upward mobility
• Higher wage gaps between men and women and blacks and whites
• More workers and retirees on public assistance, especially in female-headed households
• Larger share of “at risk” children in low-income families
To help leaders assess the full impacts of outsourcing decisions on their own communities, the report includes a guide for calculating the social and economic consequences to a state or community. Examples of statutes that address broader economic and social issues are included.
Governments across the country are exploring more outsourcing based on long‐term pension obligations. Getting out of pension obligations is the reason city officials in Colorado Springs give for contracting out many services this year. Following a one year experiment in contracted snowplowing where audited costs were 489% higher than in areas the city plowed, the mayor’s office plans to expand the experiment and make it longerGreenwood goes on to note there's a cost to everyone for slashing pensions:
term to get “enough data to analyze it.” All this, for some savings on pensions?
State and local governments need to keep the big picture in mind. Terminating or sharply reducing worker pensions will have a whole series of negative effects on local economies, well‐being and the sustainability of existing pension funds. The short‐term effects of eliminating or reducing pensions may appear quite small, since many workers will not be immediately affected. But the movement away from traditional ‘defined benefit’ pensions has already put more senior citizens at risk. 16.4% of older households without a defined benefit pension received food stamps, rent subsidies, energy assistance or supplemental social security (SSI), averaging $6,494 per household. This was over triple the rate (4.7%) of cash transfers for older households with a defined benefit pension.
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