For Immediate Release:
May 8, 2001

Contact: Jonathan Adams, ARC, Tel: (646) 502-8843

Oakland, CA—Welfare reform in 1996 promised that by turning social services over to private companies, government inefficiency would be overcome and services delivered better and cheaper. Is the privatization of welfare delivering on those promises? Have private companies transformed the old system into a suite of services leading to decent-paying, long-term employment for former welfare recipients? Preliminary results are in and the news is not good, according to a new report, Prospecting Among the Poor: Welfare Privatization, released by the Applied Research Center.

Far too often, corporations such as Maximus Inc. and Lockheed Martin, who have won contracts to manage welfare-to-work incentives, training programs, and treatment for people with substance abuse problems "underbid, over promised and … didn’t deliver." Job training and support services simply aren’t there for too many of those who need them.

In order to win contracts, according to author Bill Berkowitz, "companies like Maximus and Lockheed Martin blithely spend monies from other jurisdictions to wine, dine, and pay off decision-makers." Meanwhile, as in the case of Curtis and Associates, "staff working for private companies have neither the credentials nor the training to handle their caseloads. Consequently, clients do not receive services they need, and to which they are entitled, such as childcare and transportation subsidies and medical care."

The study uncovers the proliferation of profiteering scams and corporate failures whose costs ultimately come out of the hides of welfare recipients and taxpayers. Berkowitz says "corporations have sometimes achieved drastic reductions in welfare rolls, but privatization has not moved recipients from the underclass to the working class." On the contrary many welfare -to-work initiatives are placing people in short-term, low-paying, dead-end jobs and contributing to creating a group of people who work hard but still can’t make ends meet.

Welfare is no longer a question of poverty- it’s about the bottom line. And it looks as if that line can barely hold, let alone lift anyone out of poverty. The line is bottoming out and leaving those most in need under the rubble.

Author Bill Berkowitz, a Senior Research Fellow with the Applied Research Center, was the co-founder of the Oakland, CA-based Data Center and a well known feature writer who has a regular column on workingforchange.com.

View the full report online here

The Applied Research Center is a public policy institute advancing racial justice through research, advocacy and journalism.

###