If the shutdown lasts a week or longer, as many as 250,000 to 300,000 contract workers could be affected in some way, says Fernando Galaviz, chairman of the National Federal Contractors Association. “A week would be like a bad headache,” he says. “If it’s more than two weeks, they can expect a lot of negative impact.”
No one expects life to be a bed of roses. But, when the circumstances pull us down so much that we become extremely despondent, it is better to remind ourselves that “this too shall pass’! Of course, the question that must be answered is: at what cost?
We are now in the 2nd week of the government shutdown, and we have every reason to believe that it will have serious effects on workers as well as the economy at large. One may say that the U.S. Government has experienced 17 shutdowns, since 1977, with most lasting less than 3 days. The longest of them lasted 21 days and left the country poorer in many ways – in terms of stock market losses, decreased economic growth and $1.4 billion in contingency planning costs, lost user fees and back pay to the furloughed workers.
With reports of 800,000 to a million federal workers being furloughed, and predictions of lowered economic growth in an already bleak economy; the cost of this shutdown is estimated at $300 million per day. Even with assurances of pay protection, the furloughed employees will see bleak times as they have to start penny-pinching in an effort to tide over the lean days as they wait for the shutdown end so they can return to work. At least, these workers are significantly better off as they are assured of being paid at some future date. But the impact doesn’t stop there.
As time passes, the shutdown will also affect many private companies and their workers very negatively; as it will have an indirect effect on other businesses and other workers, including contingent workers. In week two, the impact has spread from government workers to private workers, full-time as well as contingent, who work for government contractors who serve the needs of the government. Projects are being halted, the contractors do not know when their invoices will be paid, and will have to delay hiring, lay-off workers and employ other cost-cutting measures.
According to a recent survey by the National Association of Government Contractors, 29% of federal contractors said they will put their hiring plans on hold, while 58% feared its effect on their businesses, as meetings get cancelled, approvals are withheld, projects are delayed and orders never materialize. One contractor had to furlough 107 out of 115 employees in the IT and health care space – releasing hard to find resources, many of whom may not be available when the shutdown ends and projects are re-started.
Things are about to get worse! None of the previous shutdowns coincided with the need to raise the country’s debt ceiling, failing which the country would earn the dubious distinction of defaulting on its financial commitments. Many companies, struggling to recover from recent economic conditions, are still in the process of ramping up their businesses, bringing on additional staff to support new business initiatives. Historically, temporary workers have been the first to be terminated when a company faces financial difficulties. Without positive news from the government in the next few days, we can expect to see a repeat of that pattern.
Undoubtedly these are bleak times for many families and businesses across the country, and we cannot wait for them to pass!
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