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Each federal layoff could lead to at least 1 other job loss in the private sector
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Each federal layoff could lead to at least 1 other job loss in the private sector
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Listener Brian Hempstead from Seattle asks:
In Seattle, pre-Microsoft and Amazon, when layoffs happened, there was a phrase “the Rule of 7.” For each high white-collar job laid off, it affected seven support jobs in the community
When you talk about these huge government layoffs, is there a formula of its down river effect on the economy?
The federal government has announced more than 62,000 layoffs this year as part of a new initiative to curb “wasteful” spending, even though federal worker salaries represent less than 5% of total government expenditures.
These sweeping layoffs, led by the Department of Government Efficiency, have hit departments and agencies like the Department of Veterans Affairs, the Internal Revenue Service, and the Department of Education.
The Department of Education announced earlier this month that it will reduce half of its workforce, with those employees being placed on administrative leave starting on Friday. Then on Thursday, President Donald Trump signed an executive order to dismantle the agency.
It’s been a major period of upheaval – and confusion – for federal workers, some of whom have been rehired in recent weeks after their initial firings. On Thursday, the National Park Service was allowed to reinstate 1,000 terminated employees.
The federal government employs about 3 million workers, a figure that excludes active-duty military personnel. The vast majority of federal workers live outside of Washington, D.C., residing in states like California, Washington, Texas and Pennsylvania, where they help stimulate the economy.
Jonathan Schwabish, a senior fellow at the Urban Institute who’s worked for the federal government, said government workers take pride in serving the country.
“Federal workers are just like any other person working in the United States. They’re just trying to do good work, pay their mortgage, pay their bills, raise their family, and put food on the table,” Schwabish said.
Each federal layoff could result in the loss of 1.3 additional workers in the private sector, according to Patrick Clapp, senior economic consultant at Chmura Economics & Analytics, a labor market consulting and data firm.
That’s because the federal government works directly with other businesses who sell them items like office supplies, while laid-off federal workers are no longer spending money in industries like food, health care and retail, Clapp explained.
Some local economies, like Washington, D.C., could be hit even harder. “On average, for every job in the federal government, you explain two to three jobs in the regional economy,” Terry Clower, a public policy professor at George Mason University, told the Washingtonian. Government jobs lead to jobs for contractors like Lockheed Martin, the Washingtonian explained.
Some federal workers, like national park employees, live in communities that are especially tight-knit.
If they’re unemployed, that creates ripple effects throughout the regions where they live, said John Garder, senior director of budget and appropriations at the National Parks Conservation Association.
“These are dedicated park servants who have moved their families in many cases, and are integral parts of their communities,” Garder said. “Their children go to the same schools. They have friends and family in the community.”
And they’re investing their paychecks in the area, whether that’s buying groceries or taking their families out to local restaurants, Garder added.
While the NPS is now able to reinstate workers, the parks still face the possibility of future cuts.
“After they have been treated so poorly, it remains to be seen how many of them will actually want to return,” Garder said.
The federal government is also cutting back on grants and contracts and laying off the people who run them, Schwabish said.
Take the Department of Agriculture. If the government fires everyone who handles contracts, they’re no longer able to provide contracts or grants to research or farm-lending organizations, Schwabish said.
“So that money is not going out the door,” he said.
Without that money, these organizations may then lay off their own employees. Johns Hopkins University announced last week that it’s going to eliminate more than 2,000 jobs after the Trump administration clawed back $800 million in grants for the university.
Americans will soon become even more aware of how vital federal services are, said Emily Gee, senior vice president for Inclusive Growth at the Center for American Progress.
People might face longer lines at their Social Security offices and receive less reliable weather forecasting information, Gee said.
“It’s not pain that’s going to be contained to the federal workforce,” Gee said.
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