Thoughts on Outsourcing

As the city of Pomona moves forward with a "policy" of outsourcing city services to save money, it's time to look at the history of civic services, how we got into the situations we're in today, what are the perceived benefits of outsourcing, and my perception as to why we're taking the current actions.

Today, A History Lesson

When cities were originally formed, the main purpose for creating a city government was to manage the "commons," that is those things that are common interest to all the citizens. Things such as police protection, fire fighting, the management of "common" property (this probably included public pastures for grazing, town squares, and parks), etc. As cities grew, other common interest items were taken on such as maintenance of the roadways, public lands management, ensuring cohesive development, etc.

To do the work of the city, under our form of government, citizens formed community councils (sometimes they included the entire city in town-hall meeting type situations, today it's city councils) which went about determining needs, setting taxes to pay for those needs so that everyone contributed to the "shared" costs, and hiring either companies or individuals to do the work necessary to carry out the needs of the community.

Hiring police, firefighters, maintenance people, etc. in a political situation such as a city is fraught with dangers. Early on, much of this work was done through political appointment which became what is today called a "spoils" system whereby the winner of an election can distribute the spoils to his/her supporters. Soon the electorate determined that this type of system resulted in corruption and in many areas a "civil service" system was instituted so that these important jobs were given to "qualified" people rather than through the problematic spoils system.

Individuals who were hired for civic service were often hired at salaries that were well below what was common in the private sector. So cities began to offer other incentives to attract and retain good employees. Retirement plans, healthcare plans, assured job security plans (such as tenure), were all ways that cities attracted people out of the private sector and into civic service.

Enter collective bargaining: As unions became strong, city employees formed unions so that they could collectively bargain for their wages and benefits. City council's bargained with the employees and, in good faith, employees agreed to terms of employment. Unions only got what cities were willing to give them. Any city, at any time, could have held out for different conditions. The idea that unions somehow coerce their way to benefits is as ludicrous as the idea that cities coerce employees to take cuts. It is a negotiated process. Each side tries to get the best deal that they can, and in the end both sides make a promise to act in accordance with the final contract.

Over the years, during good times, unions were able to negotiate contracts which included some very good benefits. The cities were willing to give them these benefits because they felt that this was the way that they could compete with private industry for workers, many of whom were getting the exact same benefits but higher pay.

Subsequently, private industry started to cut benefits and pay. As the economy started to falter, the gap between benefits and pay for public employees was catching up with the private sector and for some jobs surpassing it. Where in the past cities could work "on the cheap" by hiring their own workers, now that benefit has dissolved and cost savings can be made by "hiring out" or outsourcing the work.

Next time: Why Outsourcing