Due to the closure, hundreds of thousands of federal employees were temporarily suspended, that is, sent home without salary until financing resumes. Before closing, President Donald Trump suggested that a prolonged interruption of financing could generate irreversible changes, such as the reduction of the federal staff.
The closure represents another difficult time this year for the Federal Work Force, which to date lost more than 300,000 jobs. This is largely due to the continuous efforts of the Trump administration to reduce parts of the federal government and restructure or eliminate certain government agencies, with the declared objective of increasing efficiency.
As a team of financial economists who study labor markets and employment in the public sector, and that millions of federal personnel records that cover similar government closures in the past, we have discovered that the consequences go far beyond the already known images of closed national parks and paralyzed federal services.
In fact, our study on the end of October 2013 – during which about 800,000 federal employees were temporarily suspended for 16 days – these events have a lasting negative effect on the Federal Work Force, reconfiguring their composition and weakening their performance for years.
What about workers?
Millions of Americans interact with the federal government daily, in various ways. More than a third of the US national spending is channeled through government programs, such as Medicare and Social Security. Federal officials manage national parks, write environmental regulations and contribute to air travel safety.
Whatever the political inclinations of each person, if the objective is a government that manages these responsibilities effectively, attracting and retaining a talented workforce is essential. However, the federal government’s ability to do so can be increasingly limited, partly because prolonged closures can have hidden effects.
When Congress does not approve the budget allocations, federal agencies must temporarily suspend employees whose positions are not considered “exempt”, commonly called essential. These exempted employees continue to work, while others are prohibited from working or even offering themselves as volunteers until financing resumes.
The temporary suspension state reflects the sources of financing and mission categories, not individual performance, so it offers no signal on the future perspectives of the employee and acts mainly as a blow to morality.
It is important to note that permits do not generate long -term patrimonial losses: backward payment has always been granted and, since 2019, it is legally guaranteed. Therefore, employees recover their salary, although they may face real short -term financial difficulties.
A cynical observer could consider permits without salary enjoyment as a paid vacation, but the data tells a different story.
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Using broad administrative records on federal civil employees since the end of October 2013, we analyzed how this impact on morals extended to government operations. Employees exposed to temporary suspensions were 31% more likely to leave their work within one year.
These outputs were not quickly replaced, which forced agencies to resort to expensive temporary workers and caused measurable decreases in basic functions such as the accuracy of payments, legal compliance and patent activity.
In addition, we observe that this exodus intensifies during the first two years after closing and then consolidates in a permanently lower template, which implies a lasting loss of human capital. The impact on morality is more pronounced among young professionals, women and those with a high educational level and wide external options. In fact, our survey data analysis of a subsequent closure (2018-2019) confirms that morality, and not loss of income, drives outputs.
Employees who felt more affected reported a strong drop in their sense of autonomy, control and recognition, and were much more likely to plan their departure.
The effect of loss of motivation is surprising. Using a simple economic model in which workers are expected to value both money and purpose, we estimate that the fall in intrinsic motivation after a closure would require a salary increase of approximately 10% to compensate for it.
Political implications in the closure of government
Some people argued that this employee output is equivalent to a necessary cut, a way to reduce the size of the government through an alleged “slaughter of the beast.”
However, the evidence shows a different panorama. The agencies most affected by temporary permits resorted to eventual personnel to cover vacancies. During the two years after the closure we analyzed, these agencies spent approximately 1,000 million dollars on contractors than they saved on payroll.
The costs go beyond replacement spending, since government performance was also affected. The agencies most impacted by the closure registered higher rates of inaccurate federal payments for several years. Even after a partial recovery, the losses amounted to hundreds of millions of dollars that taxpayers never recovered.
Other functions that require high specialization also decreased. The application of the law was reduced in the agencies that lost experienced lawyers, and the patented activity fell into the science and engineering agencies after the game of key inventors.
Official estimates of closing costs usually focus on short -term effects on GDP and backward wages. However, our findings show that later an even greater invoice is generated, in the form of greater rotation of personnel, higher labor costs to cover vacancies and measurable losses of productivity.
The closures are overwhelming and recurring impacts that demoralize public workforce and erode their performance. These costs have an impact on all those that depend on government services. If citizens want efficient and responsible public institutions, then we should all worry about avoiding closures.
After a year already turbulent, it is not clear if a new closure would significantly increase the pressure on federal employees or would have a more limited effect, since many of those who considered leaving already did so through compensation or forced dismissals this year. What is evident is that hundreds of thousands of federal employees will face another period of uncertainty.
*Gonzalo Maturana He is an associate professor of Finance, Emory University; Andrew TeodorescuHe is a candidate for Doctor in Finance, University of Stanford; Christoph Herpfer He is an attached Professor of Business Administration, University of Virginia.
This article was originally published in The Conversation
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