How Trump’s Federal Workforce Cuts Could Impact Employment Across the Nation

Contrary to popular belief, most federal employees actually work outside of the D.C. metro area. See where and how vulnerable regional economies might be to reductions.
by | April 24, 2017

On the campaign trail, Donald Trump responded to voter discontent with Washington by repeatedly pledging to reduce the size of government. But if he does succeed in significantly shrinking the federal workforce, most of the cuts will likely be felt outside the Capital Beltway.

The president issued a temporary hiring freeze days after taking office followed by a budget proposal that calls for drastically diminishing the federal workforce. A memo issued earlier this month by Office of Management and Budget (OMB) Director Mick Mulvaney lifted the hiring freeze but advises agencies to begin downsizing their workforces and submit a reform plan by September.

The federal government currently employs just over 2 million civilian employees, another 1.3 million active-duty military members and funds millions more contract positions. Contrary to popular notion, the majority of those jobs aren't located in the Washington, D.C., area. In fact, a review of the most recent Office of Personnel Management (OPM) figures shows 79 percent of federal civilians are based outside of D.C., Maryland and Virginia.

How vulnerable federal employees are to job reductions depends in part on how their agencies are viewed by the administration and Congress. Trump’s funding proposals so far mostly mirror his rhetoric on the campaign trail: Boost defense spending and cut everything else.

The administration’s initial budget blueprint calls for spending increases to the departments of Defense, Homeland Security and Veterans Affairs. About 1,274,000 civilians were employed in these agencies as of December, according to the OPM. Not including the U.S. Postal Service, that leaves another 774,000 in other federal agencies who are more vulnerable to cuts.

States with the highest tallies of these remaining civilian employees, by our calculations, include: Maryland (81,325), California (45,682), Texas (35,505), Virginia (28,991) and Georgia (26,438).

Figures do not include USPS, a limited number of smaller agencies and those for which job locations were suppressed.

SOURCE: Governing calculations of OPM data current as of December 2016

 

Trump’s top target, the Environmental Protection Agency (EPA), is certain to incur cuts, and the agency announced last week that it would start offering buyouts to its employees. Other agencies with the steepest cuts in discretionary funding in Trump’s budget include the State Department (-29 percent), Agriculture Department (-21 percent) and Labor Department (-21 percent).

Congressional Republicans, though, have already signaled that Trump’s funding proposal is dead on arrival. Furthermore, many of his plans to trim the workforce or eliminate programs require approval from Congress and will likely encounter resistance, says Jessica Klement, legislative director for the National Active and Retired Federal Employees Association.

Either way, while federal agencies might not be in for deep cuts right away, the OMB memo, which specifically addresses the federal civilian workforce, makes it clear that they'll need to downsize over the longer term.

“There’s definitely a focus on cutting the headcount,” says Klement. “It stems from the perception that the workforce is growing.” 

Federal payrolls ticked up during the recession but otherwise haven't grown much over the past several decades. About the same number of employees (excluding postal workers) worked for the federal government last year as in the mid-1970s.

Another way to gauge how cuts could affect states and localities is by considering employee earnings. The latest estimates from the Bureau of Economic Analysis suggest that in 16 metro areas, federal civilians account for more than 10 percent of all work-related earnings. Most of these areas are near military bases.

Federal civilians make up 17 percent of earnings in the D.C. metro area and about 9 percent in Baltimore -- figures that would be much higher if they included federal contracting. In the small California-Lexington Park, Md., metro area, which is supported by a Naval air station, federal civilians account for one-third of all employee earnings. Other major metro areas where they have a greater presence include Albuquerque, N.M.; El Paso, Texas; and Honolulu.

Estimates are reported in current dollars and do not include active-duty military earnings or contractors.

SOURCE: Governing calculations of BEA data

 

In Mulvaney's memo, agency heads are directed to consider reducing or eliminating duplicative, inefficient and nonessential programs as well as activities “no longer necessary in today’s society" and those that other public or private entities could “more appropriately fulfill part or all of the role.”

Of course, this isn’t the first time a new administration has sought to reform federal agencies. The last major cuts to the federal workforce came during the Clinton administration’s “reinventing government” initiative. More than 400,000 federal jobs were axed.

One key difference in this administration’s approach is a greater emphasis on trimming the size of the federal workforce rather than merely implementing broad spending cuts by any means necessary.

“It seems like the one specific thing that they definitely know they want to do,” says Chris Edwards, an economist who tracks the issue at the libertarian Cato Institute.

The breadth and size of the cuts, particularly around the elimination of entire programs, also exceed that of prior administrations.

“Bush and Obama had long lists of line items to eliminate, but they were pretty tiny things,” Edwards says. “There isn’t any smoke or mirrors now. These are real terminations and cuts they want to achieve.”

In most states, federal civilian employees alone don’t make up a sizable segment of the labor force. They account for the largest shares of total employment in Alaska, Hawaii, Maryland and Virginia.

Federal Civilian (Excluding Postal Workers) Share of Total Employment

 
Less than 1%
 
1-2%
 
2-3%
 
Greater than 3%

 
SOURCE: Governing calculations of OPM data (excluding these agencies), BLS nonfarm job estimates for December 2016
 

In reality, the federal government's role in the labor market is much larger. That’s because so much of the work is outsourced to private firms. Paul Light, a New York University professor, previously estimated federal contracts and grants yielded approximately 8 million jobs in 2002, far more than the number of federal employees.

Interestingly, the OMB memo makes little mention of reducing contracting costs, other than advising agencies to avoid redundant contracts and consider government-wide agreements. While private contractors are often based near federal employment centers, it’s hard to know precisely where they’re located because the federal government doesn’t publish such state- or local-level employment data.

Edwards suggests the rhetoric around cost savings doesn’t necessarily align with actual employment counts for some agencies. Many, like the EPA, employ relatively few workers, so cutting them would generate little cost savings.

A clearer picture of how cuts could potentially be applied should emerge later this year after agency heads submit their reform plans to the OMB.