Yesterday's New York Times contains an interesting article on the supposed gains from privatization.
The article briefly profiles a health-care worker at a state-run veterans facility in Michigan. The worker, employed by a private contractor, is paid $10 per hour rather than $20 per hour like her government-employed counterparts. However, that $10 is not adequate to support her family, so she also receives food stamps. Now Michigan wants to lay off 170 state employees and replace them with contract workers. Will it save the state money, when indirect costs are taken into account?