Inequality in the United States, which began its most recent rise in the late 1970s, continues to surge in the post–Great Recession era. During similar eras— such as the New Deal—many of the public goods and services we value today were created to deliver widespread prosperity.

But the way in which cities, school districts, states, and the federal government deliver things like education, social services, and water profoundly affects the quality and availability of these vital goods and services. In the last few decades, efforts to privatize public goods and services have helped fuel an increasingly unequal society.

How privatization increases inequality examines the ways in which the insertion of private interests into the provision of public goods and services hurts poor individuals and families, and people of color.

In the Public Interest’s analysis of recent government contracting identifies five ways in which government privatization disproportionately hurts poor individuals and families, each of which is explored in greater detail in the five main sections of the report:

Creation of new user fees: The creation of new user fees to fund public services disproportionately impacts the poor. As government budgets have declined, some jurisdictions have tried outsourcing services to private companies and allowing those companies to charge fees to the end-user to subsidize or completely fund the service. Many of the services that use this contracting and payment structure are those that poor individuals and families must use or are subject to through their interactions with the government. (Download this section of the report.) Increase in existing user fees: Residents of jurisdictions that have privatized critical public services such as water or transit have experienced steep increases in their rates—such increases particularly harm low-income residents and those on fixed-incomes. (Download this section of the report.) Privatization of the social safety net: Programs that provide and deliver critical support to the poor are often the subject of privatization experiments, many times with tragic results. Because these programs assist those who have little to no political power, these programs are low hanging fruit for privatization. (Download this section of the report.) Decreased wages and benefits: Privatization increases income inequality through the decline of contracted workers’ wages and benefits. When governments directly provide a service, they often provide living wages and decent benefits to workers. When private companies take control, they often slash wages and benefits in an attempt to cut labor costs, replacing stable, middle class jobs with poverty-level jobs. (Download this section of the report.) Increased socioeconomic and racial segregation: The introduction of private interests into public goods and services can radically impact access for certain groups. In some cases, as the public park example in Section 5 shows, privatization can create parallel systems in which one system propped up by private interests typically serves higher-income people, while another lesser quality system serves lower-income people. In other cases, the creation of a private system, such as charter schools in a school district, siphons funding away from the public system meant to serve everyone. In some situations, poor individuals and families can lose access to the public good completely. (Download this section of the report.)

How privatization increases inequality concludes with recommendations for addressing some of the many problems with privatization identified in this report. These recommendations will go a long way towards addressing inequality and restoring the concept of the common good and the very sense of “community” that sustains a healthy, equitable society.

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