Fear of Labor Is Top Impediment to Privatization
Fifty-seven percent of cities participating in a recent survey identified labor issues as the top impediment to developing and implementing public-private partnerships for water and wastewater services. The 1997 U.S. Conference of Mayors Status Report on Public -Private Partnerships in Municipal Water and Waste-water Systems includes the results of the 261 city survey, recently conducted by the Conference of Mayors’ Urban Water Council. The survey is “intended to provide a baseline from which to monitor trends in the provision of municipal water and wastewater services.”

The high percentage of cities citing labor issues as the primary impediment to establishing public-private partnerships clearly illustrates that one of the long-standing myths of privatization is still with us. And that is this:

MYTH: Under a public-private partnership, employees are released, replaced or lose their benefits when a private company takes over. But in reality, just the opposite is true.

FACT: Typically, municipal employees are retained and receive an equal or better salary/benefit package. Staff reductions, if required, are generally achieved through attrition or advancement.

The contract OM&M approach for providing water and wastewater services could not have achieved the success it has if agreeable employee transition practices were not attainable. But the myth that privatization is detrimental to labor persists.

Probably the most commonly misunderstood aspect of contract operations regards the transition from public to private operations. Very often, staff members fear the 100 private firm will fire all existing plant employees and replace 80 then with its own operators. But a study by the National Commission of Employment Policy the research arm of the US. Labor Department) on the private operation of 34 different city and county services found only seven percent of the employees affected by those agreements were laid off, with the majority joining the private firm.

Although the issue of labor is often a more complex part of a public-private partnership, the plant staff most often benefits from a city’s switch to contract OM&M. But fear of the unknown, and fear of change, can understandably raise anxiety levels for city workers.


graph of survey

For example, when Schenectady, N.Y., was establishing a public-private partnership, the workers spoke against the change, wrote letters and lobbied. Even city management was, at the time, somewhat divided. Today, however, things are different.

Schenectady’s Mayor, City Council and workers at the plant now strongly support the continuation of this public-private partnership, and this has contributed to a recent contract renewal. This should he encouraging for other municipalities considering establishing a public-private partnership for the OM&M of their water and wastewater facilities. Just as important, Schenectady’s experience should also be encouraging for the municipal employees currently working at these facilities.

Job security is the key question most municipal water or wastewater plant employees ask when first faced with the prospect of their city establishing a public-private partnership for facility operations. In Schenectady, PSC offered jobs to all existing plant workers, with equal or better pay and benefits. But although the city and the private firm did what they could do to allay worker fears, one fourth of them decided to use their seniority to "bump" down into some other municipal department.

Many of these workers have seen the positive changes that have taken place at the plant over the past five years and have systematically submitted employee applications to work for PSG According to PSG Project Manager in Schenectady, of the 10 workers who decided to stay with the city, five currently have job applications on file with PSG.

One of the keys to success in this area is to work with a firm with plenty of employee transition experience. At PSG, most employees, including upper management, were once city employees. Our philosophy is people recognition; showing respect, honesty and fairness to employees; providing wages and benefits equal to or better than previous compensation; and supporting good communications to foster understanding and promote education.

by Douglas Herbst, Vice President of Corporate Development, PSG