'I Work; You Pay Me': Repercussions Of The U.S. Government Breaking The First Rule Of Employment

There was a pithy rant some years back in the comments section of an article about employee engagement. Forget all the nonsense about meaning, recognition, teamwork, free food, company parties, empowerment and making it a cool place to work, the commentator wrote.

“The deal is this: I work; you pay me.”

Stripped down to its bare essentials, this is indeed the bargain. However important the rest may be to people’s motivation, it’s all gravy on the meat of that core agreement.

Unless you work for the U.S. federal government. In that case, your current deal is one of four varieties:

A. You work; you get paid. This applies to the roughly three-quarters of the government funded before December 22.

B. You don’t work; you’ll get paid later. This is the deal for 334,000 still-furloughed workers.

C. You work; you don’t get paid until Congress acts. These are the rules for 420,000 employees required to keep showing up from the beginning of the shutdown.

D. You didn’t work, but now you need to come back and work; you’ll get paid – you guessed it – later. This is the head-spinning arrangement for 46,000 “nonessential” employees first furloughed, but now called back because, after about a month, it turns out they are more essential than first appreciated.

Working for the federal government has its upsides. For many, that starts with a sense of mission, whether it’s protecting the country from external threats or ensuring people can safely enjoy the beauty of the National Parks. The pension program kicks in after just 20 years. Depending on the job, the combined pay and benefits package can be generous compared to the private sector. And if you always wanted to grow up to be an astronaut, spy, FBI agent, submarine commander or ranger at Yosemite, the federal government is the only show in town.

One of the other advantages has been the relative stability of federal jobs. A company such as Good to Great exemplar Circuit City might go out business, but the Department of Justice won’t. Large-scale layoffs are a fact of life in the commercial world. It’s tough to find a middle-aged, private-sector employee who can’t outdo federal workers’ current shutdown woes with a personal story of a job that flat-out vaporized.

“Job security in the private sector is much weaker than it once was, a big reason that many people’s incomes have become tremendously volatile, swinging up and down a lot more than they did before,” wrote Rick Wartzman in his essential book, The End of Loyalty. “For workers, the American corporation used to act as a shock absorber. Now, it’s a roller coater.” But just because life can be rough in private industry doesn’t diminish the frustrations of government jobs.

The uniquely bizarre downside of federal employment is the near certainty of a future shutdown. That it shouldn’t happen doesn’t mean that it won’t. Any government workers who didn’t recognize this as part of what they signed on for were fooling themselves. As one TSA agent gamely replied when I expressed my sympathies at the Minneapolis airport on Monday, “It happens.”

“It” – a gap in federal funding – has happened 21 times since 1976. But this one is different. Past shutdowns averaged 6.45 days. Eleven of those gaps were for three or fewer days. This shutdown, partial though it may be, has continued for a month and set the record for the longest after it exceeded 21 days. This one now includes a missed payday, with the prospect of more. This “it” has the potential to recalibrate what it means to work for the government and to have far-reaching consequences.

In ascending order of probability, these are the most important consequences of the government having broken the first rule of employment.

Unlikely: Mass resignations. Much like pilots reluctant to switch airlines and lose their seniority, federal workers who have years of service accumulated toward their pensions will most often persevere so they don’t lose the time they’ve invested. The vast majority will also have little interest in changing professions when the same kind of job is not available in the private sector and when they will be badly needed after Congress eventually acts.

Don’t be surprised, however, if workers with less tenure – frequently those who are younger, renters, not married or without kids – end up baling out in larger proportions than they have in the past. The current mess is also just the thing to tip over the edge someone thinking about retiring.

Likely: Increased difficulty recruiting new employees. We’re in a tight labor market, with just nine job candidates for every 10 open positions. That shortage of available labor affects the government as well. Even the Central Intelligence Agency, which doesn’t talk about much, had been talking openly about its recruiting needs.

The stories of furloughed federal employees taking side jobs, needing loans, filing for unemployment and resorting to food banks are the worst kind of advertising for joining the federal workforce. Unlike current government workers, potential applicants have no skin in the game. They can veer off painlessly to commercial opportunities as long as the labor market remains strong.

Happening and threatening to get worse: Eroding confidence in the economy. Government workers will eventually get paid. But the toothpaste tough to get back in the tube is faith in the economy. On Friday, the University of Michigan reported its benchmark consumer sentiment index “declined in early January to its lowest level since Trump was elected” and “the year-ahead outlook for the national economy (is) judged the worst since mid 2014.”

The decline in optimism “does not yet indicate the start of a sustained downturn in economic activity” and people’s finances are strong enough for “favorable levels” of spending, reported economist Richard Curtin. “Nonetheless,” he wrote, “consumers now sense a need to buttress their precautionary savings, which is typically done by reducing their discretionary spending.”

Happening and going to get worse: Cash flow problems for federal employees. Overall, less than a third of Americans keep savings sufficient to get themselves through six months or more without income. Eighteen percent have enough to cover between three and five months of expenses. Twenty-two percent have fewer than three months of cash on hand. And 23% have none.

The problem is not that government workers will never get paid, but that they are not being paid now. It’s a cash flow issue. At the end of the year, their W-2 forms will show precisely the same amount of income as if there had been no shutdown. But that’s cold comfort for workers who have no money to pay their current commitments.

Happening and going to get worse: Rethinking government contracting. While federal employees will eventually get back wages, there are no such guarantees for those who work for private companies fulfilling government contracts. An estimated $200 million is being lost each day of the shutdown – money not going to workers at those firms and therefore not being spent in the wider economy. The number of private workers directly affect is put at 1.2 million. Once the Trump Administration factored in the cost to contractors (an effect that would not have escaped most freshman macroeconomics students), it more than doubled its estimate of the negative economic impact of the shutdown Trump said going in he would be “proud” to instigate.

As the shutdown continues, the number of contractors who lose their jobs will increase. While there will be a certain amount of catching up in work and billings down the line, this unprecedented gap may force government contractors to change how they propose, price and staff future government work.

Happened: Trust takes another hit.  There was a telling and under-appreciated statistic in October’s most recent release of the Federal Employee Viewpoint Survey. Only about four in 10 government workers (41%) even bothered to fill it out. (One of its key questions, “Considering everything, how satisfied are you with your pay?” seems like salt in the wound at the moment.)

It was already established that large swaths of people in the broader economy don’t trust their employers enough to tell the truth in employee surveys, but the federal government has this problem far worse than most private firms. Even among those who volunteered their opinions, “only 41% of respondents believe the results of the FEVS will be used to make their agency a better place to work.” The shutdown exacerbates the problem.

Research indicates that when people are laid off, it affects their levels of trust for many years after the event (measured by statements such as “Generally speaking, would you say that most people can be trusted, or that you can’t be too careful in dealing with people?”). While the federal workers are not being laid off, this breach of the first rule of employment, combined with a president taunting that “most of the people not getting paid are Democrats” and a White House economic advisor who says they are “better off” because “they have the vacation but they don’t have to use their vacation days” again takes a knife to our social fabric.

So this petulant president, insisting on his wall, and this Congress, failing to assert its constitutional authority to appropriate money with or without his signature, further degrade what’s worth protecting on this side of the border.

(Full disclosure: I have done leadership advisory work on behalf of several U.S. government agencies.)