The article is too one-sided for sure, but the fact that the cash that doesn't go to the workers goes to the shareholders' pockets is practically a truism: That cash is called profit, and shareholders (rightfully) expect it from their investment.
State total cost = State front line workers' salaries + State overheads
Private sector total cost = Private sector front line workers' salaries + Private sector overheads + Profit.
Overheads are everything from paddy wagons to radios to uniforms to back office staff to police horses loaned to Rebekah Brooks to the G4S CEO's £830K/year salary. Private sector firms will presumably only bid on a contract if the profit is positive, I'd agree that's a truism. But is the profit positive because the private sector total cost is higher, or because the private sector front line workers' salaries are lower, or because the private sector overheads are lower?
The problem is that usually the people doing all the work get very little whilst the people who're just being rich get made richer. Yes within the current system a small return on investment should be expected but a commensurably larger wage should be paid before a large return is given to investors.
It's by no means a universal truth that an investor deserves profit.
I didn't say that an investor deserves (which is a moral judgement) a profit, I said that she rightfully expects to make one - otherwise she simply wouldn't invest.
It's not a "truism" at all. For a start, companies are going bust taking these contracts[1] -- going bust generally being a good sign that they aren't making a profit. More importantly, the alternative is a state-owned security service (police, army, etc) who are likely to be inefficient, highly unionized with tons of overhanging pension payments. Is that cheaper? I don't know which is why I was saying in my original comment that these things can be studied.
The article said that "the cash not going to the work force is redirected into shareholders' pockets". I don't read anything in that phrase about the service being cheaper or not. I just read that if the contractor gets X cash, and then gives Y cash to its workforce, the difference goes to the shareholders. If labor is what makes the biggest part of the expenses (and I guess the author is referring to such cases) that is almost a truism.
Comments
The article is too one-sided for sure, but the fact that the cash that doesn't go to the workers goes to the shareholders' pockets is practically a truism: That cash is called profit, and shareholders (rightfully) expect it from their investment.
I think what rwmj is saying is:
State total cost = State front line workers' salaries + State overheads Private sector total cost = Private sector front line workers' salaries + Private sector overheads + Profit.
Overheads are everything from paddy wagons to radios to uniforms to back office staff to police horses loaned to Rebekah Brooks to the G4S CEO's £830K/year salary. Private sector firms will presumably only bid on a contract if the profit is positive, I'd agree that's a truism. But is the profit positive because the private sector total cost is higher, or because the private sector front line workers' salaries are lower, or because the private sector overheads are lower?
I think that's what rwmj wants evidence of.
The problem is that usually the people doing all the work get very little whilst the people who're just being rich get made richer. Yes within the current system a small return on investment should be expected but a commensurably larger wage should be paid before a large return is given to investors.
It's by no means a universal truth that an investor deserves profit.
I didn't say that an investor deserves (which is a moral judgement) a profit, I said that she rightfully expects to make one - otherwise she simply wouldn't invest.
It's not a "truism" at all. For a start, companies are going bust taking these contracts[1] -- going bust generally being a good sign that they aren't making a profit. More importantly, the alternative is a state-owned security service (police, army, etc) who are likely to be inefficient, highly unionized with tons of overhanging pension payments. Is that cheaper? I don't know which is why I was saying in my original comment that these things can be studied.
[1] http://www.out-law.com/en/articles/2012/july/special-adminis...
The article said that "the cash not going to the work force is redirected into shareholders' pockets". I don't read anything in that phrase about the service being cheaper or not. I just read that if the contractor gets X cash, and then gives Y cash to its workforce, the difference goes to the shareholders. If labor is what makes the biggest part of the expenses (and I guess the author is referring to such cases) that is almost a truism.