Private Security Vs. Public Police Experiences, Evaluation, and Future Direction

1. Private Security Vs. Public PoliceExperiences, Evaluation, and Future Direction Drs. Simon Hakim and Erwin A. Blackstone Center for Competitive Government Department of Economics Temple University http://www.fox.temple.edu/ccg hakim@temple.edu

2. Problem and Its Significance • Is the growth of private security desirable for city government and for the constituents? Growth includes new security activities and new types of crime; also, police shedding private services/contracting out public police services. • If the trend is desired then cities should encourage the shift to greater reliance on private security. If not, regulate against private expansion and finance additional police.

3. Source: BLS National Occupational Employment and Wage Estimates for 1997 through 2007.

4. Source: BLS National Occupational Employment and Wage Estimates for 1997 through 2007.

5. Source：BLS National OccupationalEmployment and wage estimates for 1997 through 2008

6. Figure 4: Crime Rates Over Time

7. Figure 5: Economic Crime Complaints

8. Source: BLS National Occupational Employment and Wage Estimates for 1997 through 2007.

9. Empirical Findings • Private security is growing more rapidly (50%) than both total and public police (constant) employment over 11 years. • Private police wages grew slightly less than both overall and public police wages. • Private police employment is related to GDP while public police are not. • No relation of private or public police employment to both property and violent crime levels. • Expenditures on public police are overtime constant at 3.14 percent of all state and local expenditures. • Public police wages are consistently 2.15 times private police.

10. Demand for Private Security • GDP. Police respond to non-public 911 calls leading to inability to satisfy demand for crime related calls, forcing businesses and residents to hire private security services. For example, undesirables congregating around stores in SF, business districts in Chicago, and response to false alarms. • Privatization. Reflects general trend, tighter state & local budgets. • Liability. Premises and inadequate security even beyond the perimeter. The number and size of judgments have been increasing. • Regulation. Universities (The Cleary Act publication of crime data , hospitals (Accreditation), chemical plants (DHS), nuclear (DOE, armed guards), Defense contractors (DOD). • Concern about negative publicity (reduces customers demand, higher wages for workers, liability suits)

11. Differences Between Public & Private Policing • Objectives and behavior: Private services clients. Private deters crime while public emphasizes arrest & assisting in punishment. Private concentrates on surveillance (cameras, access control, target hardening and encourage displacement) • Legal: Private police derive authority from client (agent). Public police enjoy legal authority & greater liability protection. Private police are not bound by constitutional restrictions (warning before interrogation)

12. Differences between Public & Private Policing • Cost: Wages of private guards are 47% of sworn officers. Public police are better trained but their salaries are determined by union contracts unlike competitive private guards. • Public police, like monopolies, provide standardized service, insensitive to changing market demands. Private police serve new niche markets by hiring lawyers, accountants and IT professionals. Public police constrained by civil service rules can only train sworn officers for such uses. • Private police blend into IT, and customer service while public police are more rigid to change. • Private less likely to abuse citizens: Private police can be sued, fired more easily, and are more susceptible to market forces.

13. Results: Low Level Security • Concentration is moderate and increasing modestly (50%). Like movie production & distribution, less than soft drinks, and candy. • Low barriers to entry. Relies mainly on unskilled labor, low initial investment, no regulatory barriers (training requirements are modest) • Companies can and do provide their own security • Homogeneous service • Knowledgeable buyers • Individual negotiations on contracts encourages competitive pricing.

14. Results: High Level Security • New types of economic crimes: identity theft, cyber fraud, malicious (viruses) internet crimes, counterfeiting goods, employee fraud. • Police do not have the requisite skills to deal with them; they require much time and expenses, are not jurisdictionally bounded, and they lack desired press publicity. • Police refrain from dealing with crimes that adversely affect profitability of firms unless directed by the district attorney. • Businesses wish to avoid publicity of crime targeted at them. • As a result, Economic crimes are handled by accounting, engineering, law firms, and newly created highly professional security companies.

15. Future of Private Policing • Private police will expand above and below the standardized service provided by public police. • From below, private police will expand in guarding activities and especially in the growing industries like universities, hospitals, chemical and other critical infrastructures. Guard wages and prices of services are unlikely to rise much because of competitive low skilled labor market and the industry. • Private police will expand by blending into non-security services enjoying economies of scope. For example, alarm response, patrol and vacation services. • From above, private police will provide high quality IT and financial related services that require highly professional workers.

16. Future of Private Policing • Tight budgets will encourage public police to shed non-public services and contract out quantifiable public services. For example, guarding prisoners, courts and other government buildings, crime labs, guarding public transit. This will expand demand for private security. The highly competitive private security industry will ensure competitive pricing. • Hospitals, universities, FedEx, Longwood Security formed sworn officer services in order to provide greater arrest and investigation authority. This is, however, a limited trend. • Competitiveness of the industry will ensure that security firms will tap every niche market. • Competition forces firms to employ technology intensively in order to deliver service cheaply, effectively, and reduce number of guards. Monopolistic public police have less incentive to introduce technology.

17. Recommendations • Industry: Establish expertise in a particular industry or security focus. Examples, Akal guarding military installations, Wackenhut securing nuclear facilities, Securitas-universities, Allied/Barton- shopping centers. • Government: The highly competitive nature of the industry makes even the existing loose background and training requirements unimportant. Additional regulation is unnecessary. Exception may be for weapon training because of externalities. • Expansion of highly competitive private security is a socially desired trend and does not require cities to regulate. Free markets provide quality control, and technological and managerial innovations. • Promote Public Private Partnerships like in a case of response to burglar alarms, counterfeit goods, and identity thefts.