Privatization

Contract Revisions

Cities ponder "living wage" requirements for government contractors.

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While nearly everyone focused like a laser on the "Republican revolution" in Washington, D.C., a revolution was beginning up the road in Baltimore and going in a very different direction. Scarcely a month after the 1994 elections, Baltimore Mayor Kurt Schmoke signed into law a "living wage" bill that gradually raises the pay of private employees working on city contracts to at least $7.70 an hour in 1998. (It rises to $6.60 this July.) A coalition of community organizations, religious groups, and unions led the effort. Now similar coalitions in more than 20 cities, including New York, Los Angeles, and Chicago, are looking to do the same.

Supporters insist that such laws won't cost cities much overall. Baltimore estimates an additional tab of $3.5 million per year–less than 1 percent of the city's annual budget–after the final wage increase in 1998. Supporters also argue that the higher wages will be offset by drops in city welfare spending that currently goes to low-wage workers.

For unions, the idea is a win-win proposition. If private firms can eat the additional costs through increased efficiency or lower profits, then cities lose nothing, encouraging others to enact similar measures. Conversely, if contractors try to pass on the costs, cities will have less incentive to privatize, preserving public employee jobs. And, in either case, if contractors have to pay their workers at or near union wages, they'll be less opposed to unions.

E.S. Savas, professor at City University of New York and privatization consultant to New York City, says the living wage proposals could seriously affect privatization efforts: "It is clearly a transparent device to drive up the cost of community services and make privatization much less attractive."

The New York City Council is considering a compromise proposal that applies only to contracts for security, food service, cleaning, and temp work–which just happen to be areas where the city has been contracting out a number of services. Nonprofits would be exempt.

"In many ways this is a sop to the unions," says Richard Schwartz, senior adviser to New York Mayor Rudolph Giuliani. Giuliani's opinion may not matter, however. City Councilwoman Kathryn Freed, the bill's sponsor, says she expects it to obtain a veto-proof majority.