The impact of privatization on wages
Introduction
Privatization can be defined as the process of shifting ownership of an agency, public service or a business from the public sector to the private sector or those businesses that operate on making profits. In addition it includes shifting most of the governments function to the private sector inclusive of governments function like law enforcement and collection of government revenue. Privatization also includes sale of the public property or service to private companies with the aim of ensuring the services reach the public at lower costs compared to the earlier prices. In the US most of the services earlier provided by the government such as provision of social security have been privatized and are now provided by the private sector. Privatization has had its cons and pros and thus has been a challenge in the US since people feel that the services are provided at higher prices than they should have. Privatization in the US has extended such that economic and political changes have taken place in that responsibilities and assets of the government have been transferred to the private sectors and thus private companies provide such services. Socioeconomic trends and public strategies and policies are factors that affect privatization. Since privatization is a political process, regardless of the economic benefits people criticize it especially if the workers are displaced. People are affected especially if they lose their jobs since it will affect their incomes and in turn lower their standards of living. Therefore this paper will focus on the social, economic and political impacts of privatization on peoples’ wages.
Social impact of privatization on wages
There are a number of social consequences of privatization and the negative ones often ensure privatization is criticized. For instance the service provision is worse since private companies have the aim of ensuring they gain profits rather than ensuring social services reach the public. Private companies may end up investing in projects that ensure they earn profits compared to useful projects which are non profit in nature but of beneficial to the society. Water companies have been reluctant in ensuring proper sanitation and installing the necessary infrastructure (Correa, 2015). Thus without provision of better social amenities to the people, peoples’ lives are affected negatively which indicate poor living conditions in the people. Private companies ensure they come up with profitable contracts unlike partnering with other companies like the government does in ensuring social amenities and services reach the public (International, 2009). It is the responsibility of the government to ensure it provides its people with social services and thus privatizing the services reduces the chances of people enjoying the best services. People have publicly demonstrated against the government privatizing all the services since the government is responsible in ensuring that its people get quality services at affordable prices. Government jobs have ensured that all employees are treated equally and get equal benefits thus employees are able to afford quality social lives. Privatization on the other hand ensures that employees remain being subjected to poor living and working conditions since they lack benefits and good salaries (Chong, 2005). Most of the employees are not able to provide education and other basic services to their families
In addition privatization causes loss of employment to some people since private companies cannot employ lots of people because their main aim is ensuring they make reasonable profits. Private companies replace existing employees with other new employees and the existing ones are usually undermined and leveled to casual laborers. Former employees are subjected to poor working conditions and are paid less wages which impact negatively not on their performance but their income as well. Poor income indicates poor living conditions and in turn such families fail to provide services such as education and health which they always did in the absence of privatization. Privatization has ensured that health facilities are expensive to the people such that people fail to afford them (Chong, 2005). The public suffers since employees lose their jobs or rather paid less wages compared to what they earned before. Employees become dependent on the government aid since they fail to afford quality of services they used to afford before. Thus the public is against privatization since it has too many negative consequences compared to positive impacts and thus is disadvantageous to the public. With privatization employees suffer reduced benefits than they did and live poor lives instead of becoming better both financially and socially. Privatization is thus non beneficial to the people and instead causes harm to the social lives of individuals thus they are left without enough to cater for their present and future needs (Chong, 2005). Thus privatization hurt the American people more instead of benefitting them which show that it only contributes negatively to the lives of people who depend on the government for provision of affordable services. The government should instead look for more opportunities and ensure it partners with other partners in ensuring its people get quality and affordable services.
Economic impact of privatization on wages
The government earns more money from privatization since it collects revenue in form of taxes from the private companies. This shows that the government is benefiting compared to its people who suffer under the hands of the private companies since their wages and benefits are reduced. The government believes the private companies manage companies more efficiently thus assumes that the companies will provide better and excellent services to its people which is not true (Keithly, 2013). The government assumes that privatization will save money and generate more money to both the government and its people which is far from the truth. It assumes that private companies handle jobs in an easy and cheap manner thus managing the public property more efficiently. Privatization benefits the economy since the governments collects huge revenues from the private companies but on the other hand deprives people off their freedom of enjoying government jobs and benefits. Privatization has made the cost to go up since people have to pay more for them to get services which they would have enjoyed freely (Keithly, 2013). People pay more taxes and directly to get services which they would have enjoyed at affordable prices such as education, health, security and water if they would be provided by the government. The value for the money obviously goes down since private companies ensured they make enough profits to meet their demands which include paying its employees and paying taxes to the government. Thus people end up paying more money to private companies for them to enjoy the services provided by those companies. This shows that people who cannot afford those services will end up depending on the government for aid which indicates the people are living in poor conditions such that they cannot sustain themselves.
Private companies provide services at very high prices such that travel expenses on private buses, trains, airplanes and other services in America are high. Energy, water and issuing bills are high too thus indicating that people with low paying jobs cannot afford quality and standard lives (Keithly, 2013). Thus people are against privatization since they need the costs cut for them to afford those services since most of them are basic therefore necessary. Privatization leads to high fees and wages decrease while the government benefits as private companies employ low paid workers therefore they get enough money to pay the taxes. Private companies ensure they generate huge profits at the expense of low production cost since their main aim is generating profits rather than providing services to the public (Keithly, 2013). Privatization ensures that public services and goods are the responsibility of the individual rather than the responsibility of the government which should ensure it provides its citizens with affordable quality services. The government becomes reluctant since it leaves its responsibilities under the hands of the private companies which in turn charge consumers high prices for them to afford the services. The US government further explains that it sort alternatives ways of generating revenues through privatization since politics overtook government chances of getting revenues (Keithly, 2013). Thus government officulas sort out privatization as its main source of revenue to the government. This is however not a long lasting solution since it will make consumers suffer and end up becoming poor and unable to afford the costly services. Most Americans believe the government has relied too much on privatization and that this cannot be changed since there are no better alternatives of the government earning revenue. Americans suffer economic problems since they have to strain in order to get services which the government would have provided at better costs thus ensuring all the citizens enjoy those services.
Political impact of privatization on wages
The legislature came up with the idea of ensuring privatization is made possible since the government lacked other alternatives sources of revenue. The government has failed on it part in ensuring it meets its responsibility to the citizens since it fails to provide public services which are provided by the private sector at higher prices (Coudouel, 2006). The government makes its citizens suffer and thus people lose jobs and remain subjected to poor living conditions and in turn crime rates increase since people look for alternatives sources of income. The government however much it has benefited from privatization the common people suffer since they are forced to pay more in order to get public services. The government is not concerned about this problem since it is focused on collecting revenues useful in ensuring the activities of the government run smoothly. Privatization cannot be reversed and thus once the government decided to privatize, the process cannot be reversed and thus people will continue paying in order to get access to public services (Coudouel, 2006). Those people who lost their jobs in the process of privatization continue leading poor lives since the government is not able to provide jobs and services to its people. The government benefits while those people that elected the legislature are suffering which indicates that the government does little in order to curb privatization in America as it has bright more harm than good to the people. People often demonstrates in order for the government to reduce depending much in privatization but often the government fails to listen since privatization ensure that revenues are collected faster and more efficiently.
Private companies are often associated with providing quality and excellent service within the shortest time possible and thus some prefer getting services at private companies since they will not waste much time (Correa, 2015). Health and education services in the private sector are excellently provided compared to the public sectors and thus the government privatizes its public sectors in order to ensure that people get quality and excellent services. People get excellent services but not all can afford the services offered by private companies since the costs are high than same services offered in the public offices (Shi & Sun, 2016). People who afford private services are lucky since private companies ensure they provide excellent services within the shortest periods of time. Services offered by private companies are better compared to those offered in the public companies thus the government privatizes the services in order to ensure they are quality. As much as the government wants the best for its people it should ensure that its people afford the services since the people should not suffer while the government can still look for other alternatives of collecting revenue (Avid et al, 2010). The government should ensure that the lives of its people are not interfered with and that people live comfortably without failing to afford basic services simply because the government has transferred ownership of all the services to the private sector.
Conclusion
From the above discussion there are some lessons learnt in that privatization is important but favors the government more compared to it does to the public. Privatization in the US has extended such that economic and political changes have taken place in that responsibilities and assets of the government have been transferred to the private sectors and thus private companies provide such services. The American citizens however are not comfortable with this issue of privatization since it denies them chances of affording some services since they are expensive and unaffordable when provided by the private companies. It is the responsibility of the government to ensure it provides its people with social services and thus privatizing the services reduces the chances of people enjoying the best services. People have publicly demonstrated against the government privatizing all the services since the government is responsible in ensuring that its people get quality services at affordable prices. However, privatization benefits the economy since the government collects huge revenues from the private companies but on the other hand deprives people off their freedom of enjoying government jobs and benefits. . Private companies ensure they generate huge profits at the expense of low production cost since their main aim is generating profits rather than providing services to the public. This is unlike the government whose main responsibility is providing its people with the social services and amenities and ensuring the people can afford. The government however much it has benefited from privatization the common people suffer since they are forced to pay more in order to get public services and therefore the government needs to come up with better ways of getting revenue without interfering with the people.
References
Avid Brown, J., Earle, J. S., & Telegdy, Á. (2010). Employment and Wage Effects of Privatisation: Evidence from Hungary, Romania, Russia and Ukraine. Economic Journal, 120(545), 683-708. doi:10.1111/j.1468-0297.2009.02300.x
Chong, A. (2005). Privatization in Latin America: Myths and Reality. Washington: World Bank.
Correa, E. (2015). Budgetary Impact of Social Security Privatization: Women Doubly Unprotected. International Journal Of Political Economy, 44(4), 260-276. doi:10.1080/08911916.2015.1129839
Coudouel, A. (2006). Poverty and social impact analysis of reforms: Lessons and examples from implementation. Washington, DC: World Bank.
International, B. P. U. (2009). Global privatization laws and regulations handbook. Place of publication not identified: Intl Business Pubns Usa
Keithly, D. M. (2013). The USA & the world 2013. Lanham, MD: Stryker-Post Publications.
Shi, W., & Sun, J. (2016). The impact of privatization on efficiency and profitability. Economics Of Transition, 24(3), 393-420. doi:10.1111/ecot.12094
