Up In The Air…

Every once in a while, the Indianapolis Star actually carries something we can consider news. (Not often: as I skimmed the paper the other day looking for actual information about the city, municipal and/or state government, area schools, or other coverage that could be classified as news, I came across several sports stories and an article–I kid you not–about a local family being reunited with their lost cat….)

One recent article that was newsworthy raised questions about privatization and a living wage.

The article began by profiling one of the baristas who works at the Indianapolis airport, noting that like most of the airport’s workers, she makes 10.50 an hour, and has to work two jobs in order to make ends meet.

In August, the City-County Council passed a proposal that sets a $13 “living wage” for city and county staff members. There are 365 workers earning $9.13 to $12.98 per hour who work for the city and county that will be eligible for pay increases.

But not everyone who works for the City will see a raise.

Reed, and nearly 100 cashiers, coffee baristas, janitors and service workers at the airport, argue that the city’s recent move to increase municipal workers’ minimum wage to $13 an hour should apply to them, too.

However, because the Indianapolis International Airport — ranked the top airport in the country five-straight years — has outsourced its labor to private companies through public-private partnerships, airport workers will not see those wage increases.

The article noted that airport privatization began with former Republican Indianapolis Mayor Stephen Goldsmith in 1995.  Ours was the country’s first full outsourcing of an airport. Goldsmith declined to comment on the Star’s report, but was quoted on the subject from a previous article:

 “I wanted to market-test whether a private company that specializes in airport management, with access to worldwide technology and best practices, could produce more customer satisfaction, better airline relationships and more net revenue while holding down increases in passenger enplanement costs,” Goldsmith told Governing Magazine in April.

Goldsmith was a major proponent of what is incorrectly called privatization (real privatization occurs when government simply “sells off” a function to the private sector a la Margaret Thatcher in England, and is thereafter not involved). What we call privatization is really contracting out. Government is still responsible for supplying the service, but rather than employing people directly, it hires companies or organizations whose employees provide it on government’s behalf.

One of the arguments for these arrangements–sometimes called “third-party government”–has been that private companies could do the work more cheaply. More recent research suggests the savings are largely illusory when the costs of negotiating and monitoring the contracts are factored in. (Unlike government, private companies bidding on government contracts also have to pay taxes, which adds to their costs.)

To the extent savings are realized, it’s usually because the private sector employees are paid less than their government counterparts.

The public administration literature suggests that actual experience with contracting has diminished its attractiveness to government agencies. Management problems, loss of institutional competence and other unanticipated consequences have taken the bloom off that particular rose, and many services that were enthusiastically outsourced by proponents like Goldsmith are being brought back “in house.”

That national reevaluation isn’t likely to be much comfort to the underpaid airport workers who are doing public jobs that benefit their communities but not making the same wage that they would make if they were on government’s direct, rather than indirect, payroll.

27 thoughts on “Up In The Air…

  1. I imagine there is quite a bit of unrest and anger among the airport employees right now. Sadly, if they must work two jobs to make ends meet they most likely don’t have the time or energy to demand a living wage.

  2. imagine being one of thease workers,just slanted by your own network your employed by. if i rememeber right, u.p.s and fed.ex use this airport for cross traffic,and its a big deal. theres nothing like again, whipping up on the workers for the right to show em were in charge. now read the sign,shut up,and carry on…this breeds contempt. if the labor market was any better in indy, a full scale walk off would be some news the indy papers,well, could,absorb…maybe pence is profiting of this too. economic slavery ,very real…

  3. Several years ago POGO did a study of privatization in the federal government. In nearly all of the job categories that were considered, the cost to government increased, often by a factor of two, even though the employees were paid less than government workers doing the same job. The reason was that the private firms charged excessive overhead costs – executive salaries and dividends to shareholders, being the biggest ones.

  4. From the 1995 Goldsmith quote you use today one gets the idea that the former mayor did not think at all about the effect his privatization plans would have on the workers. So Republican.

  5. The only valid reason for contracting for a service is the lack of expertise within your organization to complete the task at hand. Everything else is just a money making scheme for the contractor and too often for the individual in charge of letting the contract. This is true for both the public and the private sector.

  6. SOME THOUGHTS ON “Newspapers”, “News”, and the “Nonchalant”:

    Once in a while, I get to read a Wall Street Journal, a New York Times, a Washington Post, or a Christian Science Monitor. I can’t afford them, but sometimes someone leaves one in a restaurant, or I find them in the library. Anyway, they set the news and journalism bar kind of high, and every year they are contenders for a Pulitzer. I wonder what their budget looks like, especially their set-aside for legal costs. Those investigative pieces can court big expenses, pun intended.

    And then there are the hundreds of large city newspapers sadly wanting of excellence. I am speculating here, but maybe that is because the deep-pocket owner behind them is more interested in buying another thirty smaller newspapers each year than producing a single issue to be proud of. Speculating again; maybe that drive to expand into more and more markets is a symptom of the real motivation behind newspaper ownership–to politically influence as many voters as possible, the news be damned.

    Whatever the cause of lightweight journalism, it is not a new phenomenon (I recall professors in the 1950s ranting about the problem); it has been around long enough to have legitimized nonchalant journalism; that’s what’s new–the nonchalance. So, we don’t really give you the news, but we really look cool doing it. And that attitude likely grew out of the sixties–I don’t mind people seeing me unkempt, or living in my car, or sleeping in a doorway, or out of my mind, or failing miserably, but don’t ever let them see me trying.

  7. Gannett isn’t a news agency – it’s an advertising vehicle. If you offend the politicians funded by advertisers, guess what happens?

    As for privatization or Neoliberalism…Thatcher and Reagan started the program in the 80’s and every POTUS since has upheld the theft of public assets. It’s part of the whole “trickle-down” economic scheme employed by the boys in Chicago.

    Thomas Piketty pointed to Neoliberal policies for our extremely wide gaps in wealth and income inequality.

    Outsourcing to capture management expertise is legitimate. Using contracts to circumvent public sector labor unions is also a motive.

    I managed an outsourced contract for a municipality who increased their minimum wage to $10.10 an hour. We matched it even though we were exempt because we didn’t want morale to decline and lose quality staff. Hopefully, the airport contractor will do the same.

  8. Sheila, I’m glad that you found at least one relevant article to read in the “Pravda of the Plains”. The Indianapolis Star is a total farce with maybe three pages in the USA Today supplement devoted to national and international news and even then it’s normally a day or two old. I still subscribe for the coupon section since I put a dent in its weekly cost by using them.

    A city the size of Indianapolis deserves an actual newspaper whose editorial focus is not on new sandwiches at local restaurants or just one or two major stories that take up pages at the expense of other more relevant stuff. This is made worse for me by the fact that my “senior” relatives on my Mom’s side of my family, including herself, either worked for the Star as journalists or the late Indianapolis News in the same capacity.

  9. Theresa; that 1995 Goldsmith quote came the year after I left City government so I can’t speak to it directly. But…Goldsmith blasted Mayor Bill Hudnut for wasting millions of our tax dollars, especially to run the Mayor’s Office. Goldsmith’s annual public “budget reports” listing his savings to run this city did not include the amounts of our tax dollars spent on his many “privatization” contracts or hiring those sans contracts, the contract employees actually working in and for City government, listing only City employee expenses. To further his “savings” on the Mayor’s Office budget; he hid some of his office employees in other departments and they were paid from that department’s budget. That bit of trickery finally did go public; the two journalist from the Star and News were soon no longer employed by the two local newspapers owned by his wife’s grandfather, Eugene Pullium.

    “Privatization” can usually be traced to very personal connections to politicians.

  10. Nothing is fair when it comes to paying good wages to non-union labor. The corporatists that populate the Republican Party give not a whit to anything but money. When their donors are able to make money off of the taxpayers, they are happy.

    It still amazes me how that profit-at-all-cost (pun intended) ignores the fact that the lower-wage people spend EVERY dollar they earn as consumers. Consumer dollars run this economy, not greed or stockholders whining for more growth. The more money consumers have, the more they spend on … everything.

    Why hold down wages so severely if you want to have a vibrant economy? I understand overhead and cost-control, but worker’s families have to eat too, just like the rich ones.

  11. Todd and Tom; Gannett, Inc., is fast becoming as strong a monopoly nationally regarding print media as the Indianapolis Power and Light and Citizens Energy Group are sole owners and providers of “public utilities” here in Indianapolis. The only sources with enough money to buy out Gannett are the very ones who currently own and operate the Trump administration – his cabinet and Congress and Trump himself.

  12. Sheila’s piece today reminds me of an even greater travesty than she suggested, one that suppresses already slave wages paid in the private sector – and it is this. First, some background > New Deal labor laws (FLSA et al.) did not include agricultural workers and, traditionally, independent contractors. Independent contractors are not employees and therefore do not enjoy employees’ rights, so the trick was and is to have those labor brokers who supply labor as workers (but not employees) to corporations offer such workers as independent contractors. If one is not an “employee” then it follows that there are no workers compensation rights or rights to join unions or any of the otherwise protected rights of labor within the definition of “employee,” though perhaps depending upon the language of the contract and/or the law of the particular jurisdiction.

    Different “rights” have different definitions. I once took a tort case arising out of a workers compensation matter to a state supreme court based on the definition of employee where the owner of the corporation claimed to be a “fellow employee” as a defense. The court agreed with our position that a fellow employee defense required more than just saying so; that the definition of employee depended upon who had the right to tell such a worker what to do on the job, set working hours etc. Owners of corporations are not fellow employees any more than employees can be said to be owners, especially (as we showed) where owners tell their “fellow employees” what to do and otherwise direct their activities on the job.

    However, labor contractors and the corporations they serve apparently are not bound by such definitional strictures. The corporation certainly tells the “independent contractor” what to do on the job and otherwise directs his or her activities, but this is within a contractural rather than a workers compensation context and, without legislative disapproval, has judicial sanction.

    Result? The labor brokers take their pound of flesh off the top of the worker’s already low wage while the worker enjoys little if any rights as an “employee.” Such a situation, especially when added to the so-called “right to work” invasion of workers’ rights, is contrary to the spirit if not the letter of the Norris-LaGuardia Act, the Wagner Act, and human decency, but who cares in this day of threatened outsourcing, theft of worker productivity, “shareholder value” etc.? What to do? Same old thing – change the people in the Congress and state houses with a view toward changing this lopsided reward to capital over labor (aka wage inequality) at our earliest opportunity.

  13. As someone who has worked in the Airport Industry over most of my career I am a bit confused at this article. For a period of this career I was employed by BAA that was the contractor who was hired to run the airports under control by the Indianapolis Airport Authority (IAA). If I am not mistaken this contract was terminated quite a while back and IS A is back in control of the management’s of all airports. That being said , food service personnel and other concessions are never in direct employ of the “Airport”. The airport leases space for other businesses to operate.
    Without getting involved in a lengthy discussion on the operati on of airports it will suffice to say that very few people who work at an airport are employed by the governing authority.
    The real question remains is why do we not have a living minimum wage?

  14. Gerald; your comments reminded me of that long ago Tennessee Ernie hit song; “Sixteen Tons”.

    “I load 16 tons and what do I get,
    another day older and deeper in debt.
    St. Peter don’t you call me cause I can’t go,
    I owe my soul to the company store.”

  15. JoAnn – The “company stores” had their own scrip in lieu of ordinary currency. This control of pricing led to higher profits for the coal companies and is another example of wage theft in disguise. Corporate thieves have since become more sophisticated; they pay off state and federal legislatures via what are euphemistically called “campaign contributions.” I have a hard time telling the difference between such payoffs and what we used to call “bribes,” a very hard time.

  16. Gerald,

    It took the Ludlow, CO massacre by the Rockefellers to finally get laws overturning scrip payments. That was in 1914, I believe. The Rockefellers paid the state of Colorado to send the National Guard down to the coal mines near Trinidad, CO. to break the strike by the miners. The result was the NG killed men, women and children in their beds.

    As I said earlier, there is nothing fair about capitalism that exploits labor for profit. Unions were necessary back then, and they are still necessary now, only because greed knows no limits.

  17. Goldsmith bought into neoliberalism or it bought into him. Goldsmith was one of those politicians that would do anything if there was money in it for him. He and Ballard sucked as mayors. Moreover, Goldsmith went on to screw up big time in NYC. He followed that debacle with an encore performance in DC by beating his wife. Yeah,Goldsmith enjoyed the game wherein contractors paid into campaigns and having those same politicians skimming monies from their campaigns. Plus,if it was something hurtful to the average citizen,Goldsmith would be all for it because Republicans have always been a very hateful,resentful and racist organization.

    If we were in a perfect and just world,Goldsmith would be homeless,destitute and relegated to dumpster diving for his sustenance. Politicians such as Goldsmith deserve no compassion.

    Here’s a good historical perspective of neoliberalism:

    https://www.nakedcapitalism.com/2017/10/look-behind-neoliberal-economists-youll-discover-rich-economic-theories-serve-big-business.html

    And another:

    https://www.nakedcapitalism.com/2017/10/gaius-publius-defining-neoliberalism.html

  18. When I was a graduate business student in the late 70’s, you could could not pick up a copy of the Harvard Business Review without reading an article on one or more of these three emerging management practices, all powered by the relatively nascent digital revolution: Out-sourcing (contracting-out), Off-shoring (which may also be outsourcing but not necessarily), and Supply-Chain-Management. The last of these is the least well-known and understood but it has to do with an organization that understands exactly how its manufacturing and/or service-provisioning processes work in great detail; how they may be separated into their own economic units (measured by profit and loss) and last; whether they should be performed internally or by one or more outside entities. Adoption of these practices and enabling technologies has been nothing short of an economic miracle over the past 35 years.

    A lot of business research has been done about outsourcing and the results led to findings that were counter-intuitive. Companies which generally managed their processes more efficiently and effectively gained MORE from outsourcing than did companies who understood and managed their processes poorly. Why? Because companies that generally don’t have good overall management skills and know-how don’t do a very good job of managing the outsourcing process either – they put defective proposals out for bid, they put crummy contracts in place and they don’t monitor the results and provide feedback very well. “Out of sight-out of mind” rules the day. Companies who are good at managing their processes realize that among their most important and limited resource is management know-how and talent and have learned that through outsourcing they can concentrate more resources on those internal processes that give them a competitive edge in the marketplace. Outsourcing decisions are no longer simply driven by consideration of cost savings.

    So going back to the airport example, if the city regime that outsourced the operation of the airport did so in order to simply achieve cost-savings, then as our author suggests, those savings are likely illusory. The real reason, in my opinion, that it makes some sense to outsource municipal services and operations, is to provide a degree of insulation of day-to-day operations from meddling incompetent elected politicians. In other words, poor managers. Probably the best example of this is the 75-year lease of the Indiana Toll Road to Indiana Toll Road Concession Company (ITRCC), a closely held limited liability corporation.

    Say what you will about Mitch Daniels (I’m not a fan) but the IN TR was a mess, and because it wasn’t really of much use to the Indianapolis area, it never got the attention it demanded of the Indiana General Assembly, especially when it came to making road and bridge repairs, adoption of new technologies, and of course, raising toll rates…which they rarely approved. The result was that ITR became a liability as a part of the economic development story all along the Northern part of the state. Something had to be done. As one who lives nearby and uses the ITR quite regularly, the decision to outsource it was a god-send, and not just a cost-savings initiative. The Indiana Finance Authority, which oversees the contract to ITRCC has been able to far better manage ITR operations than the bureaucratic and, at times, corrupt Indiana Toll Road Commission.

    As for the wage-disparity issue then, if the city of Indianapolis was really concerned about maintaining the status of the airport as best-in-class nationally, then they had better heed the warning mentioned above and know that “out-of-sight-out-of-mind” or simply cost-savings can NEVER be the sole aims of outsourcing. The aim is and always should be “operational excellence”. And the management principles of OE would NEVER EVER tolerate a situation where airport employees felt short-changed because municipal employees were paid more for doing similar jobs requiring similar skills and education (this is a whole different topic – what employees see as equivalence is often much different that what management sees and what reality dictates). It will eventually lead to poor worker morale, performance, turnover and an overall deterioration in the quality of the product – that of serving travelers.

  19. Glad to see the Ludlow Massacre mentioned. It was just over one hundred years ago. Amazing,that bit of history hardly gets mentioned. It’s also amazing people looked to the Rockefellers as heroes after such an event. That says something about the American psyche. Kent State gets a lot of mentions…..But one never hears much wrt the Ludlow Massacre and of course,Jackson State which happened just 10 days after Kent State.

    Perhaps if events such as those mentioned were wiped clean from the history books…..

  20. Those of you familiar with supply-chain-management concepts and principles might have found reason to disagree with my general definition and you would be justified. SCM is much broader than what I described it to be but one of its core elements is the practice of Business Process Management, which is a better name for what I described generally. For more info on SCM I recommend a visit to Wikipedia! PW

  21. In line with James Lemons comments.

    SSP America, a company that specializes in food service and concessions at airports, train stations, etc. was awarded a contract by the Indianapolis Airport Authority in 2008 to operate all the food service and concessions at Indianapolis International Airport. SSP runs all the restaurants and hires all the employees. SSP licenses the names of all those “local” restaurants and the right to use some of their signature menu items. But SSP is in charge, and the local restaurants, whose names are being used, have nothing to do with the day-to-day operations.

    SSP America still held the contract at IIA as recently as 2013, and probably still does. And if not SSP, then another similar private company more than likely does.

    Regardless, the Indianapolis Airport Authority isn’t in the restaurant business. It’s essentially a landlord that probably also receives a percentage of SSP’s profits under the contract, similar to mall operators, etc. And frankly, I don’t think anyone would want the Airport Authority to be actually operating and managing restaurants; not really within their core area of expertise and where its efforts should be focused. To me, in this instance, contracting out the responsibility for running and operating the restaurants at the airport seems to be a pretty good business decision for the taxpayers — unlike many other instances.

    While I’m totally in agreement that restaurant workers (actually all workers) should be paid a living wage, regardless of whom their employer is, the Indy Star article seems to have failed to recognize that the employees at the airport restaurants, such as Starbucks, aren’t employed by Indianapolis government. Thus the article fosters kind of a false equivalency. Nonetheless, I, too, would hope that SSP America, or whatever mega-corp that might be the current airport concessionaire, would do the right thing and give it’s workers a raise to a living wage. But I won’t hold my breath that it would do so voluntarily.

  22. James: The real question remains is why do we not have a living minimum wage?

    Because the right/fox spews claims that is socialism, am I right?

  23. “Because the right/fox spews claims that is socialism, am I right?”

    That’s half of it,the other half is because the Democrats have refused to counter such an argument from the right because Republicans and Democrats both serve the donor-class.

    The donor-class doesn’t want real universal healthcare among the population either. Did the Democrats fight for universal healthcare? Absolutely not. When the donor-class engages upon class warfare,it’s ok and to be commended by the acolytes of both parties, because markets! When the plebes understand what’s going on and fight back…….Well,oh my goodness,how gauche! Let’s sign an online petition! We should force congress (by online petition) to write a sternly worded letter! Let’s keep supporting bad behaviour by continually voting for blue-dogs! That’ll fix things!

    The Democrats ruled for how many years? Decades? The problems of today didn’t manifest themselves within the last 11 months. So,who is to blame for the inertia for the preceding 40+ years? Fox News?

  24. I suspect that the demand from employers like Target (who are promoting increased wages) especially at holiday time, will be far more beneficial to increased wages than various unions. As to Mitch Daniels, he is affiliating Purdue with Kaplan, thus enabling Purdue to help provide good value in education, and has helped Purdue crack down on irresponsible members of the educational-government complex trying to raise prices by making you take “just one more semester $$$” with e-z pay student loans, which in fact is much like wrapping undercoating and simonize into your car loan.

  25. It’s this simple: any time you add a middle man, you end up paying more one way or another. It is utterly vexing that American corporations and government organizations haven’t figured this out, and it’s infuriating that workers pay for this with lower wages and less job security than we’d otherwise have.

  26. Anonymoose,

    “It’s this simple……It is utterly vexing…….American corporations and government organizations haven’t figured this out.”

    They’ve figured it out alright, it’s called the EASY WAY OUT. This phenomenon now reaches every aspect affecting our future: from global warming to destroying our democracy, all of which has put the future not only of America but also of Planet Earth AT RISK.

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