Welfare Privatization: A New Arena of Class Struggle
CLAIMING THAT THE PRIVATIZATION OF SERVICES INCREASED THEIR COST-EFFECTIVENESS and efficiency, the United States Congress authorized the privatization of a wider range of welfare services than ever before through the 1996 Personal Responsibility and Work Opportunity Reconciliation Act or PRWORA. State and local governments could now offer contracts to for-profit and nonprofit private agencies for eligibility determination and welfare-to-work case management services for Temporary Aid to Needy Families (TANF). Formerly known as Aid to Families with Dependent Children, TANF provides public assistance to low-income families, most of which are headed by women. Since t996, multibillion-dollar companies, including defense contractor Lockheed Martin, and nonprofit agencies, such as Catholic Charities, aggressively pursued contracts for welfare services. By 1999, Maximus, Inc., had become one of the leading welfare contractors, with contracts in almost every state in the U.S., including welfare-to-work contracts in 11 states (Cooper, 1998; Hartung and Washburn, 1998; Zullo, 2000: 1-3; Maximus, 1999; Murray, 1999).
This takeover of welfare services by private agencies sparked considerable opposition from labor unions, welfare recipients, and community groups, who point to examples in which privatization increased welfare expenditures, lowered service quality, reduced public accountability, and eliminated good union jobs (Reese, Giedraitis, and Vega, 2005). In this article, we examine the concerns of community and labor groups over welfare privatization in Milwaukee, Wisconsin, and their efforts to resist it and to improve the delivery of welfare services. This case is of particular interest because welfare privatization was carried out so fully there. Our research is based on a combination of sources, including newspaper articles, organizational literature, and interviews with activists and local policymakers.
In most U.S. cities where welfare privatization took place, it was carried out by local officials and affected only a portion of the TANF caseload. In this case, in 1997 state officials contracted out to private agencies the administration of TANF cash aid eligibility as well as welfare-to-work case management for Milwaukee County's entire program, known there as Wisconsin Works (W-2); the county's Private Industry Council was given oversight of these agencies (AFSCME, 1998a). State officials claimed that privatization was justified because public employees were performing below the state's required standards. Union leaders, however, claim that the county's relatively high error rate was partly due to its higher-than-average caseloads and the implementation of a new computer system; they contend that the county was targeted for welfare privatization because it was home to the vast majority of the state's welfare recipients and was a Democratic stronghold in a conservative state (AFSCME District Council 48 staff, 2002; AFSCME District Council 48 official, 2002; AFSCME Local 594 official, 2001; Smith-Nightengale and Mikelson, 2000: 4).
Multimillion-dollar contracts for W-2 services were given to two for-profit agencies, Maximus and YW Works (an affiliate of YWCA), and three nonprofit private agencies, Opportunities Industrialization Center of Greater Milwaukee, United Migrant Opportunity Services, and Goodwill Industries' Employment Solutions. (1) The largest contract went to Employment Solutions, run by Will Martin, a former aide to Wisconsin's then-Governor Tommy Thompson (Schultze, 2000d). The Wisconsin Policy Institute boasted that privatization saved the state at least $10.3 million over the first two years of operation (Flaherty, 1998; Elke, 1998). Most of these savings resulted from the dramatic decline in welfare caseloads, which were partly due to the implementation of new welfare rules, tougher work requirements, and favorable labor market conditions. …