Working for Less: As States Shift to Contract Workers, Savings Are Not Clear-Cut

Ginny Townsend, 41, took a job in January as a nursing assistant in the state-run home for veterans here. Technically, she works for a private company that supplies some employees to the veterans home under a state contract. She makes $10 an hour, about half the wage of the public employees working at the facility.

“I love my job, and I appreciate the opportunity to be here,” Ms. Townsend, a former home health care aide, said on a recent afternoon as she cheerfully delivered fruit and a newspaper to an 85-year-old resident in a sun-drenched solarium.

With the national unemployment rate at roughly 9 percent, Ms. Townsend says she feels lucky just to have a job. But on her low wages, she is barely scraping by. She said she was raising four grandchildren under 11 with her unemployed sister and could not support them without the $300 in food stamps she collects every month.

Now, the state wants to dismiss 170 nursing assistants on the public payroll at the veterans home and replace them with more contract workers like Ms. Townsend, prompting a legal dispute and much personal anguish.

The legal battle highlights the potential pitfalls in such decisions. Outsourcing, usually intended to ease strained public budgets, tends to most directly affect people like Ms. Townsend and her co-workers. But there can be other drawbacks. The quality of services provided by contract workers, for example, may not be as consistent as that of experienced government employees. And taxpayers can end up paying for the cuts in more indirect ways.

What governments save in salaries and benefits often “ends up on the government books through all sorts of programs,” said Paul C. Light, a professor at the Wagner School of Public Service at New York University, referring to unemployment insurance, Medicaid and other public assistance for workers earning low incomes.

Outsourcing becomes more popular during tough economic times as states and municipalities transfer the operations of facilities like prisons, school cafeterias and sanitation departments to private contractors. Governors or legislatures in Arizona, Louisiana, New Jersey and Pennsylvania have all proposed reviews of state agencies in search of opportunities to privatize operations.

Many local governments like Anaheim, Calif., and Luzerne County, Pa., have contracted out services including park maintenance, graffiti removal and tax claims. Mayor Rahm Emanuel of Chicago recently outsourced recycling collection in parts of the city.

In Michigan, the plan to replace state nursing assistants at the veterans home resulted in a lawsuit contending that some temporary workers employed by the contract company had already jeopardized patient care. In one case, the suit says, a resident fell off his bed and broke his neck after being left unattended by a contract worker. A judge has granted a preliminary injunction that keeps the state employees at work while the lawsuit moves forward.

The injunction also prevents new workers from J2S Healthforce Group, which recently won the contract to replace the state employees, from taking jobs at the facility. The company has provided fill-in nursing assistants at the veterans’ home since 2001.

The state has appealed the decision, saying in court documents that the incidents cited were isolated and that state workers had been involved in negligent care as well. It says contract workers can provide quality care to the veterans while saving about $5.8 million a year.

With state budgets under pressure, Michigan says it can no longer afford the relatively high wages of the public workers, which range from $15 to $20 an hour, along with health and retirement benefits. According to Salary.com, certified nursing assistants in private long-term care facilities in the area earn a median salary of just over $25,000 a year, or about $12.25 a hour.

The home, opened 125 years ago to provide care to the state’s war veterans and their spouses, now serves nearly 600 residents. About 40 percent of its financing comes from the United States Department of Veterans’ Affairs, with the rest coming from state funds and fees paid by residents.

Many of the nursing aides have worked here for decades, and the union that represents them says their experience and relationships with their patients cannot easily be replaced.

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