Greenwood’s study sheds new light on outsourcing

Filed under: Hazlehurst,Print | Tags:

If you ever spent much time with UCCS economics professor Daphne Greenwood, one point should’ve been abundantly clear.

She’s usually the smartest person in the room.

That’s why we should pay attention to her newly released study of the business of local government, “The Decision to Contract Out: Understanding the Full Economic and Social Impacts.”

Greenwood questions this local governmental practice on multiple grounds. She notes, as analysts have in the past, that outsourcing undermines “accountability, transparency and clarity about who’s in charge,” and may “remove control of key public decisions from citizens and their elected officials,” while encouraging corruption and nepotism.

But her central contention, buttressed by impressive research, is new.

“Contracting (or outsourcing) can involve substantially lower wages and benefits for local workers providing services,” she claims, “siphoning dollars away from local economies.”

Those fugitive dollars often benefit out-of-town companies. Well-paid workers lose their jobs or earn less, thereby spending less in their own communities. Outsourcing may yield only marginal economies for governments, which are substantially outweighed by reduced consumer demand, more demand for public assistance, a larger share of at-risk children in lower income families and a host of similar outcomes.

You might instinctively dismiss Greenwood’s study as liberal theorizing, most likely subsidized by the Public Employees’ Retirement Association and the Colorado Educational Association. Unfortunately for the privatizers among us, Greenwood backs her contentions with hard data and rigorous analysis.

Can it be that the whole outsourcing movement is not the product of the search for cost efficiency in local government, but that of conservative social engineering? Is it possible that by outsourcing jobs, and privatizing key functions of government, elected officials are hollowing out local economies?

When I graduated in 1958 from Colorado Springs High School (now Palmer), many of my classmates went on to work for the city, for Colorado Springs Utilities, or Memorial Hospital. Working as a maintenance man for the Parks Department, a lineman for CSU or a nurse at Memorial meant you were doing something of value for your community. It meant respect, decent pay and a modest pension in your old age.

A decade hence, city employees may find themselves with stagnant pay, no pensions, no job security and longer work hours. 

When female city employees came to former Mayor Bob Isaac and showed him data demonstrating that jobs traditionally filled by women were undercompensated compared to those filled by men, Isaac took action.

The city adopted a policy of “comparable worth,” compensating employees based on the value of their position to the city, regardless of local salary scales. Many local business owners feared that the city’s new policy would shrink the pool of skilled women workers, but Isaac memorably dismissed their concerns.

“We’re not a private business,” he said. “We don’t discriminate in the dark.”

City Councilors understood where political power lay. In the days before mail-in ballots, relatively few voters participated in the biennial April city elections. Those who did, including public employees and their families, had a disproportionately large voice in the outcome.

Few candidates could prevail without support from CSU, Memorial and city employees. Would-be councilors eagerly sought the endorsement of associations, particularly police and firefighters.

Douglas Bruce changed the calculus. In 1991 he pushed through radical changes in the city charter, reducing taxes and preventing Council from raising them without voter assent. His anti-government campaign tapped the rising resentment of residents, many of whom saw public employees as overpaid leeches getting rich at city expense.

And while the Dougster has faded into obscurity, his ideas and ideology are now shared by a majority of City Council.

Twenty years ago it would have been political suicide to privatize entire city departments, much less attack the public pension system that all of them will depend upon in retirement.

The Wal-Martizing of Colorado Springs will likely continue, Greenwood or no Greenwood. A decade hence, city employees may find themselves with stagnant pay, no pensions, no job security and longer work hours.

The community they serve may be older, more service-dependent, poorer and even more tax-averse. The increasingly desperate pleas by advocates of aggressive economic development strategies may fall on deaf ears as the city settles into a shabby senescence.

And who knows? By that time, leading-edge economic theorists may have become “Greenwoodians.”

Citing as examples cities such as Denver and Boulder, they’ll make a simple argument: High taxes and high government salaries grow local economies. Counterintuitive? Just read the book. It’s “The Shining” for conservatives.

Heeeeeeere’s Daphne!!!

One Response to Greenwood’s study sheds new light on outsourcing

  1. one point missing is why cities outsource and this is due to escalating pension and healthcare costs..

    one could address such as well in a different way:
    1. raise pension age slowly over the next 30 years to 70 years (current retirement rules were implemented 60-70 years ago when people lived on average only to age 65)
    2. remove the ability to retire before age 65 and make the private sector and government sector the same
    3. have meaningful healthcare reform in our country which addresses our much higher cost in %of GDP compared to Europe or low cost leader Singapore (less testing, less lawsuits, better primary care and less bureaucracy)

    peter miller
    March 20, 2014 at 4:02 pm