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Government shutdown 2019

The U.S. government is becoming more dependent on contract workers

Janet Nguyen Jan 17, 2019
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A view of the U.S. Capitol in Washington, D.C.
Mark Wilson/Getty Images

In this growing gig economy, Lyft and Uber aren’t the only big names that rely on contract workers. You should also take into account the United States government.

With the partial government shutdown in its fourth week, hundreds of thousands of federal workers have either been furloughed or have to work without pay.

While President Donald Trump has signed a law that guarantees backpay, the picture looks very different for contractors who represent a growing segment of the federal workforce. Last month, Julie Burr — a single mother and a contractor for the Department of Transportation in Kansas City, Missouri — told us she’s feeling “panicked.” As a contractor, Burr said she wouldn’t be included in the group of employees that will get that backpay.

The Trump administration has pushed for smaller government, but the number of federal employees has actually remained steady over the years, while the number of contractors working for the government rose from about 3 million in 1996 to 4.1 million in 2017. 

“We’ve seen a lot more services that used to be performed in-house, outsourced. Another big factor is technology and modernization. The government wants to take advantage of commercial services,” said Nick Taborek, a partner at Nation Analytics.

The White House recently doubled its projections of how much damage the partial government shutdown will inflict on the economy. The shutdown reduces quarterly economic growth by 0.13 percentage points for every week that it lasts. To put that into context, economic growth totaled 2.2 percent in the first quarter of 2018.

“They forgot to count the economic effects of contractors who aren’t at work,” said Paul Light, a public service professor at New York University.  

While the overall numbers for federal contractors have risen over the past couple of decades, Light said they go up or down depending on whether the U.S. is at war.

“Because the Department of Defense is simultaneously the military, of course. They contract out a lot of their guard duty,” said Jack Pitney, a political science professor at Claremont McKenna College.

The Department of Defense happens to be the agency with the largest number of contractors. Some of the biggest companies the DoD does business with include Lockheed Martin, Boeing and Raytheon. (However, unlike other parts of the government that are currently shutdown, the DoD is fully funded through this fiscal year.) 

From 2002 to 2010 — which is the period when wars in Afghanistan and Iraq waged on — the number of contractors rose from about 2.8 million to 4.9 million. Light said the government increased its spending on equipment and supplies for those wars, along with grants for job training, education and highway education.  

The number of contractors then dipped from 2010 to 2015 as the Iraq War ended. Light said it rose again in 2017 because President Trump pushed for an increase in defense spending.

But even if we controlled for war, Light said there would still, to some extent, be a significant increase in the number of contractors in the U.S.

Other major agencies that employ contractors include the Department of Energy (they manage the nuclear stockpile and are doing a lot of high-tech work, Light points out) and the Department of Health and Human Services (which Light says purchases medical supplies and labor). 

The cost of employing a contractor compared to a federal worker has been hotly debated, but while private contract employees are paid less than federal employees, they could actually end up costing more for taxpayers

“When the individual contractor goes home with her paycheck, she’s going to find less in that envelope than the federal worker who’s got the same job, same responsibility, same education. But when her paycheck is built into a contract and loaded with overhead, she costs more,” Light said. “Federal government employees work in government buildings. They are not paying rent. If you’re a private contractor and you’ve got a big building, you have to pay rent and you have to pay utilities.”

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