Federal workers’ salaries represent less than 5% of federal spending and 1% of GDP
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Federal workers’ salaries represent less than 5% of federal spending and 1% of GDP
Layoffs are at their highest level since 2020 thanks in part to the Department of Government Efficiency’s attempt to cull the federal workforce.
U.S. employers announced more than 172,000 job cuts in February, a 245% increase from the nearly 50,000 cuts announced in January, according to a new report from the outplacement firm Challenger, Gray & Christmas. Canceled government contracts, trade war concerns and bankruptcies also fueled the increase, the report found.
The government announced more than 62,000 job cuts across 17 different agencies last month, the report said, and even more cuts are expected to come. The Department of Veterans Affairs is planning to slash 80,000 jobs, the Associated Press reported on Wednesday.
DOGE, headed by unelected billionaire Elon Musk, is spearheading these federal layoffs to cut what it considers wasteful government spending. In 2024, the government spent almost $7 trillion. The largest spending categories were Social Security, health insurance programs and defense, which totaled more than $4 trillion.
But federal workers’ salaries only make up a small fraction of total spending. “It’s a tiny little drop in a very, very big bucket,” said Don Kettl, a professor emeritus and former dean of the University of Maryland School of Public Policy.
The total amount we spend on payroll for federal workers is about $336 billion a year, Kettl said.
That’s 1% of gross domestic product, and almost 5% of total federal spending. The government payroll for other developed countries is typically 5% of GDP, Kettl said.
The federal government employs about 3 million workers, a figure that excludes active-duty military personnel.
There’s value in the work that federal employees do, Kettl said. “Everyone is working on a project, a program, a benefit of some kind — whether it’s putting out Medicare and Medicaid money or whether it’s dealing with environmental safety or making sure that the drinking water we have is safe,” Kettl said.
These workers also drive the services that help make our economy and financial system run efficiently, said Matthew Shapiro, an economics professor at the University of Michigan.
“When there’s a bank failure, we have federal employees who — as we saw a few years ago with the Silicon Valley Bank — will close it on a Friday and make sure it’s open Monday morning so that depositors can be paid,” Shapiro said.
The federal civilian workforce as a share of total non-farm employment is on the decline, Shapiro said. In 1960, that share was about 3.5%. Now it’s about 1.5%.
“There’s a huge amount of federal services delivered by a very small and quite effective federal workforce,” Shapiro said.
Cutting federal workers indiscriminately will “substantially damage the economy,” Shapiro said.
Wendy Edelberg, a senior fellow at the Brookings Institution, said there are ways to make the federal workforce efficient. Sometimes, hiring decisions are based on whether a congressman wants a certain number of jobs in his district rather than how many people an agency actually needs, she said.
But these workers are not what Edelberg would consider “low-hanging fruit” if the U.S. wants to reduce the deficit.
Spending is growing, largely because of our increasingly aging population, Shapiro said. The number of retirees on Social Security is rising relative to the working-age population, while the U.S. has to pay the Medicare benefits it’s promised retirees, Shapiro said.
Shapiro said the U.S. does have to figure out how to make these programs more sustainable.
“But these are important benefits that our citizens are counting on and have earned through their contribution to the tax system throughout their working careers,” he said.
The U.S. continues to offer tax cuts and tax breaks that hinders its ability to reduce spending, Kettl said.
And once those tax breaks are in the tax code, they tend to last forever, he said.
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