Background Report: Government Shutdown

The paper I chose to write is regarding the recent 2013 government shutdown in relation to the labor market; specifically the short term vs. long term implications. My hypothesis starts off slightly broad, saying that the shutdown did, in fact, have short term and long term effects upon the labor market. This idea then develops into an educated proposal towards the end saying that perhaps the ultimate long term effect the shutdown will have on the labor market is that one day a labor market will cease to exist due to a failure to maintain our governmental structure. Furthermore I mentioned various effects the shutdown had specifically upon the private sector and public sector labor markets. This is to say when focusing on the long term and short term I went into details regarding how public sector and private sector agencies or businesses may have been negatively, or if positively, affected by the changes the shutdown had. Additionally I chose to focus heavily on data on the past government shutdowns, mostly focusing on the 1995 & 1996 data regarding economic effects. The information regarding the past sets the precedent for the rest of my paper as it introduces how government shutdowns can directly affect labor markets, and in what specific ways they have in the past. This was essential because information is needed on what a government shutdown is exactly, why they happen, and what effects are seen on the labor market in regards to all other factors being set forth.

The United States government runs on a fiscal year which ends September 30th, it is expected that by that time Congress and President Obama sign an allotted number of bills before October 1st so that government activities may continue running (Kosar, 2004). History has shown a number of government shutdowns, and those shutdowns have occurred to due failures to pass these necessary bills by the deadline, largely caused by a disagreement on the funding for government operations resulting in impasses (Kosar, 2004). The government continues to be in the state of “shutdown” until congress can reach a decision on funding, during which time they set additional deadlines for this to be accomplished. In regards to the labor market, the largest effect the government shutdown has is on federal government jobs in the public sector throughout a variety of agencies run by the government. In the past there was data showing that in shutdowns there are essential and nonessential employees, and the ones deemed nonessential are “furloughed”, despite not working during shutdowns all employees are retroactively compensated for their work (Kosar, 2004). Some direct effects on the public, which in turn affected the private sector both long term and short term, were on health departments, law enforcement agencies, tourist spots (museums, national parks, monuments), veterans, and federal contractors (Kosar, 2004).

These agencies experienced short term losses by having to furlough employees and long term losses by experiencing monetary losses by not being able to process certain applications and carry on a variety of processes necessary for their businesses/agencies to run efficiently. The information on the past is very similar to that of the present 2013 shutdown, as many of the same agencies which were affected then took hits now. A release by the Executive Office of the President of the United States stated that this was the most significant shutdown on record and was measured in terms of employee furloughs (2013). The shutdown was viewed in terms which I said were relevant during the 1996 shutdown, these terms being economic disruptions, unemployment rates, changes on the labor market as a result of unemployment, and overall economic disruptions. Nearly all of the agencies aforementioned (health, federal contractors, tourism, private sector businesses, law enforcement, etc…) were all seen taking hits during the 2013 shutdown. The purpose of my paper is to recognize the similarities between the shutdowns and focus on the short term and long term effects being had on the labor market.

References

Executive Office of the President of the United States, (2013). Impacts and costs of the October 2013 federal government shutdown. Retrieved from website: http://www.whitehouse.gov/sites/default/files/omb/reports/impacts-and-costs-of-october-2013-federal-government-shutdown-report.pdf

Kosar, K.R. (2004, September 20). Shutdown of the Federal Government: Causes, Effects, and Process. CRS Report for Congress.