This chapter reviews the privatization of social welfare, a dynamic that has accelerated in recent decades. As a function of public dissatisfaction with governmental social programs, increasing reliance on the private sector to finance and deliver social services has emerged as an important theme in American social welfare.

1. CHAPTER 7.
PRIVATIZATION AND
HUMAN SERVICE
CORPORATIONS

2. PRIVATIZATION
The ownership or management of social services by the private
sector, either nonprofit agencies or proprietary corporations.
• Privatization of public assistance refers to attempts by individual
states to have for-profit corporations manage the delivery of their
public assistance benefits.

3. PROPONENTS OF PRIVATIZATION
Non-profit
Voluntary Sector
Historically has led the way in
providing services to the public
Proximity to the communities
they serve
Selfless motive for providing
services to populations in need
For-profit
Corporate Sector
Cost-effective administration
of services
Responsive to consumer
demand
Pay corporate tax

4. 3 WAYS TO PRIVATIZE THROUGH
CORPORATIONS
• 1. Selling government assets. Take over cost and risks associated with
asset.
• 2. Contracting with private firms to provide goods and services
previously offered by the government
• Ex. Prison system, Student Loan Marketing Association (Sallie Mae) and the
Federal National Mortgage Association (Fannie Mae)
• Human Services Market – when private companies provide human care services
like child care, medical care, correction services and financial services

5. 3 WAYS TO PRIVATIZE THROUGH
CORPORATIONS
• 3. Government programs through contractors – using vouchers which
authorize the provider of the services to be reimbursed from
government funds for the service provided
• Ex. Housing vouchers

6. PROS OF PRIVATIZATION
• Cost Reduction
• Risk Transfer
• Source of revenue
• Quality of service and expertise
• Flexibility

7. CONS OF PRIVATIZATION
• Limiting access to services due to profit margin
• Temptation to reduce overhead to save money
• Preferential Selection – providing services based on the need of the
provider instead of the need of the client
• Ex. Aiming services to those with insurance or less severe problems
• Automation both in staffing and in the provision of services; thereby
not making dispensations for those who are not technologically savvy

8. CONS OF PRIVATIZATION
• Gaps in service when corporations stop providing that service;
government facilities would not be available
• Corporations will engage in policymaking to their benefit and/or be in
a position to shape welfare policy
• Oligopolization – control of the market by a few providers; will engage
in power buyouts to eliminate competition