The Effects of Sequestration on Federal Employees - Research Paper Example

The Effects of Sequestration on Federal Employees Table of Contents Figure Economic impacts as a result of sequestration budget cuts in 2013……………………4 Figure 2: States with greatest job-loss after sequestration………………………….…………….6 Introduction Sequestration is of the hottest and one of the most-talked about issues in the education circles at the moment. House (2012) contends that sequestration entails the federal government, congress, funding and schools. Isaacs and Whittaker (2013) define sequestration as an automatic process, particularly involving a reduction on the budgetary resources to achieve certain budgetary policy aims. In the fiscal year 2013, there was a reduced funding to the selected components of the U.S federal agencies, as well as their partners. Due to these reduced funding; the selected components as well as their partners reduced or delayed some essential services to the public and other operations in the year 2013. In some instances, program partners reported an increased reliance on the funding sources from the federal, local sources, and the state to mitigate the effects of sequestration and meet the services to the public. Some state agencies reported that they relied on the additional state funds in inspecting and investigating facilities for healthcare on behalf of the CMS. In other cases, there were reports from the program partners that the reduction in the other funding sources exaggerated the effects of sequestration on the services to the public (United States Government Accountability Office, 2014). In terms of employment, spending by the federal government supports jobs in paying salary to federal employees, creating additional jobs in terms of contracts, and other indirect jobs. This paper will attempt to explore the various impacts sequestration on federal employees. To unearth the real effects of sequestration on federal employees, this paper will review a myriad of studies that have attempted to estimate these effects. Sequestration and payroll savings During the financial year, 2013, all federal agencies have adopted the Furlough as their means to achieving payroll savings. Instead of terminating employees from their jobs, the Furlough system requires the affected employees to reduce their salaries by up to 20% annual reduction (Fuller, 2013). The Furlough system has been embraced as basic means of reducing the expenditure on payrolls. A total amount $29.7 billion is believed to be saved every year by the federal government through the system of Furlough (Fuller, 2013). There is a myriad of impacts generated by the adoption of the sequester program by the federal agencies. Figure 1: Economic impacts as a result of sequestration budget cuts in 2013(Fuller, 2013). As observed in figure 1, it was estimated that $85.4 billion reductions federal expenditure would impact on how the economy of U.S by reducing the GDP by a total of $158.2 billion in the year 2013. Further, figure 1 shows that employment across the federal government agencies is one of the direct impacts of the adoption of the sequestration of the budget in the federal government. Effects of sequestration of federal employees Defense and Nondefense Department Agencies According studies conducted by Stephen Fuller, it was estimated that the budget cuts of $115.7 billion resulting from the financial year, 2012-2013, was expected to have a huge impact in the federal jobs by 2.1 million in the same year. Levine (2012) argues that the budget reduction under the program of Budget Control Act (BCA) in the subsequent years was projected to result fewer job employment opportunities. Of the 2.1 million job losses, 746,000 job losses were the federal civilian jobs, and contractor jobs. Levine (2012) further posits that the remaining job losses were accounted for indirect jobs at firms, as well as suppliers who depend on prime contractors for business; and the other job losses accounted for induced jobs. There was a small difference witnessed by this study on the number of direct and indirect federal job losses. The expenditure of the department of defense (1,090,000) in the fiscal year 2012-2013 resulted in a total of $56.7 billion reduction, and on the other hand, the expenditure by the nondefense agencies (1,047,000) resulted in $59.0 billion reduction. It was estimated that the federal government employees were the likeliest to face a larger direct and indirect job losses due to the reduction in nondefense budgets. In addition, the study also projected the effects of sequestration on federal employees on each state. The estimates of this report indicated that federal job losses due to sequestration in the federal government were high in California, Maryland, Texas, the District of Columbia, and Virginia (Levine, 2012). Figure 2: States with greatest job-loss after sequestration (Fuller, 2013). Department of Defense The department of defense was another federal government agency whose expenditure was high reduced. Due to the reduction of expenditure by the ministry of defense in the fiscal year, 2012-2013, there was an expectation of job losses in the subsequent years. Levine (2012) indicates that in the subsequent years after the year 2013, the number of laid-off workers that would be searching for new jobs is expected to be extremely high. Other sectors of the economy are expected to enjoy a relatively stable financial status in the year 2022, and this would provide these lay-off employees an opportunity to work. Based on industry basis, the manufacturing industry was projected to offer the biggest share of jobs relative to the baseline forecast. Even those manufacturing industries that were initially projected to experience job losses are expected to experience an abundance of jobs in the subsequent years because of the adjustment of the economy. Department of Education and Head Start The department of education is another agency of the federal government that was highly affected by the sequestration policy. The year 2013 saw the federal government cut down its expenditure on the department of education by 7.8%. As observed by Levine (2012), job losses due to the reduction on education expenditure would be 80,000 among personnel in charge of early childhood, elementary, secondary, post secondary faculty, as well as other support personnel in the year 2013. Further, within the estimate of about 80,500 job losses, about 27,400 could be at the national level among the educators. Based on the same approach taken by the National Education Association in calculating the number of potential job losses, it is expected that in the subsequent years the number of direct, indirect, as well as induced jobs will be significantly high. Federal Aviation Administration Federal aviation administration was another federal agency in which there was a high reduction in expenditure. The first scenario has seen the annual reduction of 8.5% impact on the current operations of the agency, as well as of the air transportation system. Due this reduction of expenditure in the federal aviation, there was a general impact of job losses throughout the economy. These job losses would from 66,000 to 132,000 for direct, indirect, and induced jobs through to the year 2021. Another scenario, the cut in the expenditure on the federal aviation sector led to a general impact on how the developments of the future of the air transport system. The projected impact of this second scenario is a potential loss in jobs over the entire economy by 40,000 every year, through to the year 2020 (Bidwell, 2013).Particularly, according to the first scenario, by applying the cut budget across the expenditure categories of the federal aviation there would be reduced passenger traffic by 5-10%. On the commercial air freight, the same was projected to reduce it by 5-10%, and reduce the passenger traffic in aircraft manufacturing by 1-2%. As observed by the Econsult, a firm that was tasked with analyzing the economic impact of sequestration of federal government, the federal aviation agency budget cut would lead to a loss ranging between 66,000 and 132,000 of direct, indirect, and induced jobs every year till the year 2020 (Levine, 2012). On the second scenario, it was expected that the sequestration of the federal aviation administration would lead to affecting of the nation’s future air transport system. By expanding on the previous work of Deloitte on the benefits and costs of implementing NextGen on varying schedules, the Econsult postulated that there would be a loss of 40,000 jobs for indirect, direct and induced jobs every year up to 2020 if there was a delay in implementing the scale-down of version NextGen. National Institutes of Health Sequestration of the budget in the National Institute of Health is also attributed to causing a devastating impact on the federal employees. Levine (2012) posits that the sequestration in the fiscal year 2013 would lead to a reduction of employment by about 33,700 for direct, indirect, and induced jobs. A research led by Dr. Ehrich concluded that sequestration in the financial year, 2013, lead to the highest job loss in the National Institute of Health (Levine, 2012). The states that were most affected by this sequestration in this sector include California, Texas, New York, and Massachusetts. Social Security Administration: Medicare It was estimated that the year 2013, social security recorded a cut of $10.7 billion from the baseline. This reduction on the expenditure on social security led to the loss of jobs by 500,000 fewer on direct, indirect, and induced jobs. Out of the total job-loss, about 212,000 job-losses accounted for such occupations as independent contractors, nurses, housekeepers, and medical residents. United States Government Accountability Office (2014) points out that by the year 2020 when it is expected that the Medicare reduction would be $16.4 billion, there could be a job loss in the entire economy of about 767,000. It is agreed that of one out of five job-losses in direct, indirect and induced employment in 2013 took place in the hospital sector. Further, United States Government Accountability Office (2014) posits that a little more than one of five direct, indirect, and induced jobs lost were thought to take place in the following three industries: dentists, offices of physicians, and health practitioners; outpatient and other services for ambulance, and medical and diagnostic labs. Conclusion Sequestration of the budget in the federal government has had or is projected to have a huge impact of federal employees in the current and future. As observed in the paper, since the program of sequestration was introduced by the federal government, job-employment has been the most hit. Thousands of federal employees across several federal agencies have lost their jobs, and many more are projected to be next on the line. Going through the fiscal year2012-2013, all federal agencies have adopted the system of sequestration wherever they have been faced with economic meltdown. The consequence of sequestration is economic saving to these agencies, but employment in the federal government has continued to suffer. Whereas some employees have lost jobs directly due to job dismissal, other employees have left the federal government jobs in search of well-paying jobs. So, cutting the spending of the federal government due to economic recession would not be a good deal in as far as employment is concerned. References Bidwell, A. (2013). Sequestration Creates Uncertainty for Students, Researchers, and Job Seekers. Chronicle Of Higher Education, 59(27), A4. Fuller,S. S. (2013). The Economic Impact of Sequestration Budget Cuts to DOD and Non- ­‐DOD Agencies as Modified by the American Taxpayer Relief Act of 2012. Retrieved 29th April 2015, from, http://cra.gmu.edu/pdfs/Sequestration_Update.pdf House,J.(2012). Sequestration: A Mighty Sword. Retrieved 29th April 2015, from, http://eds.a.ebscohost.com/ehost/pdfviewer/pdfviewer?sid=ab6e4e08-b2d3-4a10-8ec6-3643d779676a%40sessionmgr4005&vid=0&hid=4202 Isaacs, K. P.,& Whittaker, J.M. (2013). The Impact of Sequestration on Unemployment Insurance Benefits: Frequently Asked Questions. Retrieved 29th April 2015, from, http://journalistsresource.org/wp-content/uploads/2012/10/R42763.pdf Levine, L. (2012). Sequestration: A Review of Estimates of Potential Job Losses. Retrieved 29th April 2015, from, http://journalistsresource.org/wp-content/uploads/2012/10/R42763.pdf United States Government Accountability Office. (2014). Sequestration Agencies Reduced Some Services and Investments, While Taking Certain Actions to Mitigate Effects. Retrieved 29th April 2015, from http://eds.a.ebscohost.com/ehost/pdfviewer/pdfviewer?sid=154c686f-0f89-4386-b192-61c8b3ff1395%40sessionmgr4003&vid=1&hid=4202 Read More