Human services for profit: the evidence is in

Over at Club Troppo, Nicholas Gruen has a thoughtful piece on the role of competition and choice in human services. He’s responding to the less-than-thoughtful boosterism of the Productivity Commission and the Harper Review on this topic. It’s well worth reading. Before doing so, though it’s important to take a look at the mounting evidence that for-profit provision of human services is almost invariably disastrous.

I’ll write a longer piece on this soon, I hope. But here are three recent examples from the United States, which has led the way in for-profit human services, and is now beginning to pull back

Shonky for-profit educator ITT closes down without notice, right at the beginning of a new semester.

Following a damning report, the US Department of Justice announces it will no longer use private prisons.

Charter schools (some openly for-profit, many others run as businesses) have been failing at a starting rate.

91 thoughts on “Human services for profit: the evidence is in

  1. @Donald Oats

    I concur with you regarding the homeless. I mentioned the orangesky laundry because of Gruen’s interest in social innovation and entrepreneurship. Note, no managerial guidance was required for these young guys to do something that is immediately helpful in a practical sense to at least some. It is no solution to the growing number of homeless.

    You mention the growing number of homeless in Adelaide. I live in a suburb in the leafy North Shore in Sydney. I don’t remember the exact year – some time after the GFC – homeless people who looked destitute appeared in the shopping strips and around train stations in the suburbs of the North Shore – 20 and more km from the CBD. My friends, acquaintances, neighbours, chance meetings with locals who are strangers to me, saw it for what it was, namely growing homelessness. They didn’t like. Contrary to what some people might presume, the said locals on the North Shore didn’t like it not because they didn’t want their vista’s disturbed by ‘riff ruff’ that had invaded their patch but because it was evidence of how widespread and serious the problem of homelessness has become. People are seriously concerned about government policies regarding housing, health, education, employment insecurity, etc. etc. Although ‘they’ are in a blue ribbon liberal LGA, they are not blind to social division and the growing income and wealth inequality and associated problems. (Sometimes it seems to me focusing on ‘the left’ and ‘the right’ is not helpful.)

    One point of clarification regarding my mode 1. This mode also applies to public service providers who get a fixed amount of ‘revenue’ (or according to some formula) from the government. Corporatisation of public sector services tends to provide a bridge into mode 2 in my experience in higher education.

    I take your point about health and safety matters.

  2. @may
    @ 26 May

    as well as receiving public money to run a prison at a profit, a profit is made from the inmates productivity.

    is this true?

    It seems very likely.

    if it is true ,are these products exported under “free trade”treaties?

    No idea

    The Canadian Federal prison system had/has(?) an office furntiture industry but I believe would only sell to Canadian goverment entities. Very nice products. I believe the inmates were paid a small amount of money—probably well below minimum wage.

  3. @Ernestine Gross

    It’s a strange two-speed economy. I see the opposite near where I live. People seem to be able to afford massive automobiles these days. I’ve looked up their prices. I see for example;

    (a) numerous medium SUV AWDs ($55,000 to $65,000);
    (b) numerous new Prados ($ 65,000 plus);
    (c) a fair sprinkling of Series 200 Landcruisers ($90,000 plus)
    (d) A few Audi Q7s ($100,000 plus).
    (e) A few BMWX5s ($185,000 plus);
    (f) A few Rangerovers ($250,000 plus);

    And there are plenty of luxury sedans in the $75,000 to $100,000 bracket. Many of these are in driveways which have 2 or 3 automobiles in total. This is not the north shore of Sydney, just the western periphery of Brisbane. One certainly does get the impression of wide disparities of wealth in our economy. Do so many people really have enough loose change for these indulgences or are they spending everything they have and re-mortgaging the house? I do wonder.

  4. @Ikonoclast

    I propose the following universal means test. “See that car you are driving? Who owns it?” If it turns out that the driver actually is the owner, they pass the means test. But if it is owned by a company, trust, or leased under some fancy tax arrangement, they fail the means test.

  5. @Ernestine Gross
    Your #76

    It was interesting to hear about the travelling laundry cum shower service. However, if it is to service the homeless, doesn’t that mean there are sizable concentrations of homeless somewhere ? Unless the service can be called like an Uber.

    It caused me to consider just a few things that are done for the ‘non-homeless’: Meals-on-Wheels, for instance and Royal District Nursing Service’s home nursing service just for two. And I remember way back when – in my case 60 years ago – we young cubs ‘n’ scouts did ‘bob-a-job’ which was in part a cheap labour service to oldies and pensioners who couldn’t do things like they used to. It disappeared for a while, but apparently now it’s back – as a major undertaking in the UK, I believe, but also under the local title of Scout Job Week. Now alongside such old stayers as Rotary and Lions Clubs etc.

    But yes, they are mainly for us ‘non-homeless’. Though it used to be that for the homeless in or near the City they could get a bit of a wash and shower at the Melbourne City Baths. There were toilets there, too, as well as at the Melbourne City Hall. Entrance fee for the MCB is currently $6.20, but I have no idea how much begging in the street it would take to earn that much.

    As to increasing numbers of homeless, well, consider this: the population of Melbourne grew by 91,600 in 2014-2015 – an average of 1760 people per week. I would be very surprised if some percentage of that 1760 didn’t end up as new homeless, and/or displace some oldies to become new homeless, wouldn’t you ?

  6. @GrueBleen

    As I understand it, meals on wheels is not a thing anymore because there are no volunteers who will do this voluntary unpaid work. The women who usually did it back in the day are now working. If not they might be homeless.

    The type of person becoming homeless is changing.

    A man is not a plan: from a recent radio national program.

    “Up until quite recently, there was an idea among Western society that “a man is a plan”.

    Young women should find a man, get married and take care of the kids.

    It was seen as unusual for women to go to university or have a full time job.

    In fact in some cases, that would’ve been considered rebellious.

    Now, society has changed its expectations and values around how women should work and live.

    And the divorce rate is higher than ever.

    Now, many of those women who were sold the idea of marriage, kids and part-time work are over the age of 50.

    Many have been divorced, their kids have moved out, and they’re probably struggling to find work.

    Some are also struggling to find a home.

    This generation of women – the over 55s – is the fastest growing demographic among Australia’s homeless population.”

    So many things have changed. Some of us have noticed more than others.

    I can’t imagine how the old bob a job thing would work now. It isn’t in our culture to do things like that. It’s much too dangerous to let kids go house to house without supervision in a suburb of a city or a big town. Perhaps not in the area where you live though?

    That is one thing that has changed in our society; the way poor people all live together whereas once there was more integration when there was less inequality. It was said that the well off were a good example for the less lucky. Not any more.

    But for the young couples who move out here they have only been able to afford to live in suburbs where they say, you just wouldn’t send your kids raffle ticket selling unless you drive around with them and watch from the car at each house after giving them all the rules about not going inside no matter what the potential bad person says.

  7. @Julie Thomas

    I did Bob a Job as a kid (Cubs). It seemed safe enough then going around our suburb. My parents were, relatively speaking, “helicopter parents” for that era. Yet today, my parents’ parenting style would be considered extraordinarily lax about child safety. How times change. Then again, we did make our own fun. I remember cracker night, all sorts of unauthorised a chemical experiments with caustic soda, hydrochloric acid etc., billy carts, go-carts with motor-scooter engines (even had the gear-boxes), land yachts, building crude bridges over local creeks and slashing bush trails and clearing lantana on our own initiative for the high school cross-country. With that last, I am sure the rest of the school and just about all the teachers thought the cross-country route stayed clear all by itself or was cleared by the council.

    Now, if kids don’t have a screen they are lost. Lawd help them if they get a prickle in their foot. I used to run 10km a day in bare feet on stony dirt roads for athletics training. True story. I do admit though that I lived in a house not in a hole in the road. (Apologies to Monty Python.)

  8. @Ikonoclast

    Trove is a wonderful place to go looking for interesting things about life in the past. There are even photographs. I was looking for ones of Main Street in Brisbane. We lived on Main Street, when I was born just off the Storey Bridge as one drives toward Wooloongabba; the house was opposite the Mt Olivett Hospital which wasn’t there and St Mary’s church which was I think and my grandmothers huge old Queenslander was just down the road and our doctor was just down the road.

    Brisbane, just a country town in the ’50 and now it’s Brisvegas. 🙂

  9. @GrueBleen


    I suppose the mobile laundry service presupposes local concentration of homeless people. I haven’t seen this service on the North Shore in Sydney as yet. Yes, increasing population is likely to increase the number of homeless but not necessarily. To the best of my knowledge, there is statistical evidence that the proportion of people who are homeless in Australia has increased in recent times. (The extent of homelessness in the USA after the GFC gained world attention.) As for the particular local example I gave, I am absolutely sure I had never seen a homeless person 15 years ago, possibly even 10 years ago. There are factors such as public benches in bus shelters which are not (as yet) divided into seats in some localities only. It seems just finding a dry and at least partially protected spot in a safe area to settle for the night seems to have become a ‘challenge’ (managerial word for hard work or impossible task).

    Some of the specific examples you gave of social services for the non-homeless may be dated but there is no doubt that a lot of social services are provided now, which are neither organised via ‘the market’ (ie paid for in money) or via ‘the government’ (paid for in money). They range from driving a neighbour to a train station when their car isn’t working or they missed a bus to local people introducing new immigrants to local customs in a myriad of situations, to John Quggin’s (interactive) public lectures on this blog site. The debate you have with Julie Thomas contains another example. Child rearing is a social service. Without it there would be no future generation (and no pension payments!) Another one is the work done by retired people in persuing overcharging by banks or insurance companies – it takes a lot of time and perserverence to get through the private or public bureaucracy, time not available to working man and women.

    All these are examples, which technically fall into the category of ‘incomplete markets’. Just as well, because otherwise life would be absolutely boring and sterile – IMHO of course.

  10. @Ikonoclast

    No Mercs? Very popular on the North Shore. I am reasonably sure you are not the only one who doubts that the relative prices (‘values’ in money terms) we are observing are making any sense.

  11. @Julie Thomas
    Your #81

    Meals on Wheels still seems to be functioning – at least it still has active websites (one for each State and one central. Plus America, apparently). But I haven’t had to seek their services so far, so I can’t speak from any sort of personal experience. But come the not too distant future, who knows ?

    On the national website, BTW, MoW claims to provide multiple services as per:
    “We provide 3 services in 1:
    – A Meal (nutrition)
    – A Safe and Well Being Check (monitoring of physical and psychological well-being)
    – Social Cohesiveness (strengthening communities / locals helping locals)”

    I’m not familiar with any statistics on gender rates amongst the homeless, and I don’t get into the Melbourne CBD much nowadays (trains are too crowded, even in off-peak times), so I haven’t any anecdotal evidence to quote either, but I would expect an increase in female homeless because of the factors you mention. Just have no idea how many – yes, divorce is common, but both remarriage and ‘common law’ partnerships are also quite common these days. Personally, I have lived in an ongoing ‘common law marriage’ since 1967.

    But in my case, when I sat for Matriculation (in 1960) nearly half of the 20 who passed were girls (as we called them then, and we were boys 🙂 ) and nearly all of the girls went on to Uni. One became a doctor, several became lawyers and so on. All but one – at least of those who turn up to the 1960 Matric Year Annual Reunion Lunch – married and had children and all are still quite “well off”. But that was in the upper middle class Melbourne suburb of Brighton – I have no idea what it would have been like back then out in Yarraville or Seddon. And not everybody comes to the lunch, so I have no idea regarding about half of the Year of 1960 class. (Only one – a male – that we know of has died though – the key being “that we know of”).

    Can’t say how Bob-a-job would work these days either – maybe with scoutmasters and volunteer parents on the day (or week). But then, there’s the Halloween thing now that is fairly recent, and kids seem to wander around on their own – at least the ones who knock on my door do. However, I’d guess that might be location dependent too.

    And yes, my suburb – or at least the part of it where I live – is quite genteel compared to many. My street now has approximately 30% Chinese occupancy rate now, so I expect that to mostly continue. I wonder if/when we’ll see an increasing rate of Chinese homeless in Melbourne.

  12. @Ikonoclast
    Your #83

    Oh yes, but did you ever try Nitrogen triIodide (reaction of ammonia with iodine – which I could get at the local “chemist” (aka pharmacy these days).

    Excruciatingly vibration sensitive when dry – and a great little fun additive to the local footpaths and roads – in small quantities only, though.

  13. @Ernestine Gross
    Your #85

    Yes, a decent ‘hunkering down place’ can be somewhat hard to find, I guess; which explains the ‘explosion’ of homeless sleeping out in the Melbourne CBD laneways etc. There once was fairly cheap overnight dormitory style bedding down places in Melbourne – there was a quite well known one called Gordon House once upon a time. Now all subject to “knock-down rebuild” as the building industry likes to call it. Office blocks and “studio apartments” etc, so nowhere for the homeless to go. Gordon House was only for homeless men though – I’m not sure whether anybody ever thought that there were homeless women at the time.

    There is, as you say, many different services now – quite a few provided by local Councils too – none of which have I yet had to avail myself of. My learning curve might end up being very steep. The one you mention about pursuing bureaucracies (public and/or private) is interesting: my partner, I think, would be very good at that (I’m way too bad-tempered and impatient).

    So indeed, the ‘incomplete markets’ (as you label them) services are a “very good thing”. Though I must say it all looks more and more like a “precarious living taking in each other’s washing” economy to me.

  14. @GrueBleen

    ” Though I must say it all looks more and more like a “precarious living taking in each other’s washing” economy to me.”

    Indeed. And the precarious living wouldn’t turn into comfortable living if the transactions were to be carried out via ‘the market’ (exchanging invoices and payments) with the help of an innovative service provider, not for profit of course (because the profit becomes income for the managers), even though GDP might increase a little.

    The conversation is really about the growth of income and wealth inequality, which services are best provided by non-corporatised public institutions and which services are best provided by private enterprises and which, among the latter, are best organised via partnerships (where professionals are in control and they risk their own money) and which are best organised by the corporate finance form (physical capital intensive).

    Beside appreciating the linguistic skills of essay writers, I usually do not get much out of these pieces of prose. For example, the only clear cut message I received from Gruen’s essay is that he, like many others including myself, also does not see much benefit from ‘new public sector management’.

  15. @Ernestine Gross
    Your #90

    The now perennial problem: what, by whom, how. And as always, individual variation obscures systemic success or failure.

    I almost always find Nick Gruen readable, I just don’t very often find him enlightening, though he has gotten through to me a few times in the past. Besides, he’s a big chess fan.

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