Privatization Hurts The Economy

A new research book from the Alberta Federation of Labour demonstrates that public health care and public education give Alberta and Canada a clear competitive advantage over the United States and other countries who deliver these services privately. The book, released today at a seminar, compares the economic costs and benefits of public services versus delivering those services privately.

"Advocates for privatization try to tell us that the private sector is always more efficient, and that is we want to remain competitive, we have to privatize key programs like health care, education and pensions," says AFL Secretary Treasurer Kerry Barrett. "Well, when you finally put that myth to the test, it comes up short. Public delivery is more efficient and makes us more competitive than the U.S."

"If we privatize health care and education, we harm our economy by making it more expensive for employers to do business and by lowering benefit levels to workers."

The book, titled The Other Competitive Advantage: The Economic Case for Strong Social Programs, compares the economic effects of delivering programs publicly and privately. It examines both sides of the economic picture - the cost to employers and citizens and the benefits provided. It studies five areas of public policy: health care, education, income security, retirement pensions and WCB.

"U.S. employers pay two to three times more in health payroll costs than comparable Canadian employers," says Barrett. "And for that extra money, the workers receive worse health coverage than Canadian workers."

"This is only one example of how our tradition of publicly delivered social programs makes doing business in Canada cheaper and more efficient," adds Barrett.

The book shows that public health care lowers employer costs, even when income taxes are taken into account. Workers pay less out of pocket for health expenses in a public system, and the overall effectiveness of the health system increases when it is operated publicly.

Education has similar effects. Public education operates 16% cheaper than private schools and delivers equal or better quality education.

Other highlights of the book include:

  • Public health care lowers labour costs for building vehicles by $6 an hour;
  • An effective unemployment insurance system shortens and softens recessions, helping to save jobs during economic hard times. In the 1991/92 recession, 30,000 jobs were saved by UI;
  • Public pension plans operate more efficiently, with administration costs at a fraction of private pension schemes;
  • Private WCB premium rates are double public WCB, and benefit levels are 2/3 what is offered to workers in public systems;
  • High tuition limits access to post-secondary education, reducing the economic benefits of an educated workforce.

"We all want a strong economy. To do that we need to be smart, and that means not just blindly following ideological theories," observes Barrett. "We need to deliver services in the way that will be most effective, for employers and for workers."

"Businesspeople in particular should be looking at this book. Privatization will increase the cost of doing business," says Barrett.  "For employers, privatization means at least $6 an hour in extra health costs, a doubling of WCB premiums, a huge increase in pension premiums and a less educated workforce."

The AFL will be distributing the book to Chambers of Commerce and large employers around Alberta. They will also be available to make presentations to business groups.

"The message of this book is simple: if you want good jobs and a competitive economy, things like health care, education and income security need to be delivering publicly," Barrett concludes.

NOTE: Copies of The Other Competitive Advantage: The Economic Case for Strong Social Programs are available from the AFL at (780)483-3021.

For more information contact:

Kerry Barrett, Secretary Treasurer @ 780-483-3021(wk) 780-720-8945(cell)

Jason Foster, Director of Policy Analysis @ 780-483-3021(wk)

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