To thwart HB2 provision, NC governments could insource services

House Bill 2 goes a lot further than regulating bathrooms or repealing workers’ protections against employer discrimination. HB2 also changes how local governments contract with private businesses – raising important questions about whether local governments should move from outsourcing to insourcing essential public services.

Local governments often contract with private businesses to maintain government buildings, process local tax payments, provide temporary clerical support, in addition to other functions. House Bill 2 severely restricts what local governments can require contractors do in terms of how they treat their employees in regards to living wages, paid sick days or even workplace health and safety standards.

The good news, however, is that local governments still have an important tool they can use to protect workers against discrimination and provide them with family-sustaining wages: City and county governments across North Carolina can rethink their decision to outsource service provision to private businesses and instead insource the work they need done by doing it directly – adding government jobs that pay higher wages, better benefits and offer stronger protections.

Fortunately, local governments throughout North Carolina still retain authority to set wages and benefits for their direct employees. Some North Carolina cities and counties already guarantee living wage standards and good benefits for government employees. Others can follow their lead.

It was not that long ago that most public services were performed and managed inhouse and by well-paid government employees – be that at the state or local level. Over time, however, local governments have bought into the logic of outsourcing and with it a much-touted assumption this would generate greater efficiencies by enabling government agencies to harness private business knowledge and expertise. Many local governments now use a competitive bidding process to select among multiple business vendors.

Basing decisions solely on price

Admittedly, this has the potential to put downward pressure on wages, but only if the bidding process is based solely on price. In the past decade, local governments have countered this by adding other selection criteria to protect workers at the bottom of the labor market: Some have required private contractors pay their employees at least a living wage; others have required they offer good benefits, adhere to more stringent anti-discrimination policies or implement more rigorous health and safety protocols. These actions reinforce what planners, economists and labor advocates have long known to be true: Markets function best when governed by clear rules, shared values and community-enhancing norms and practices.

As enacted, House Bill 2 undermines the ability of local governments to promote shared prosperity through the contracts they extend to private business. Eliminating this option is equivalent to telling individual consumers they can select products and services only on the basis of lower prices – even if those immediate financial gains come at the expense of product safety, quality and reliability. But unlike most individuals, local governments can still decide to perform essential public services through a calculated “make or buy” decision that ultimately allows them to retain labor market control and reach.

For some, this proposed insourcing solution might seem short-sighted, but research suggests otherwise. Cornell University researchers analyzed a national survey and found city and county governments frequently reverse outsourcing decisions, especially when they encounter difficulty in monitoring or managing service provision. And the economic benefits from government insourcing go well beyond better jobs and working conditions. According to a recent report by the Center for American Progress, federal agencies that have reabsorbed key functions and jobs have saved taxpayer dollars. And they have experienced productivity gains and increased government transparency in the process.

House Bill 2 has once again put North Carolina on the national map. The question facing local governments now is whether they are willing to etch in a higher road.

Nichola Lowe of Durham is an associate professor in the Department of City and Regional Planning at the University of North Carolina at Chapel Hill.